On January 18, The Heartland Institute held an event with economist Robert Murphy, author of Choice: Cooperation, Enterprise, and Human Action., a book that distills Ludwig von Mises’ seminal work on Austrian economics Human Action for a general audience. Unlike what usually passes for economics in many classrooms, government, and the media, Murphy’s book is an engaging and intriguing book that provides something quite unique: a genuine treatise on economics that instructs and entertains both professional economists and general readers.
You can watch the whole presentation at this link.
About the Speaker
Robert P. Murphy is a Research Fellow at the Independent Institute, Research Assistant Professor with the Free Market Institute at Texas Tech University, President of Consulting by RPM, Senior Economist with the Institute for Energy Research, and Associated Scholar with the Ludwig von Mises Institute. He received his Ph.D. in economics from New York University, and he was formerly Visiting Assistant Professor of Economics at Hillsdale College, Visiting Scholar at New York University, Research Analyst at Laffer Associates, Chief Economist for the Institute for Energy Research, and Senior Fellow in Business and Economic Studies at the Pacific Research Institute.
Murphy is author of the books, Lessons for the Young Economist, The Politically Incorrect to the Great Depression and the New Deal, The Politically Incorrect Guide to Capitalism, How Privatized Banking Really Works, Study Guide for Ludwig von Mises’ Human Action, Study Guide for Murray Rothbard’s Man, Economy, and State with Power and Market, and Study Guide to The Theory of Money & Credit by Ludwig von Mises.
His articles and reviews have appeared in such scholarly journals as The Independent Review, Review of Austrian Economics, Journal of the History of Economic Thought, Quarterly Journal of Austrian Economics, Economic Affairs, American Journal of Economics and Sociology, Journal of Libertarian Studies, and Homo Oeconomicus. And his popular article have appeared in the LosAngeles Times, Detroit New, Washington Times, Orange County Register, Atlanta Journal-Constitution, MarketWatch, The Freeman, Buffalo News, San Jose Mercury News, Barron’s, Forbes, and Investor’s Business Daily. In addition, he has appeared on CNBC, Fox Business Network, C-SPAN, and other TV and radio networks and programs.
In his introduction of Murphy at the event, Heartland Institute Director of Communications Jim Lakely noted that Murphy is a proponent of the Austrian School of Economics, following in the tradition of Ludwig von Mises, Nobel Prize winner Friedrich Hayek, and economist Murray Rothbard.
Summary of Professor Murphy’s remarks about his book, Choice
Many attribute the most ambitious, and arguably greatest, treatise on economics ever written as Human Action by Ludwig von Mises published in 1949. In that masterpiece, the learned scholar, who had fled war-torn Europe in 1940 and landed a visiting professorship at New York University five years later, summarized the state of economic science, especially as it related to the flourishing of a free and prosperous society. Mises valued the importance of educating the public about the basic teachings of economics, because public opinion ultimately shapes government policies that either support or sabotage the workings of the market economy. Human Action was Mises’s most painstaking effort to instill in the thinking public the profound notion that civilization rests on the basic fact that human society is vastly more productive when individuals work in cooperation with one another.
Although Mises’s Human Action is considered brilliant – uncompromising in his commitment to teach the deepest truths about economic science and to enlist the public in the defense of a free society – it’s length and depth can be intimidating to many potential readers. Murphy, in his book Choice: Cooperation, Enterprise, and Human Action, manages to distill the essence of Mises’s treatise into a more reader-friendly, and understandable book.
Murphy notes that his book is not meant as a mere study guide of Mises’s treatise. Instead, it’s a stand-alone work that elucidates Mises’s most important teachings in a style designed to engage the reader, but without sacrificing the rigor of the master’s arguments.
Importance of Human Action
Murphy begins by explaining the historical context that gave special meaning to the phrase “human action” – showing its fundamental importance to the study of man, society, and economics. From its inception through the founding of classical economics (the time of Adam Smith and David Hume), economists focused on the patterns observed in market phenomena, such as the connection between prices and costs or the influx of new money and the drop in its purchasing power. Later, however, the so-called “Marginal Revolution” of the 1870s ushered in a new way of thinking about economic affairs.
Rather than focusing on the objective characteristics of physical commodities and labor-hours, economists began to study the subjective processes by which humans made choices. Economics was now embedded in the larger enterprise of the study of human action itself.
After defining “human action” as intentional behavior, Murphy spells out some of the implications of this idea. For example, if an action takes place, there must be an actor – that is, a volitional being, one who chooses among various alternatives for the sake of achieving a desired outcome. For without the presence of goals or preferences, Murphy notes, it would make little sense to classify an observed behavior as intentional.
Critical Insights of Economic Science in Austrian School Tradition
After laying the foundation of economic science (in the tradition of the Austrian School), Murphy spoke about some of its most crucial insights. Chief among them was the recognition that modern civilization depends on the higher productivity of labor that results when people cooperate with each other, rather than when they work in isolation.
A key theme in Murphy’s book, likewise for Mises’s treatise, was defined by Murphy in the importance of economic calculations to the market economy, hence to modern society. Nearly all economists agree that “economizing” on the use of society’s scarce resources is necessary for making optimal production choices, but Murphy explains why Mises’s writings on this subject were path-breaking. Mises showed that economic calculation requires that a society recognize (and enforce) private-property rights – not only in consumer goods, but also in the “means of production.” And money must be utilized – thus humanity can reap the benefits of economic calculation only if people allow the free functioning of the market economy.
Socialism vs Free Market System
Murphy described a pure socialist society as one in which the state owns all means of production and then decides what will be produced and how the output will be allocated. In contrast, entrepreneurs in the pure market economy possess the potential to rationally allocate scarce resources in ways intended to satisfy the desires of the consumers.
In his talk Murphy included a numerical example to illustrate a principle set forth by Mises – that of the “master builder” who must revise his architectural blueprints after realizing he has too few bricks to complete building – to explain the harm caused by government interventions meant to forestall the liquidation of wasteful projects during an economic recession.
Murphy goes on to explain how a pure socialist society cannot match the performance of a free market system, even if socialist planners mean well. For without market prices they have no reliable method for discovering how to devote resources to their most important uses. This shortcoming leads some people to mistakenly conclude that the best economic system would rely on a “third way” – one that harnesses the dynamism of capitalism while retaining the egalitarianism of socialism. Murphy noted how interference in the workings of a market economy can create unintended consequences that make problems worse. For example, minimum wage laws are intended to boost income among the least-skilled workers, but they result in high unemployment among this demographic.
Robert Murphy, in the final section of Choice, explains why the study of economics is unique. In physics or engineering it really doesn’t matter whether the public understands the theories presented. But for economic science to be useful, it is necessary for public opinion to support the institutions of the market economy.
Future Wednesday Evening Heartland events
Wednesday, Feb 1
Failure: The Federal Misedukation of America’s Children
5:30 PM – 7:30 PM
Wednesday, Feb 8
Charlie Kirk: Time for a Turning Point
5:30 PM – 7:30 PM
Wednesday, Feb 22
Defending Free Speech
5:30 PM – 7:30 PM
All events are free and take place in Heartland’s Andrew Breitbart Freedom Center. Call for reservations at 312/377-4000. If you are not able to make the event, you can watch the live-stream on Heartland’s YouTube channel.