The economist Thomas Sowell frequently reminds us that inequality is inherent in human nature. Rather than being puzzled by economic inequality, we should be concerned with understanding the causes of productivity. It is productivity that improves everyone’s material conditions and their material standard of living.
Yet, for several decades, economists have been less concerned with the causes of productivity and more concerned with wealth distribution. Although they may loosely use the terminology of causation—they seem to be asking what causes inequality—they are not involved in causal inquiry and are merely expressing their ideological objection to what they describe as the racial wealth gap. They assume that, in the absence of discrimination, everyone would have more equal economic outcomes. And yet, as Sowell argues,
Neither logic nor empirical evidence provides a compelling reason for expecting either equal or random outcomes among individuals, groups, institutions or nations.
Sowell highlights empirical studies showing that wealth distribution is influenced by so many different variables that it would be wrong to assume that racial identity is a causal factor in economic outcomes. In his book Disparities and Discrimination he identifies some of the key factors that correlate with economic outcomes, arguing that,
Neither in nature nor among human beings are either equal or randomly distributed outcomes automatic. On the contrary, grossly unequal distributions of outcomes are common, both in nature and among people, in circumstances where neither genes nor discrimination are involved.
He, therefore, cautions that empirical evidence of racial disparities, by itself, cannot explain causation. To understand the causes of economic prosperity we must inquire into why people act, what purposes they seek to attain. In that context, Ludwig von Mises emphasizes that we cannot understand human action without “the category of causality.”
In this sense we may say that causality is a category of action. The category means and ends presupposes the category cause and effect. In a world without causality and regularity of phenomena there would be no field for human reasoning and human action. Such a world would be a chaos in which man would be at a loss to find any orientation and guidance. Man is not even capable of imagining the conditions of such a chaotic universe.
We do not find this point difficult to understand in studying the causes of natural phenomena. Scientists conduct experiments and test different hypotheses until they identify the root cause of the phenomenon under investigation. That is how we now know that the force of gravity causes a ball to roll down a hill. No further explanation is needed for what causes the ball to behave that way. As teenagers like to say, “it’s not that deep.”
But in relation to human action, matters are more complicated. Human behavior is so variable that it cannot be subjected to the same types of tests as, say, the structure of a bridge.
Aristotle identified four different types of causes. To give a brief summary, the material cause of a phenomenon is what constitutes it, what it is made up of. The formal cause is its appearance, shape, or design. The efficient cause refers to the forces of nature that transformed it into its current form. The final cause is its goal or purpose in achieving the outcome or phenomenon as it now pertains. The final cause is the ultimate purpose for which the thing exists or happens.
In Aristotle’s example of an acorn, outside the world of fairy tales, nobody who investigates plant growth really wants to know the final cause, or purpose, of the acorn growing into a tree—all those nights when the acorn dreamed of one day turning into a giant oak. As Mises observed,
Both primitive man and the infant, in a naïve anthropomorphic attitude, consider it quite plausible that every change and event is the outcome of the action of a being acting in the same way as they themselves do. They believe that animals, plants, mountains, rivers, and fountains, even stones and celestial bodies, are, like themselves, feeling, willing, and acting beings.
Understanding human action is not as simple as investigating where a river is going, or why it flows in a particular direction. To understand why people act as they do, one approach is to study correlations and identify patterns which may strongly suggest possible causes that may then be subjected to empirical testing. This is how most economists interested in racial wealth gaps occupy their time. But if they are wrong about the causes of what they observe, there would be no obvious “feedback” to alert them to their error—or rather, their results could easily be attributed to random other factors that may plausibly explain the outcome.
In the natural sciences, it is not so easy to rationalize unfavorable results in that way. Being wrong about, say, what causes an airplane to take flight, would be disastrous. The results would be immediate and catastrophic. By contrast, as long as the explanation for human behavior seems logical and fits their worldview, people can carry on mistakenly believing that they can identify causal relations from studying group disparities. This is especially the case where they observe what appear to be strong and persistent correlations between race and economic outcomes. Such errors can persist for a surprisingly long time, and some errors never get corrected because failed experiments are rationalized as “not real socialism.”
In his book The Ultimate Foundation of Economic Science, Mises explains the importance of teleology in avoiding these errors: “The natural sciences are causality research; the sciences of human action are teleological.” He saw both teleology and causality as important. In Human Action he explains that, “There are for man only two principles available for a mental grasp of reality, namely, those of teleology and causality.”
Teleology and causality are different but connected. In Human Action, Mises argues that “teleology can be called a variety of causal inquiry. Final causes are first of all causes.” The Aristotelian final cause—the ultimate goal or purpose—is logically the primary explanation for why man acts. In that sense, purpose is a variety of cause. We must, therefore, avoid simple explanations, rooted in mechanical causality, which exclude teleological inquiry. Mises cautions that:
The panmechanistic world view is committed to a methodological monism; it acknowledges only mechanistic causality because it attributes to it alone any cognitive value or at least a higher cognitive value than to teleology.
When economists ask why racial wealth disparities pertain, they often imply that factors such as lack of education, unstable family background, lack of resources, discrimination, criminal records, and such measurable factors are the cause of economic inequality. While such factors may explain economic outcomes in a descriptive sense, they do not establish causation. People from the most troubled backgrounds often end up wealthy and successful, while people with every advantage in life often end up in economic distress.
We should also heed Sowell’s warning against trying to explain human action by reference to “one-factor explanations of economic outcome differences.” As the economist Frank Shostak reminded us, “Correlations can only describe, but not explain.”
From the perspective of methodological individualism, the more important question is: What conditions allow individuals to improve their own situation through productive action? In answering this question, the rules and principles that apply are universal and scientific. They do not vary based on race.
