Economy, Society, and History

What I want to do in this seminar is to reconstruct world history from the bottom up, from the beginning of mankind to the present, and gradually enlarge and expand the picture. I will give you a brief overview of what I have planned, but let me say from the outset that I have never given these lectures in this form before. I have presented some of these topics in various lectures, and in my class on comparative systems I talk about subjects similar to the subjects that I will deal with in this seminar. But never before have I presented lectures structured in this way.

To give you some basic idea as to how this whole thing is structured, in the first lecture I want to talk about the nature of man, comparing men with animals and illuminating the major differences, and characterizing what one can call the human condition, the condition that mankind finds itself confronted with. In the second lecture, I will talk about the spread of humans across the globe and the development, i.e., the extensification and the intensification, of the division of labor. And the third lecture deals with the next element in human and economic development, that is, the development of money and the expansion of the use of money and the consequences that money has for the development of the division of labor. The next fundamental element, lecture four, will be the theory of time preference, and of capital and technology, and of economic growth.

All of the lectures, by the way, will contain theoretical elements as well as historical elements. I am not a historian by profession. My advantage is that I know more theory than most historians, and because of that I reconstruct history in a slightly different way than a historian might do it.

The fifth lecture will deal with ideological factors that have an influence on social and economic development, that is, in particular, religion; this will be a lecture on comparative religions and comparative ideologies. Lecture six will be dealing with details of the theory of private property and the issue of how societies would defend property, i.e., property rights, with special reference to feudal societies and what defense mechanisms would be used in modern societies where we can take some ideas from the feudal age. In lecture seven we will deal with parasitic behavior, that is, exploitative behavior and the origin of the state. And lecture eight will be based on something that I have done in my book Democracy: The God That Failed, discussing the transition from monarchical states or monarchical governments to democratic governments. Lecture nine will deal with states and imperialism and war. And the final lecture will address some strategic issues; that is, how do we go from here to a society that is free, or at least more free than the current one. 

So, with this, let me begin to talk about the nature of man and the human condition and speak in particular about three elements that are unique to mankind. First is language, the second is property, and the third is production or technology. Now, you realize that when we begin all of this here, we are already talking. We are already using some of our capabilities, some of our skills and achievements that are the result of human evolution; that is, the reconstruction that I will offer of human history already makes use of some of the tools that have only gradually evolved in the course of time. Actually, the origin of language is dated back roughly to somewhere between 150,000 and 50,000 years ago. All of these estimates are, of course, as you can imagine, rather vague; nobody was around at that time to record exactly when they started talking. But these are the numbers that some geneticists and biologists and anthropologists give us for the beginning. And you will notice something else, from the fact that we begin all of this enterprise by talking to each other, that humans are social animals. 

You are aware of the fact that there are people who are interested in game theory, for instance, who seem to have trouble sometimes explaining why people cooperate at all and do not fight each other all the time. But the funny thing is that this debate already takes place using language, which, in a way, from the outset, explains that there must be something wrong with this idea that mankind at some point was, so to speak, deciding whether they should fight each other or whether they should not fight each other. Obviously, as soon as mankind began to talk with each other, they must have already recognized that there are certain advantages to doing this and to being social in one’s endeavors. And it’s perfectly clear from the outset what the great advantage is of having a language available and communicating with other people, since we can convey knowledge to other people in a much faster way than would be possible if we simply had to look at what other people are doing and then try to reconstruct the ideas that are behind what they are doing. Through the use of language we have the possibility of communicating directly what it was that led us to do this or led us to do something else. 

Now, with language, two ideas emerged and I use here the ideas that were developed first by an Austrian psychologist, Karl Bühler, who also had some influence on Karl Popper, who uses his ideas. Karl Bühler makes the point that when we look at language, we can distinguish between four different functions, two of which we find already on the animal level and two of which are unique to humans. On the animal level, we find the use of symbols or sounds that express something like pain, for instance. That is an expressive function of language, which we can ascribe easily also to animals and say, in this sense, that they can express some internal feelings. On the other hand, language has sometimes a signal function; that is, we can produce sounds that indicate there is some danger coming, warn other animals to run away, or something like this. And this, of course, is also possible for humans to do. Language has an expressive function for us and also has this signal function, to make other people aware of things. 

