Chapter 16. Which Came First?

"It is often stated that of all the theories proposed in this century, the silliest is quantum theory. In fact, some say that the only thing quantum theory has going for it is that it is unquestionably correct."--Michio Kaku


From the point of view of an egg, a chicken is merely the egg’s way of making another egg. From the point of view of a chicken an egg is the chicken’s way of making another chicken. Hazlitt presented this analogy in a discussion about cause and effect. Something is obviously wrong with it, but what is wrong is not necessarily easy to explain. There exists a causal relationship between chicken and egg but also apparently many a slip between cause and effect. Hazlitt was not concerned about chickens. He was addressing buying and selling. I am not concerned about either of those issues, but rather about human action. However, perhaps we should address all three because it might be easier using analogies

Chicken and eggs have a causal connection, but that does not mean that eggs have perspectives. Perspective assumes purpose, and as far as we know eggs do not intend to do anything. Chickens just happen.

And while our interest here is human action, the world is tottering on the mistake John Maynard Keynes made in his assessment of buying and selling. It is true that for every buyer there is a seller, but that does not identify cause and effect. Actually, buying and selling is a reciprocal relationship and neither is dominant when the system is honest. But a problem occurs when the buyer is counterfeit. This is also not easy to understand, yet we are doomed if we fail to grasp it. So let’s take a look. The critical error occurs by confounding money with purchasing power.

Keynes looked at market exchange and assigned cause to the buyer. Buying, he felt, stimulated production. Austrian economics views it the other way around. The problem is that demand requires more than desire. Demand is desire plus means (something to exchange), a combination which elevates it above wishful thinking. It is wishful thinking backed up by previous effort, the physical component of which becomes the limiting factor. Desire is cheap, but supplies are dear. Means is not simply money. Goods are never exchanged for money. They are exchanged through money for other goods (and services). We value money not for itself but for the things we can obtain with it. In a sound monetary system goods and money stay in balance. The maker of bricks enters the market by exchanging his brick production for money. This money then represents real products he has contributed to the economy. The farmer can enter that market with his apples and through money exchange them for bricks.We exchange real goods and services, not wishful thinking and empty promises.

Keynes felt we could skirt natural law by simply printing more money—more money supposedly allows more buying. But there is nothing more to buy. Suppose the new money first goes to the maker of bricks. He spends it. The farmer wants bricks, but none are being produced. If the farmer has already started building a house he is in trouble because there will not be enough bricks to finish it. That is how inflation causes malinvestment. It gives false signals. Fiat money represents nothing tangible, so it loses value and measures nothing.

But in addition the new money reduces the purchasing power of the existing supply, thus raising prices. The farmer in essence trades his apples for higher prices. Buyers do in fact induce sellers and visa versa, but the brick manufacturer is no longer a genuine buyer. He is a fake, like the pretentious egg. Neither of these two pretenders represent honest authority. The egg does not produce a chicken and the buyer does not make a purchase. The egg simply evolves, and the buyer simply steals.

The horror of today’s economics hinges on this error. Something has to be terribly wrong when people fly airplanes into our buildings and Federal authorities advise us to fight back by going shopping. Frankly, if we cannot see that something is wrong with such a plan then we are all doomed.

Keynes treated desire as the mover, when in reality it is desire plus means that moves markets. Means are the limiting agent; desires are everywhere and hence free, like dandelions. Physical is the limiting factor in moving people. Causality and purpose exist in the physical world. There is no direct agency with mental. It guides. It is important. But it takes no action. Action entails entering a causal chain. Mental cannot engage that. It has no location or motion. It is a concept, not a thing. Unrefined, it does no work, is abundant, and hence cheap. No one trades apples for wishful thinking.

When it comes to a cause and effect relationship between mind and body it is clear which leans on which. It is one thing to wish to run a marathon and quite another to train for one. A person can think about losing weight with impunity but will lose weight only through effort. Actions speak louder than words. That is a metaphor, by the way; words do not really speak. People speak. Their bodies do the work, the mind never utters a peep. This is not to diminish mind. Mental directs us to goals; it just can’t take us to them. The body does the heavy lifting. Only the body enters the causal world of external reality. The mind functions in an advisory capacity, which can be extremely important, even critically so, but it is never the agent. If the chicken and egg are arguing about who is dominant, side with the chicken. If the mind and body are having such an argument, side with the body. Mental shuts down at night while the body keeps working. If the body shuts down the mental goes with it.

Mises merely threw up his hands when it came to metaphysics. Philosophers in his day were all abuzz about language. They did not start addressing mind until later in the century. Today we have the benefit of Searle or Chalmers and can pretty well put the mind/body dichotomy to rest: it is all body when it comes to agency. The body gets you to work. The body brings home the pizza. Mind is the global positioning system; body is the automobile. Causality exists in the physical world and only body can alter a chain of cause and effect. Mental presents itself only through physical. We plan and choose means in the virtual world of conception without which we would certainly disappear as a species. But for action as defined in action theory the agent is entirely physical. Mental and physical make a great team but the mental drafts on the physical. That is why we measure actions in praxeology, not wishful thinking. Something has to get us up off the couch. After all, 90% of responsibility is just showing up.