Is Property Theft? | Dr Robert Murphy | EP 189

52m read

·Nov 7, 2024

Okay, so one reason for ownership is that it's very difficult to monetize something without that ownership. And if you can't monetize it, you can't calculate its value. And if you can't calculate its value, you can't use it, or you can't know whether you're using it efficiently or not. Well, but that would be the same thing essentially because if you don't use it efficiently, you're going to have to stop using it pretty damn quickly. And so, to some degree, pricing is the antidote to the tragedy of the commons.

That's another way of looking at it. So, for example, in the oceans, no one owns the oceans, at least not past once you get out 200 miles—it's free-for-all essentially. And so the consequence of that is that everyone is incentivized to take every goddamn fish as fast as they possibly can, and that's exactly what's happened. And it's because the fish are free, right? But they're not, because they're a finite resource. And so the problem is we haven't... or a problem, a potential problem, is that we haven't assigned a monetized value to the fish. And so once they're pulled into an economy, they're worth something, but out there free-floating, it's every man for himself. And so that means that without private property, you know, you could make a case that private property leads to the despoiling of the natural environment.

Say, okay, well what about those situations where there is no private property? Well, then you get instantaneous despoiling of the natural environment because there's no incentive to maintain it.

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Hello everyone, I'm pleased to have with me today Dr. Robert P. Murphy. Dr. Murphy has a PhD in economics from New York University. He's a research fellow with the Independent Institute and a senior fellow with the Mises Institute. He's held academic positions at Hillsdale College and Texas Tech University. He is the author of "Choice: Cooperation, Enterprise, and Human Action," which is a modern distillation of Ludwig von Mises's important treatise on the Austrian School of Economics. He's the author of several other economics books for the layperson as well, including "Lessons for the Young Economist" and "The Politically Incorrect Guide to Capitalism." In addition to his scholarly work, he hosts the popular podcast "The Bob Murphy Show," concentrating on economic and political issues.

Thanks very much for agreeing to talk to me today, Dr. Murphy. How are you doing?

Oh, I'm doing great, and thanks so much for having me on the show, Dr. Peterson.

My pleasure. A lot of my listeners have mentioned their belief that my work is somehow reminiscent of work done in the Austrian School of economics, and after reading— I didn't really know anything about the Austrian School of economics— after reading the bulk of "Choice: Cooperation, Enterprise, and Human Action," I understand why there's an emphasis on value. I suppose a lot of my work is predicated on the idea that it's not my idea, but on the idea that human beings are goal-directed actors and that much of our motivation, much of our behavior, can be understood in that light. Profitably understood in that light, so to speak.

And Mises insisted upon the primacy of human action really as his starting point. Why did you write "Choice: Cooperation, Enterprise, and Human Action"? And maybe we'll walk through it. I wanted to talk to you because I wanted a two-hour lesson in Austrian economics, and I suppose I felt that this was the fastest way to do it, and I could share my intellectual endeavor with all of my audience. And so I'm hoping we can manage that today, so let's go to the book.

Okay, sure thing. And I'm happy to do it. Let me just mention that before I forget that I have listened to a bunch of your lectures as well, and there was one, besides what you mentioned, the affinity with, you know, value and that connection. You often talk about how people get feedback from social cues of others, and that helps people regulate their behavior. And that's a very, let's say, Hayekian perspective. Like when I heard that, I thought, oh, that's sort of like how the price system gives producers feedback as to whether they're using resources profitably in a socially right advantageous manner.

So anyway, well, I did have an economic argument in mind, or an economic analogy in mind when I formulated that argument. I would say, you know, it's very difficult for us to compute our way through life because life is so complex and so uncertain and so multifactorial, and all the factors continually change. And so in, yeah, in "Beyond Order," my second book in particular, I stress the role of responsiveness to feedback as a means of opening the individual to the corrective feedback from a distributed computational device, essentially.

I mean, each of us are calculating madly in an attempt to minimize catastrophe and pursue some degree of satisfaction and hopefully pleasure. And we're all doing that independently, and cumulatively, that makes for an incredibly complex computational system. It only makes sense to avail yourself of the outputs of that system if you want to orient yourself properly in life. And so I made the case that, well, one of the things you want to do with children, for example, is to make them socially receptive because that way they can avail themselves of the computational resources of the society around them and keep themselves in sync with other people and hopefully to some degree with the natural world.

I didn't think of that relationship.

So, okay, so let's move into the economics field.

Sure. So yes, you had asked why did I write the book. So what it is attempting to do is to take— so Ludwig von Mises is a giant in the Austrian School of Economics, and his magnum opus is called "Human Action," and it's a masterpiece.