What is not found in the animal kingdom is language that has a descriptive function; that is, language that describes, “this is such and such” and with the descriptive function of language, for the first time, the idea of truth emerges. That is, for expressions and signals, whether that is true or not is not really an issue, but when we say, “this is such and such,” then it becomes possible to ask, “Is that really the case?,” and we can try to find out whether this is the case or not. So, the idea of tools comes into being, because language has a descriptive function and the most primitive descriptive propositions would be of the type “this is such and such”; that is, having a proper name or an identifying expression, and then a general term characterizing a particular object as having some general characteristics.

The second unique human function of language is the argumentative function, that we have complex statements connected by “and” and “or,” several statements combined with each other, and that we investigate whether certain arguments are valid or not and investigate whether we draw inferences in the correct way or incorrect way and so forth. And you realize that it is precisely this last function, this argumentative function, that we must also use as a tool, if we now want to make a more precise distinction between the abilities of man on the one hand and the different abilities of animals on the other.

And I want to follow here with philosopher Brand Blanshard, who has pointed out some important differences between animals and humans. I want to begin with a short quote from Blanshard in a book, Reason and Analysis, where he says this about animals and then draws a conclusion that this is somehow still very different from what mankind can do. He asks, “What does it mean to have human reason or human rationality?” And he answers, “It cannot be consciousness, of course, because no one can sensibly doubt that animals feel fear and hunger and pleasure and pain.” Animals can also make mistakes, which we recognize, as when, for instance, a dog drops a bone for a more inviting bone that he sees in the water. And since only judgments can be mistaken, animals must also in some way be able to make judgments to come to the conclusion that “I made a wrong judgment.” And since judgment is thought, we can also say that animals think, but they do, obviously, not think in the same way as humans do. 

Now, what is the difference between our way of thinking and their way of thinking? Let me emphasize four points in this connection which partly overlap. The first thing to be noted is that animal thought is always tied to perception, whereas human thought can wander around, go back to the past, wander to the future, can think about objects that are far away, can even think about objects that have never existed. Animals cannot think in this way. Whatever they’re thinking, it requires some present cue, some observation from which their thinking arises. We can imagine, for instance, that animals can also think, to a certain extent, about things that are absent, as if a dog sits in front of a house because the dog knows that his master has gone into the house and waits there patiently until the master comes back out. But even there you can still see that it is tied to perception. If he had not seen the master go into the house, he would not do what he does, sitting there waiting. And in any case, he cannot think about things that are far away, or impossible, or things in the far distant future. So, that’s the first thing: animal thought is tied to perception and human thought is, in this way, freed up from perception.

That brings me to the second point. There is one other phenomenon, the difference between humans and animals, that shows they cannot do this. Even if you think they might think about this sort of stuff, they have no way of conveying this type of information to us. Or you can say, animals can’t abstract in the way that humans can abstract. Certainly, animals can see shapes and colors and they can perceive smells and things like this, but it doesn’t seem to be the case that they have a concept of shapes, of triangles, or a concept of green or blue or yellow, or a concept of different types of smells. Again, this is an aspect of what I just mentioned; it is tied to specific events, but they cannot abstract from the specific event and build a general concept. If they could, then we would expect them to form a word for these things, and it is not that animals are not capable of producing sounds. Many animals do have the equipment to produce sounds. So, this does not explain why they don’t have words. Obviously, despite the fact that they can form sounds, they cannot form what we refer to as words, sounds to which we attach a certain abstract idea of which we find various instances in the real world.

The third thing that distinguishes mankind from animals is that animals cannot make explicit inferences. Again, this has something intimately to do with the two points that I already made. Animals can, of course, make inferences, but these inferences are implicit. That is to say, if you have a chicken and you give a piece of food to the chicken that is too big, doesn’t fit into its mouth, and it is desperate that it can’t eat it. Then, if you throw another piece of roughly the same size in front of it, the chicken might refuse to even try to do the same with the second piece of material because it recognizes that it didn’t work with the first, it’s not likely to work with the second. But again, due to the lack of concepts, they cannot make explicit inferences; that is, infer from one concept to another and thereby be able to say why such-and-such caused such-and-such a problem and why it would be in vain to try the same thing twice that already didn’t work in the first case.

