Making Economic Sense

Making Economic Sense
by Murray Rothbard
(Contents by Publication Date)

The Consequences of Human Action: Intended or Unintended?
Chapter 7

Some economists are given to insisting that Austrian economics studies only the unintended consequences of human action, or, in the favorite phrase (from the 18th-century Scottish sociologist Adam Ferguson as filtered down to F.A. Hayek), "the consequences of human action, not human design."

At first glance, there is some plausibility to this oft-repeated slogan. As Adam Smith pointed out, it is a good thing that we don't rely on the benevolence of the butcher or baker for our daily bread, but rather on their self-interested drive for income and profit. They may intend to achieve a profit, but the efficient production for consumer wants and the advancement of the prosperity of all is the unintended consequence of their actions.

But this slogan can be shown to be faulty on further analysis. For example, how do we know what the intentions of the butcher, the baker, or indeed any businessman, are? We cannot look inside their heads and tell for sure. Suppose, for example, that the butcher and baker, out to maximize their profits, read free-market economics and see that maximizing profit also benefits their fellow-man and society as a whole. 

As they go about their business, they now intend the consequence of efficient satisfaction of consumer wants as well as their own monetary profit. So if, as some indicate, economic theory only studies unintended consequences of human action, does the learning of some economic theory by businessmen invalidate that theory because now these consequences are consciously intended by the participants on the market?

Furthermore, the learning of sound economic theory can actually change the actions of businessmen on the market. Many businessmen, influenced by anti-capitalist propaganda, have been consumed by guilt, and may consciously restrict their pursuit of profit in the mistaken idea that they are helping their fellow man. Reading and absorbing sound economic analysis may relieve them of guilt and lead them to seek the maximization of their own profit. In short, now that they are fully cognizant of economics, the intended consequences of their actions will lead to higher profits for themselves as well as greater prosperity for society.

So what is so great about unintended consequences, and why may no intended consequences be studied as well? And doesn't the accumulation of knowledge in society change consequences from unintended to intended?

Not only that: the Misesian discipline of praxeology explicitly states that individual men consciously pursue goals, and choose means to try to attain them. And if men pursue goals, surely it is only common sense to conclude that a good deal of the time they will attain them, in others words they will intend, and attain, the consequences of their actions. Mises's emphasis on conscious choice treats men and women as rational, conscious actors in the market and the world; the other tradition often falls into the trap of treating people as if they were robots or amoebae blindly responding to stimuli.

Arcane matters of methodology often have surprising political consequences. Perhaps, then, it is not an accident that those who believe in unintended and not intended consequences, will also tend to whitewash the growth of government in the 20th century. For if actions are largely always unintended, this means that government just grew like Topsy, and that no person or group ever willed the pernicious consequences of that growth. Stressing the Ferguson-Hayek formula cloaks the self-interested actions of the power elite in seeking and obtaining special privileges from government, and thereby impelling its continuing growth.

There are two ways to advance the message of Austrian economics. One is to fearlessly hold high the banner of Misesian theory to which the wise and honest can repair--a banner which requires calling a spade a spade and pointing out the special interests all too consciously at work behind the government's glittering facade of the "public interest" and the "general welfare."

The other path is to seek acceptance and respectability by watering down the Misesian message beyond repair, and carefully avoiding anything remotely "controversial" in your offering. Even to the point of taking the "free" out of "free market." Such a path only entrenches big government.

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