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Software Models and Austrian Economics

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08/08/2009

My day job is software development. Within the field there is a considerable literature on modeling, which means more or less, identifying and organizing the concepts in your problem domain into a form that is suitable for writing programs.

While reading the book Model-Driven Design Using Business Patterns by Pavel Hruby, I was struck by some similarities between the modeling strategies and some Austrian concepts.

For example, p. 19, Economic Resources:

Economic resources are things that are scarce, and have utility for economic agents, and users of business applications want to plan, monitor, and control

Compare this to Menger, The General Theory of the Good:

If a thing is to become a good, or in other words, if it is to acquire goods-character, all four of the following prerequisites must be simultaneously present:
1. A human need.
2. Such properties as render the thing capable of being brought into a causal connection with the satisfaction of this need.
3. Human knowledge of this causal connection.
4. Command of the thing sufficient to direct it to the satisfaction of the need.

and p. 30, The value of Exchanged Resources:

Each resource that is subject to exchange has a different value for the economic agents participating in the exchange. For rational economic agents, an economic exchange can occur only if both economic agents perceive the value of the received economic resources higher than the value of the given resources; otherwise they will not exchange them.

Compare to Menger, The Theory of Exchange:

The enjoyment men derive from an economic exchange of goods is the general feeling of pleasure they experience when some event permits them to make a better provision for the satisfaction of their needs than would otherwise have been possible. But the benefits of a mutual transfer of goods depend, as we have seen, on three conditions: (a) one economizing individual must have command of quantities of goods which have a smaller value to him than other quantities of goods at the disposal of another economizing individual who evaluates the goods in reverse fashion, (b) the two economizing individuals must have recognized this relationship, and (c) they must have the power actually to perform the exchange of goods.

After noticing these similarities, I wrote and asked Dr. Hruby whether his work was inspired by Menger. He wrote back the he is familiar with the Austrian school, especially Mises, and that Austrian economics had been helpful to him the development of his methodology. He wrote,

Libertarian thinking can explain some hard problems in REA we came across, for example, whether a patient in a hospital should be considered an economic agent or an economic resource. On one hand, a patient pays for the treatment (either directly or via his insurance), which is an argument for patient being an agent. On the other hand, the treatment the patient receives is a conversion process, which is an argument for the patient being a resource.

The answer to this problem can be directly derived from the basic libertarian axiom of the “right to self-ownership” (Rothbard, Libertarian Manifesto): “The right to self-ownership asserts the absolute right of each man, by virtue of his (or her) being a human being, to “own” his or her own body; that is, to control that body free of coercive interference. So in REA, a patient is an economic agent but his body is an economic resource.

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