The most important difference between animals and humans is the fact that animals do not have what we call self-consciousness. They do have consciousness, but not self-consciousness, and what I mean by self-consciousness is that they cannot mentally stand back and reflect on their own behavior. They cannot pause and criticize their own behavior, think about why their behavior was successful or unsuccessful. They do not have anything like norms or principles against which they can judge their own behavior and criticize their own behavior. Let me on this point again quote Blanshard on this most important of differences, that is, the human capacity for self-conscious reflection. There he says,

Finally, human reason has added an extra dimension to the animal consciousness in the form of self-consciousness. An animal lacks the power, which is the source in ourselves, of so much achievement and so much woe, of standing off from itself and contemplating what it is doing. It eats, sleeps and cavorts, but never pauses in the midst of a meal, to take note that it’s eating greedily, never asks, was it not unseemly to sleep the hours away…1

You see, in some respects, of course, humans have not developed that far beyond.

…apparently, never reflects, as it leaps and runs, that it is a little off-form today. It makes mistakes, but having made one, it cannot sit down and consider what principle of right thinking is violated. Because it cannot contemplate its own behavior it cannot criticize itself; being below the level of self-criticism, it has no norms; and having no norms, it lacks one great obvious essential to the life of reason, namely, the power to be guided by principle.2

And Blanshard then summarizes all of what I tried to convey up to this point, by saying the following:

When we say that man is a rational animal, then, we seem to imply that he can command ideas independently of sense, independently of perception, that he can abstract; that he can infer explicitly and that he can sit in judgment on himself. The highest of animals can do none of these things. The stupidest of man, if not a pathological case, can in some measure do them all.3

So much about the human ability, the human language ability, is characterized in particular by our abilities of self-reflection, self-criticism, self-control, and so forth.

These capabilities we can now use in order to describe the human condition, which will be my next step. And this human condition can be characterized in the following way: mankind finds itself equipped with consciousness, and discovers that we have a physical body, and discovers that there is something outside of the physical body, what economists call “land,” that is, nature-given resources, things outside, independent of our bodies. And what we learn immediately is that our bodies are constantly and permanently pressed by various needs, and that we have to act in order to satisfy these needs. What man immediately discovers is that certain things he can control directly; that is, we can all discover that we can directly control our own bodies. I can just say “I lift my arm” and my arm is lifted, or “I lift my leg” and my leg will go up. And we realize that nobody else can control my body this way. 

Everybody can do that with his own body, of course, but we have this ability of directly controlling something only with very limited things. I cannot control you directly; I can only control you by being in direct control of my own physical body first; then I can, of course, make an indirect attempt to also control you. This explains why we have the concept of I, of me, because certain things only I can do, and that distinguishes me from the outset from everybody else. This is what I can do and nobody can do this to my arm in the way I can do it. We can also say that we discover then, immediately, what we mean by having a free will. I can just want this; I just pick this up and that’s it. There’s nothing that forces me; it’s just my own wanting it, so that makes it so. And we also develop, immediately, some sort of idea of what it means to cause something. I am the cause of this bottle of water being in my hand and I am the cause of now drinking out of it. We recognize our unique relationship that we have to our own physical body and that other people have to their own physical bodies. We know that because of this, I am not you, and you are not me. We understand the concept of cause and we understand the concept of free will. Then we recognize, second, that there are other things out there that we can only control indirectly, with the help of those things that we can control directly. With the help of our body, we can attempt to control things that exist external to our own physical body. We refer to those things as means.

And we realize also that there exist things that we cannot control at all. We cannot control sunshine or rain; we cannot control the movement of the moon or the stars. Those things we refer to as the environment, which we have to take as a given, as something that is beyond our control. The borderline between those things that we can control and those things that we cannot control, the borderline, so to speak, between those that are means and what is the environment in which we act, is moveable; that is, certain things might come within our reach and can become controllable that were initially not controllable. Just think of something simple like building a tool, for instance, that makes it possible for you to reach something up high that you initially couldn’t, or reach heights that you could initially not reach, or down to depths that you initially could not reach. The borderline between the range of objects that become means and the range of objects that remain environment, this boundary is movable or flexible. It might well be the case that one day, we will be able to just move the moon around by waving certain types of tools or instruments, but currently we are not able to do so.

