Man, Economy, and State with Power and Market

We have thus concluded our analysis of voluntary and free action and its consequences in the free market, and of violent and coercive action and its consequences in economic intervention. Superficially, it looks to many people as if the free market is a chaotic and anarchic place, while government intervention imposes order and community values upon this anarchy. Actually, praxeology—economics—shows us that the truth is quite the reverse. We may divide our analysis into the direct, or palpable, effects, and the indirect, hidden effects of the two principles. Directly, voluntary action—free exchange—leads to the mutual benefit of both parties to the exchange. Indirectly, as our investigations have shown, the network of these free exchanges in society—known as the “free market”—creates a delicate and even awe-inspiring mechanism of harmony, adjustment, and precision in allocating productive resources, deciding upon prices, and gently but swiftly guiding the economic system toward the greatest possible satisfaction of the desires of all the consumers. In short, not only does the free market directly benefit all parties and leave them free and uncoerced; it also creates a mighty and efficient instrument of social order. Proudhon, indeed, wrote better than he knew when he called “Liberty, the Mother, not the Daughter, of Order.”

On the other hand, coercion has diametrically opposite features. Directly, coercion benefits one party only at the expense of others. Coerced exchange is a system of exploitation of man by man, in contrast to the free market, which is a system of cooperative exchanges in the exploitation of nature alone. And not only does coerced exchange mean that some live at the expense of others, but, indirectly, as we have just observed, coercion leads only to further problems: it is inefficient and chaotic, it cripples production, and it leads to cumulative and unforeseen difficulties. Seemingly orderly, coercion is not only exploitative; it is also profoundly disorderly.

The major function of praxeology—of economics—is to bring to the world the knowledge of these indirect, these hidden, consequences of the different forms of human action. The hidden order, harmony, and efficiency of the voluntary free market, the hidden disorder, conflict, and gross inefficiency of coercion and intervention—these are the great truths that economic science, through deductive analysis from self-evident axioms, reveals to us. Praxeology cannot, by itself, pass ethical judgment or make policy decisions. Praxeology, through its Wertfrei laws, informs us that the workings of the voluntary principle and of the free market lead inexorably to freedom, prosperity, harmony, efficiency, and order; while coercion and government intervention lead inexorably to hegemony, conflict, exploitation of man by man, inefficiency, poverty, and chaos. At this point, praxeology retires from the scene; and it is up to the citizen—the ethicist—to choose his political course according to the values that he holds dear.