AUSTRIAN ECONOMICS ADDICT

Human Action by Ludwig von Mises (Photo credit: Wikipedia)

HUMAN ACTION, IN A CHANGING WORLD.

The book  Human Action (link here), by Ludwig von Mises is full of great insights into how the world works. These insights are very helpful in understanding what happens in the world of Government and politics. The books starting point for analysis is this: man acts because of the mere fact of his existence. Human action is purposeful behavior. Action is not verbal preference, it is an individual choosing, and acting, to reach a particular end. Man acts to substitute what he thinks will be a more satisfactory state of affairs for a less satisfactory state. He wouldn’t want to change his existing state of affairs, if he didn’t think his action would bring about a better state. His actions will reveal the correctness of his thinking. Action is a tangible thing and cannot be confused with wishes or hopes. Both the material and the ideal are valued differently by each individual, and what each individual values changes in time and place. What a man values the highest drives his actions. He uses available means to achieve his most highly valued ends, and his action toward his most valued end, takes place in a world of imperfection and constant change. So to summarize: in a constantly changing imperfect world, each individual is using constantly changing means, in an attempt to obtain his most valued end, an end that can change as the actor’s values change. In a country of 300 plus million, it would be impossible to centrally plan all of these constantly changing decisions. Let’s remember this as we take a look at some sequestration cuts.

ACTION ON THE MARGIN, REVEALS  INDIVIDUAL VALUES.

Mandatory budget cuts were a result of sequestration. When you are faced with a choice of cutting something from your budget, you would pick the item you valued the least. Man acts using scarce means to acquire his most valued ends. When scarce means run out, the ends that remain unsatisfied are the least valued, as revealed by the actors actual choices. The last end satisfied by the final increment of scarce means, is the unit on the margin, or the marginal unit. The value of the marginal unit, or it’s marginal utility (read here), is revealed by the choice of the actor. This is a simple explanation of the law of marginal utility, but lets use this to analyze decisions made by politicians as they relate to sequestration.

Since we don’t live in the political or bureaucratic world, it’s difficult, but not impossible, to understand why politicians make the decisions they do. When analyzing political decisions, understand what we talked about above, politicians are using purposeful behavior to reach a highly valued end. When they chose to cut air traffic controllers, which means delays and possible danger from under staffing, it didn’t make sense to us. Air traffic controllers wouldn’t be the marginal unit on our value scale, but they have the lowest marginal utility for the politicians. And this fact reveals something about their scale of values as compared to our scale of values. The most important end on their value scale is to gain as much power as possible, and growing Government is the means used to obtain this most valued end. From their perspective, any tactic that helps grow Government must be used, no matter the cost. Delays and possible public safety problems are born by passengers. Politicians hope delays will become so bothersome; that eventually people will beg for Government to reinstate what was supposedly “cut” by sequestration, even though it was just a cut in the rate of growth. We would handle sequestration much differently than our politicians, because our goal would be to make the air traffic system work as efficiently and safely as possible, inside of the new budget constraints. Luckily for us  push back by the public, and their own self interest, made politicians reevaluate if the means they had chosen to attain their most valued end, were going to be successful. They decided that ultimately these tactics wouldn’t work, so they changed the policy. It’s just a temporary set back because politicians are already looking for other means to use in the attainment of their most valued end. Government growth is like water running down hill, no matter what barriers are placed in its way, it finds the path of least resistance and continues to move toward its ultimate goal.

Related article, Fight Back! Privatize The FAA! ,by Peter Ferrara at spectator.org.

Related article, Mises’ “Human Action” Explains Lies About Libya”, at austrianaddict.com

Related article, Fiscal Cliff or Political Theater? by austrianaddict.com

Related article, Dallas Fed President Fisher Points to the Feds Real Problem, at austrianaddict.com

This entry was posted on May 1, 2013 at 12:21 am and is filed under Econ. 201. You can subscribe via RSS 2.0 feed to this post's comments.

Tags: Air traffic controller, Austrian School, Economics, Human Action, Ludwig von Mises, Marginal Utility, Sequestration (law), Subjective Value