Then, man learns that some of the means, some of the things that he can control, that he can move, that he can manipulate, can be referred to as “goods” and others can be referred to as “bads.” Goods would obviously be those means that are suitable in order to satisfy some needs that we have, and bads would be objects that we can control, but that would have negative repercussions on us, that would not satisfy any needs but, to the contrary, may harm us or even kill us. 

At this point, let me read you the definition of goods. “Goods” are means that can be controlled and which are suitable for the satisfaction of human needs or ends. I will give you the definition that Carl Menger provided us with. Menger pointed out that there are four requirements for objects to become goods for us. The first is the existence of a human need. The second requirement is such properties as render the thing capable of being brought into a causal connection with a satisfaction of this need. That is, this object must be capable, through our performing certain manipulations with it, to cause certain needs to be satisfied or at least relieved. The third condition is that there must be human knowledge about this connection, which explains, of course, why it is important for people to learn to distinguish between goods and bads. Thus, we have human knowledge about the object, our ability to control it, and the causal power of this object to lead to certain types of satisfactory results. And the fourth factor is, as I already indicated, that we must have command of the thing sufficient to direct it to the satisfaction of the need. In this sense, for instance, even though we might consider sunshine to be a good or rain to be a good, neither would be an economic good, because we have no control over the objects that are capable of producing sunlight or rain. Only objects that we can bring under our control, and then lead to certain results, would be referred to as economic goods. Man then learns that some goods are immediately useful. We refer to those goods as consumer goods. They can be appropriated and almost instantly turned into some form of satisfaction. And we also learn that most things, however, are only indirectly useful. They require that we must transform them in some way, that we reshape them in some way, that we move or relocate them in some way, using our intelligence in order to lead to satisfaction. And those objects that we have to do something intelligent to, before they lead to satisfaction, we would call producer goods.

And man also recognizes—and this brings me to my second main point—besides language, the concept of property. I already made the point with respect to our physical bodies, where it is intuitively clear that people recognize that “this is my body, because I am the only one who can do this with it and nobody else can.” I have a unique relationship to my body, a relationship unlike what anybody else has. When it comes now to economic means, a similar idea arises. Those people who appropriate certain objects, and bring them under their control in order to satisfy certain desires, have thereby also, of course, established a unique relationship to those things that they have appropriated for the first time, and they consider those things also theirs. Maybe not in the same direct way as with my body, but as an extension of my body. I used, after all, my body in order to appropriate these things and in this sense I have a unique relationship with these objects as well. Let me read to you, in this connection, a quote from Herbert Spencer, who also explains the naturalness of the idea of property. He says

that even intelligent animals display a sense of proprietorship, negating the belief propounded by some that individual property was not recognized by primitive man. When we see the claim to exclusive possession understood by a dog, so that he fights in defense of his master’s clothes, if left in charge of them, it becomes impossible to suppose that even in their lowest state, men were devoid of those ideas and emotions, which initiate private ownership. All that may be fairly assumed is, that these ideas and sentiments were first less developed than they have since become.4

While in the early stages, it is difficult, not to say impossible, to establish a mark of individual claims to part of the area wandered over in search of food—and I’ll come to that subject later on in a future lecture—it is not difficult to mark off the claims to moveable things and to habitations, and these claims we find habitually recognized.

It is perfectly clear that moveable objects, tools, and so forth that people have were at all times recognized as their private property in those objects. In the most primitive of men, the concept of private property exists, not only with respect to his physical body, but also with respect to those appropriated means of production that indirectly satisfied his various desires. 

Now let me elaborate a little bit on this concept of property by introducing a second person, call him Friday, and then, you recall, we are already talking with each other, so we have to assume that these types of Fridays existed from the very outset of mankind. With a second person present, it becomes possible that conflicts over scarce goods can arise. It is not possible that conflicts arise over things that are in superabundance, or that conflicts arise with regard to events caused by the environment. We cannot influence the environment, and if there exists a superabundance of goods, then it is possible that people may have different ideas of what should be done or should not be done with a good, because whatever I do, it doesn’t affect what other people can do with the same type of good, because it simply exists in superabundance.