And that's really, in terms of modern Austrian economics, people can read that, but unfortunately it's something like 900 pages long. Even though he wrote it in English, it's a very Germanic formal style, and the vocabulary is difficult. And he assumes the reader is like a Renaissance man or woman and knows all lots in various fields, and Mises just makes off-hand remarks as if the reader already knows all these things.

So what I tried to do with my book "Choice" was to take, you know, the essentials of "Human Action" and make it about 300 pages or so. And the, you know, the Independent Institute, the publisher, they told me to make it so that it could be assigned plausibly to an undergraduate class. And so that's what we tried to do. And the thing in particular I wanted to make sure the reader got out of it was knowing the Austrian theory of what causes the business cycle, because to me in our times that's the essential scientific finding of the Austrians that even other free market schools are missing.

Well, let's start with the basics. So, okay, how did Mises—and in your book—how do you construe the basics of the economic system? How do you define it, define the individual actors within it?

Okay, so the way Mises proceeds is he says that historically there was the classical economists, people like Adam Smith. You know, when he wrote "The Wealth of Nations," just the title of that shows that what the classical school was focusing on was the production of wealth of, you know, physical things that people value, and that's what they were focused on.

And then there was the so-called marginal revolution when the Austrian school was born, and that happened in 1871. Carl Menger was one of the three people credited with ushering in this what's called the subjective marginal revolution in economic thought, and that gave us what's called modern value theory, right?

And so you could... there's different theories about why something is worth something, and one theory would be that something has a price because it took a certain amount of labor to produce it, took a certain amount of goods to produce it. The price has to reflect the labor and the goods.

I think it's no... it's not unreasonable to point out that that would be the fundamental presupposition of Marxist economists. And then an alternative to that would be, well, actually, if you produce something that no one wants, it doesn't matter how much work and how many resources went into it; its net price is essentially zero if there's no market demand.

And so the economist that you talked about flipped that on its head and said, well, the price of something isn't dependent on the nature of the resources that went into it; it's dependent instead on the demand of the population served for that particular good. And then you talk about the marginal revolution, which transformed that theory—that pricing occurs at the margins—and that would be something very much worth explaining.

Okay, yeah, sure. So let me just... so everything you said is perfectly correct, but let me just—some people might have the misconception that the labor theory of value is a specifically Marxist invention, which makes sense because, you know, Marx cares about the working class and thinks that the capitalists skim off the workers. But the classical economists also, like Adam Smith, you know, the heroes of the free-market tradition also adhered to what we would call a labor theory or a cost theory of value, and it goes back, I want to think even like Aristotle.

So the old conception was, if a stagecoach trades for so many chickens in the marketplace, there must be some quantity that's equal in both of them. You know, like there's a—like the market prices are a measuring rod of something that's in the objects, and what is that?

And so Marx thought, oh, it must be congealed labor power or something like that, and so the marginal subjectivist revolution of 1871 realized that no—when a stagecoach trades for a gold coin, nobody—it's not saying a stagecoach equals a gold coin. It's saying the person who gave up the stagecoach valued the gold coin more than the stagecoach; that's why that person agreed to the trade. And for the buyer, it was the other way around; they valued the stagecoach more than the gold coin, and that's why they did it.

So there's no equality going on; it's a difference in subjective measurements on the margin. So there's inequality from both parties that just is lining up differently, and why on the margin?

Okay, so the deal with calling and saying margin is—so you know there's the subjective element, which is like I said, it's just what's in people's heads. And then the marginal—the reason it's called the marginal revolution is that they realize that any given exchange is just particular units.

So the word margin meaning like on the edge, like the margin on a piece of paper. So, to exp—the famous way to motivate this is to say, you know, why is it that diamonds have a higher market value per unit than water does? Because water is essential for life, so you would think water should have a higher price.

But the reason is, in any particular exchange, you're not trading all the water in the world for all the diamonds. If you were, then the water would be more valuable. It's just like that gallon of water versus that diamond and so on.

The marginal—the reason it's called the marginal revolution is that they realized that any given exchange is just particular units.

So, the word margin means like on the edge, like the edge on a piece of paper. So to explain—the famous way to motivate this is to say, you know, why is it that diamonds have a higher market value per unit than water does? Because water is essential for life, so you would think water should have a higher price.

But the reason is, in any particular exchange, you're not trading all the water in the world for all the diamonds. If you were, then the water would be more valuable. It's just a matter of that gallon of water versus that diamond and so on.

So, the marginal—the reason it's called the marginal revolution is that they realized that any given exchange is just particular units.

Because water is essential for life, so you would think water should have a higher price.