Tag: Economics

The War on Reason

The War on Reason

“The curious task of economics is to demonstrate to men how little they know about what they imagine they can design.” – Friedrich August von Hayek

Jon McDonald is an energy economist in Texas focusing on the international trade of natural gas and natural gas derivatives. He has a master’s degree in energy economics from Rice University. Follow him on Twitter @jonnymack1010.


It is true that history gave us some philosophers who believed, through the power and process of human reason, they could predict the future of mankind as if it were as simple as watching the hands on a clock or the sun rise and fall. They claimed they were granted this power by a higher authority. Through their own arrogance they sought to produce absolute eternal truth. These utopian philosophers prepared schemes for paradise on earth but neglected the fact that what they believed to be eternal truth was just their own hubristic creation. The belief in this divinely awarded position led them to promptly establish absolute moral codes binding on all men. To free themselves from criticism, they raised themselves above fallibility and incorporated the intolerance and violent oppression of those who would dare disagree with their philosophy. Only these philosophers knew what was best for mankind so they sought dictatorship for themselves or for those who would put their ideas into practice. Only their ideas could end suffering. 

History gave us Georg Hegel and Auguste Comte. Hegel from Germany and Comte of French descent. Hegel knew everything in the universe that could be known. His doctrine held that to fully know anything required the knowledge of everything. He said the “truth” was revealed to him by Geist, or “The Absolute Spirit”. Though a brilliant thinker, nobody could interpret his work. Some took it as a reason for the autocratic dictatorship of the Prussian Church while others interpreted it as the reason for atheism and revolution. Comte said he could predict the future and he thought this entitled him to the position of supreme lawmaker. Comte worked to establish a new religion to replace Christianity and picked out a woman to supplant Mary. Comte was insane.1

The war on reason was borne out this line of thinking. It was not the result of careful self-examination, modesty, caution, or humility on behalf of the utopian philosophers nor was it caused by the failures of the natural sciences. The economic freedom which emerged as a by-product of the political freedom obtained in the late 17th and 18th centuries gave rise to the freedom to maximize knowledge towards the application of human needs. The result was the marvelous growth of science which ultimately changed the face of the world. It would be pointless to attack the technological improvements of the human race over the course of history as they speak an undeniable language of great progress and human ingenuity. Those who would wage the war on reason took aim at another target – Economics.2

The war took shape out of the conditions which existed in the 19th century. The classical economists – Say, Smith, Ricardo, and Bastiat among others – had laid socialism in its grave. They were yet to find the solutions to the classical system as drawn by Jevons and Menger, but they had done enough to expose the delusions of the socialist utopians. The communists were finished. There was only one way left open that could resurrect the collectivists ideas. They could attack reason and replace it with magical intuition.

History would choose Karl Marx to propose this solution.

Based on the omniscience granted to Hegel by Geist and the mysticism of Comte, Karl Marx gave himself the ability to predict the future for all of humanity. Karl, being the supreme knower of all things, was better informed than Hegel and Comte on the plans of Geist. In Marx’s vision of the future, the final outcome of humanity’s evolution must be the establishment of the socialist utopia. Socialism will inevitably arrive as time progresses as if it were natural law, he declared. Since every stage of human history improves upon the previous, the ultimate result of mankind’s evolution will be socialism and it will be perfect. Socialism is the highest form of civilization that man could ever achieve. Time is all that is necessary to bring about our socialist destiny and time will arrange everything for the best. There is no reason to listen to the advice of mere mortals. 

Marx still had one more hurdle in his path. The critique of the economists stood in his way, but he had a solution in mind. Human reason, he claimed, was insufficient to find truth. Universal logic and truth do not exist. Marx, replacing Hegel and Comte as the chief exhorter of “truth”, asserted that the different classes of society formulate logic in fundamentally different ways simply because the different classes have different incomes. Proletarian logic is different than bourgeois logic, he claimed. The bourgeois mind cannot produce anything other than an apology for their capitalistic exploitation of the proletariat. Therefore, bourgeois logic is irrelevant, and the proletariat class will soon abolish all classes to convert the earth into a socialist heaven. Marx stated that whatever the mind produces is ideology which can only demonstrate the selfish interests of the theorists own social class. To Marx, universal truth and reason were not available to the human mind. Yet, according to the supposedly higher mind of Marx it was universally true that socialism was mankind’s destiny.