From the most primitive stages of mankind on, what people recognize is how to solve these possible conflicts with regard to scarce resources. They will point out that, “Look, I have an objective, perceivable, noticeable connection to such and such a thing, because I have appropriated it, I have control over it, I have used it for this type of purpose, and I have all of this done before you ever came along and wanted to do something with the same object. So, my claim is better justified than yours. As a matter of fact, your claim is not justified at all, because you cannot point to any objective link established between your body and a particular object, whereas I can point to a particular visible, noticeable, intersubjectively ascertainable link between me and a particular object.”

We can recognize this by the fact that people are, again, from the most primitive stages on, willing to defend these objects from invasions by other people. If I were not willing to defend something, if I do not put up the slightest resistance against somebody taking my axe or my arrow, then I indicate, in a way, that I do not consider it to be my property. If I show the slightest resistance, saying no or pushing my hands in the direction of the person trying to take it away from me, this indicates clearly that I regard myself as being the owner and having a special control over these things. Again, we can see this if we look at small children. If they have disputes over whose toy this is, the typical response of children is to say, “Look, I’m already playing with the car and you are not.” And if they put absolutely no resistance up, then they indicate that, for the time being, they have abandoned it and made it available to others. So again, very primitive sentiments. In this sense, we can probably assume that the development of children, in a way, repeats, to a certain extent, the development of mankind as a whole. What we find in children, we also find already in primitive man.

Now, let me come to the third unique capability of mankind, besides language and the recognition of property. That is that man can produce things, that man is a producer, that he’s capable of developing technology. You realize that animals live, so to speak, a parasitic life, in the sense that they never enhance the endowment of the world. They eat something, and in a way, diminish the amount of things that are available on Earth, but they never add anything to it.

Mankind is unique in the sense that they have, as compared with most animals, a distinctive lack of specialized organs and of instincts, which makes them basically incapable of survival unless they develop substitutes for this lack of natural equipment that they have. Men have no natural weapons with which to defend themselves, or nothing to speak of. We have practically no instincts that guide us automatically to do this and that and avoid this and recognize dangers without having to know about it. What we can say is that man needs culture in order to survive in nature.

And the tools, the most important tools that man has, are, on the one hand, his hands and, on the other hand, of course, his brain. But, neither one of these tools can be described as a highly specialized tool. They are useful for a wide variety of purposes, which is an advantage, but it is also obviously a disadvantage to begin with. We just have to learn what we can do with our hands and don’t automatically know what our hands can possibly do and we have to learn what our brain is capable of doing and do not automatically, like most animals, know to what uses to put our brainpower. Men must then intelligently transform nature, by using brains and hands in particular. There are certain patterns in the development of technology that we can perceive if we look at the development of mankind as a whole.

Here I follow a German sociologist and anthropologist, Arnold Gehlen, whom I recommend quite highly. I think one of his books has also been translated into English. It’s called, simply, Man, I believe. Gehlen does not have a very good reputation, because he had some sort of connection with the Nazis. But that does not make his observations any less important. So, he points out that there are attempts during our technological development to substitute for the lack of organs that we have. Then, technology serves a purpose of relieving us of insufficient capabilities, and then it has the tendency of strengthening our nature-given capabilities. Let me read you a quote from him (the quote is in German, so I have to ad lib here a little bit, in translating):

Man is, in every natural environment, incapable of survival and because of this needs culture due to a lack of specialized organs and instincts. Without an environment that is specific to his species, in which he would fit in, without inborn purposeful behavior and behavioral patterns due to a lack of specific organs and instincts, with less than perfectly formed senses, without any weapons, naked in his habitus embryonic, insecure in his instincts, he must rely on action and on intelligent transformation of those circumstances that he happens to find.

