Economics, and more specifically, praxeology, is a value-free science. In Rothbard’s words, praxeology deals with the values, goals, and actions of the actor, but not with “how they should have acted or how they ought to act.” The ethical character of desires is not part of praxeology, although this does not preclude the two bodies of knowledge from complementing each other.
Rothbard in The Ethics of Liberty clarifies that natural law presents human beings with the ends that ought to be pursued because they are consistent with their nature, constituting a “science of happiness” that shows the paths toward it; whereas praxeology analyzes happiness in a formal sense, as the achievement of the goals individuals place on their value scales. The difference between economics and ethics is that the value relevant to the former is subjective, while the value relevant to the latter is objective, something that need not be contradictory.
The justification for taking ethics into account in economics is that, although economics can demonstrate that protecting property rights is important for enabling more individuals to achieve their ends, an ethical justification of liberty and property is still required. That is, it is necessary to provide ethical judgments about which political philosophy is most correct and how property rights and crime should be defined within the legal framework corresponding to law.
Michael Accad explains that Aristotelian ethics can be connected to the Austrian School insofar as the good is what moves the subject to act, and the common good is that which unites a community without being exhausted in the process. Aristotle points out that every community arises around a common good, something that can also be observed in the market, where voluntary cooperation is oriented toward shared ends such as production and exchange. In Austrian terms, the market is not merely a sum of individual exchanges, but a spontaneous order guided by mutual interests. The pursuit of the common good does not negate individual action; rather, it channels it toward reciprocal benefits within the division of labor, allowing each actor to pursue his or her own happiness through exchange.
Natural law—already mentioned above by Rothbard—can be defined as the “principles of human conduct that reason can discover from the basic inclinations of human nature and that are absolute, immutable, and universally valid for all times and places.” Just as human beings act in pursuit of ends, reason can perceive these ends as good or bad. This requires the concept of human nature, which should not be controversial, since everything (including human beings) has a specific nature accessible to observation and rational reflection. The main scientific criticism of Natural Law theory is that its proponents hold widely divergent views among themselves; but it would be absurd to abandon its study for that reason, just as we do not renounce astronomy because what we know is far less than what we do not know, or because past astronomical theories turned out to be false.
Its contributions are fundamental in both law and economics. In law, Frédéric Bastiat explains that the law is the collective organization of the individual right of legitimate self-defense of our person, liberty, and property: rights conferred on us by nature, that is, by God. In economics, belief in natural law is belief in order. Ludwig von Mises—although critical of natural law as a utilitarian—nevertheless recognized that this doctrine helped convince us of the existence of a natural order, the importance of human reason, and the method of judging the goodness of an action by its effects. Although Mises regarded the market economy based on property rights and the division of labor as a natural order of mutually-beneficial cooperation, we agree with Martin Rhonheimer that Mises’s utilitarianism is not utilitarianism in the strict sense, but rather an ethics centered on the well-being and happiness of each human being, discoverable through reason. Mises did not justify the market because it was good for a majority, but because it respected the preferences and choices of each individual. He was therefore not far removed from natural law or from the idea that the market is the economic order corresponding to human nature.
We do not wish to conclude without criticizing constructivist ethics that attempt to build theories without properly understanding human nature. As Jesús Huerta de Soto argues, we must be critical of “Nirvana theories” that judge real market processes in a complete institutional vacuum; but also, as Dalmacio Negro notes, of attempts to construct a moralism devoid of religious foundations through “minimal ethics” such as deontologies, which open the door to nihilism.
In this regard, Jean Bethke Elshtain in Sovereignty: God, State, and Self criticizes Kantian ethics for its rigid moralism based on abstract principles disconnected from reality. To claim that it is an absolute duty always to tell the truth can become cruel and inhumane, for example, if a murderer were looking for a friend you are hiding in your home and asked whether he was there, in which case telling the truth would be the morally wrong choice. This is the problem of clinging to an illusory moral purity that ignores the complexities of existence.
Extreme individualism suffers from similar problems, as it is linked to a psychology in which human beings sever ties with institutions, as Robert Nisbet notes. Homo economicus is part of this psychology: an individual who acts solely to obtain advantages and material gains, ultimately resulting in a mechanistic view of human behavior.
To end with, great economist Wilhelm Röpke criticizes the centralist and mechanistic inclination of contemporary economic thought under the banner of macroeconomics, which seeks to calculate outcomes in advance using mathematical-statistical methods, when in reality economics is a science of the human spirit. Truly, in this respect he was an Austrian, the only ones equipped with the tools to study what lies beyond supply and demand.