Fittingly, some members of the bourgeois were granted the ability to logic like the proletariat. By the work of some unspecified miracle, Marx was endowed with this special ability. Karl Marx, the son of a wealthy lawyer and married to a Prussian noble, was a member of bourgeoisie awarded the knowledge of the logic of all class’s past, present and future. His collaborator Frederick Engels, a wealthy textile manufacturer, was also granted this special privilege – an obvious coincidence. That Marx and Engels both attained a wealthy status by what they called “capitalistic exploitation” by other members of society was irrelevant. They had the approval to determine absolute truth by Geist and were therefore exempt from their own theory. 

In the Marxian universe, everything revolves around the income of someone else as if it were the gravity that holds that world together. The Marxist doctrine is a false prophecy that attempts to teach the world how to properly covet, envy and despise the position of another. Marx asserted that the logical structure of the mind is dependent on class, or, essentially, income and status. Thus, the Marxists reject the economic concept of scarcity as outlined by Lionel Robbins. They reject it not only because the socialist order cannot account for this reality in its operation, but because Robbins rose from the humble life as the son of a farmer to the ranks of a prestigious professor at the London School of Economics. To a Marxist, an economic theory developed by a member of the bourgeois is spurious. The Aryans reject the theories from economists like Ricardo, Rothbard and Mises because they were Jewish. The logic of a racist differs only from Marxian logic in that it ascribes to each race a different logical structure of the mind and holds that all members of certain races, regardless of class, are endowed with this logical composition. 

Now, it is irrelevant for economics to critique the concepts of class and race as prescribed by the Marxists. It is not the purpose of economics to ask a Marxist when and how the logical structure of the mind changes when a member of the proletariat succeeds in joining the ranks of the bourgeois. It is not necessary to ask a racist to explain the logic of people who are not of a single race.

Economics has more important arguments to put forward. 

The belief that simply discussing the background of an author will suffice in the attempt to illuminate the fallacies of a theory is entirely asinine. What is necessary is to construct a system of logic to counter the contested theory to show why the theory contains invalid logic. Neither the Aryans nor the Marxists have ever been able to design such a system. Nor have they been able to demonstrate precisely in what logic the proletarian logic differs from that of the bourgeoisie or the logic of the Aryans from the non-Aryans. If such a system of counter-logic cannot be constructed, a Marxist or an Aryan would have to consistently maintain that certain ideas are false because the author is not a member of the proper class, nation, or race. However, consistency is not their strength. The Marxists and the Aryans will approve any thinker whose doctrines fit their own ideology. Anybody else is their enemy guilty of treason.

In a free market system where individuals with the natural right to choose the pursuits to which they will direct their labor, either for necessity or desire and unobstructed by the arbitrary powers of another, every change in the market setting will affect the short-run interests of several different groups of people. This dynamic makes it easy to expose every single change in the existing conditions as a change which benefitted the “selfish interests of greedy people.” Many authors today fall victim to this low-hanging fruit and Marx did not discover this procedure. It was known long before his time. It never occurred to the supporters of such dogma that where there are selfish interests in favor of certain changes there must always be selfish interests against such changes. It is completely unsatisfactory to explain any event as an affair that favored a special class. The question that is necessary to answer is why the rest of the populace whose pursuits were injured by such an action failed in challenging the efforts of those who were favored by it.3

Every firm in every sector of a free and competitive economy is interested in a higher quantity of sales for its products or services. In the long run, however, there exists a prevailing tendency towards the equalization of profits in the various sectors of production through the process of competition. If the demand for the products or services of a certain branch of industry increases, prices will rise until sufficient productive capacity can be built to meet the rise in demand. The rise in price signals a shortage and an arbitrage opportunity to a profit maximizing agent. Investors rush into the sector attempting to capture a return on capital. In consequence, more capital flows into the sector increasing the productive capacities of competing firms. The dynamics of new entrants and higher production results in lower prices and the competition of new enterprises brings the height of net returns down to a more equal level.

Those at the helm of the already high profitable firms have little interest in the preservation of free competition. They are, however, opposed to new entrants expropriating their profits and would rather keep competition at a minimum to ensure higher prices. On the other hand, they are in favor of government measures which prevent new business from challenging their position in the market. Those who fight for free enterprise and free competition do not defend the interests of the rich. They want the opportunity left open to the unknown entrepreneurs and innovators of tomorrow whose ingenuity will make the life of coming generations more agreeable. They want the way left open to further economic improvements. They are the watchtowers of human progress.


*Special attention was given to the work of Ludwig von Mises in the writing of this essay. The majority of what is written here can be found in Human Action – ‘Economics and the Revolt Against Reason’. My hope was to bring this work back into discussion in a condensed version.

[1] Ludwig von Mises, “Human Action”, 1949. Hereafter abbreviated LVM.

[2] LVM

[3] LVM