Hands and brains might be considered to be specialized organs of man, but they are specialized in a different sense than animal organs are. They can be used for many purposes. They are specialized for unspecialized purposes and achievements and they are, because of that, suitable for unpredictable circumstances arising in the world. The culture of primitive people, thus, consists first of its weapons in their tools, in their huts, in their animals and gardens, all of which is changed, transformed, cultivated, that is, by newly formed nature, by intelligent action.5

The first achievements of men are substitutes for lacking organs, weapons, for instance. Also, fire, as some form of natural protection and shelter.

The second type of tools that are developed are developed in order to strengthen naturally given abilities, like using stones in order to strengthen the power that a fist has, for instance, or hammers as tools that strengthen natural given powers, or microscopes, as instruments that are more developed than the natural human organs, eyes, or telephones as instruments that strengthen and surpass the natural given abilities that we have through our ears. And then he points out that there exist techniques that relieve humans by saving them labor. For instance, a wheeled wagon, which allows us to carry weights that we could not carry naturally, and instruments that even combine all of these things, that is, they are in some sense, substitutes for lacking things, in some respects surpassing natural abilities and in some sense relieving us, saving us labor that otherwise would be necessary, for instance, an airplane. An airplane allows us to fly, which unaided we cannot do at all. It surpasses all natural abilities that exist in this regard, and it takes work away completely insofar as it transports us, without any effort on our own part, from one place to another. 

And Gehlen also points out that there exists in the history of technological development another tendency that we can recognize, and that is a gradual substitution of inorganic materials and forces for organic materials and forces. Initially, we used stone and wood and bone. The Stone Age ends roughly 8,000 years ago and then in the next stage, we already create some sort of artificial materials, bronze out of copper and tin, that begins roughly at 4,000 BC, or on the North American continent, only about 1,000 years ago. And then the next material, again, already further removed from the nature-given materials, would be iron, which comes into use around 1,200 BC, roughly, and then of course, finally, steel, which is a development of our relatively recent past. Instead of organic materials, we increasingly use cement and metals and coal. All of these things replace wood as burning material. We use steel ropes in order to replace leather and hemp ropes. We use synthetic colors instead of natural coloring materials. We increasingly use synthetic medicines instead of natural herbs, and so forth, and we make ourselves successively independent of natural energy sources.

For a long time, mankind was dependent on his naturally available energy sources, on forests growing up again. And the natural speed of trees growing up put a limitation on the speed of development that mankind could take. They were also dependent on natural, physical forces, such as the power of horses and oxen and things like this, which also could not be deliberately enlarged or empowered. And in the development of technology, gradually, we strip ourselves of these limitations by using first, coal and oil and then also water power and then of course, finally, atomic forces, which make us essentially independent of the growth of natural materials.

To conclude, let me quote again from Gehlen, who sees a logic in the development of human technology, a logic that we can see only if we look back from the present. In the past, we would not have been able, probably at the beginning of mankind, to predict that these would be the stages that technological development would go through, but looking backward, we can somehow understand that there was a certain inherent logic at work. He says,

This process of technological development has three stages. On the first stage, that of the tool, the force necessary for work and the necessary mental effort, still have to be done by the human subject itself. The tools somehow make it easier for us, the strengthen our forces, give us more force than we normally have, and reduce somehow the mental effort that is necessary, that we have to perform in conducting certain tasks. And in the second stage of the machine, steam engine and cars and so forth, the physical force is already technically objectivated; that means we don’t need any force anymore on our own part; all the force is generated by the machines. And finally, on the third stage of technological development, which is that of the automaton, even the mental effort that the subject had to show in the previous stages becomes unnecessary or of very minor importance. And with each of these three stages, the instrument, the tool, the machine, and then finally, the automaton, the objectivation of the fulfillment of the purposes of technology comes closer to its ultimate purpose, and in the automaton, it is finally reached because we can do things without our physical or mental contribution.6

• 1Brand Blanshard, Reason and Analysis (1962; Abingdon, UK: Routledge, 2013), chap. 2, p. 51.
• 2Ibid.
• 3Ibid.
• 4Herbert Spencer, Principles of Sociology, 2d ed. (New York: D. Appleton Co., 1916), vol. 2, p. 538.
• 5Quoted from Arnold Gehlen, Anthropologische Forschung (Hamburg: Rowohlt, 1965), pp. 94–95.
• 6Ibid.