The one lesson in economicsreally should understand
The basic alternatives of survival
Start with yourself. How can you survive? There are three
(A1) you produce what you need- this is living the economic way.
(A2) others give you what
- this is living on charity.
(A3) you steal what you need- this is living the criminal way.
Obviously, no other alternatives are available.
You can understand that for a person alone on an
island only option (A1) is available.
No matter how many people there are in the world, if each one
of them produces what he or she needs, all of them can satisfy their
needs. A world consisting exclusively of producers is economically
Condition (A1) is the only universal condition of
It is not possible that everybody lives on charity. No one can
live on charity unless there is some other person who produces what he
needs for himself and also what he wishes to distribute to others.
Moreover, no one can continue to live on charity unless at all times
there is another who produces what he needs himself and also what he
wishes to distribute to others. A world consisting exclusively of
paupers is not economically viable.
Condition (A2) is not a universal condition of survival.
It is not possible that everybody lives by crime. No one can
live by crime unless there is some other person who produces what the
criminal takes away. Moreover, no one can continue to live by crime
unless at all times there is another who produces what the criminal
takes away. A world consisting exclusively of criminals is not
Condition (A3) also is not a universal condition of
Living on charity and living by crime are parasitic ways of
life. They can flourish only so long as the producers do not stop producing.
When there are too many people counting on the charity of
others, the producers will not be able to satisfy their own needs and the
needs of those who live on charity. Human nature being what it is, it is
likely that the producers eventually will cut back on charitable giving because they
prefer satisfying their own needs to satisfying the needs of others. In any
case, even if the producers should prefer being charitable to satisfying their
own needs, their capacity for charitable giving is bound to diminish over time
because what they give away they cannot use for maintaining, let alone
increasing, their productive powers.
When there are too many people living by crime, the
producers will not be able to satisfy their own needs and the needs of the
thieves and robbers. Human nature being what it is, it is likely that the
producers soon will cut back on production because they prefer enjoying leisure,
even if it means poverty, to working hard for the benefit of criminals. In any
case, even if the producers should continue to produce, their capacity to do
so is bound to diminish over time because what they have to give up to thieves
and robbers they cannot use for maintaining, let alone increasing, their
Human nature being what it is, people who find that a
parasitic way of life is capable of satisfying their needs are more likely to
prefer being a parasite to being a producer. That way, they can save
themselves a lot of pain and trouble
We have seen that only (A1) is a universal condition of
survival. A single person on an otherwise deserted island can survive only
by producing what he needs himself. He has no alternatives. However, if
there is another person on the island the other alternatives are available.
For two persons on an island, the alternatives are
This is the beginning of economic
society (a household)
(B1) They work together as a team to produce what they
This is the beginning of economic
conviviality (the market).
(B2) Each one produces what he needs and what he can
exchange for a more valuable good or service produced by the other.
This is the beginning of charitable
society or charitable conviviality,
which includes a producer and a non-aggressive non-productive person. Traditionally,
families are charitable societies in which the productive members take
care of the needs of the very young, the sick and the old. Giving alms to
beggars on the street or performing acts of kindness for strangers are examples of charitable conviviality.
(B3) One of them works to sustain himself as well as
This is irregular parasitism,
the opposite of economic conviviality, which includes an antagonism
between an aggressive non-productive person and his victim.
(B4) One of them steals from or robs the other.
This is regular parasitism
or the beginning of political society, which
includes an antagonism between an aggressive non-productive ruler and his
victim. The main difference between charitable society or
conviviality, on the one hand, and political society (there being no such
thing as political conviviality), on the other hand, is that the former is
constituted by giving and the latter by taking.
(B5) One of them forces the other to produce for the
two of them.
For three or more persons, the basic relations among
individuals (B1 to B5) remain the same. However, there now is the complication
that arises from the possibility of forming and dissolving coalitions. Hence,
there may be larger and smaller households or firms, larger and smaller bands
of parasites (thieves and robbers), and larger and smaller bands of rulers.
There may be also various sorts of schemes of co-operation and support among
several groups and individuals. The bottom line, however, is that to survive
non-producers must rely either on the charity of the producers or on their own
capacity for deceit, fraud and violence to exploit the producers. There is no
If you really have understood this lesson, you
should be able to cut through the rhetoric of deceit that the more
sophisticated non-producers have used since time immemorial to perpetuate
their rule. For example, a lot of rhetorical ingenuity has been deployed to
obfuscate the difference between giving charity to persons in need and taking
from one group of people ('them', 'the others', 'the rich') while giving some
of the loot to another group ('you', 'us', 'the poor').
You should also be able to discover the
fallacy of much contemporary 'technical economics' which tends to leave
out all 'moral considerations'. Only by eliminating such considerations can
one say that the difference between giving and taking is really without
'economic significance', because both amount to a unilateral transfer of
property, without payment of compensation.
Without a moral compass, an organisation set up by
producers to organise their charitable activities is not really different
from an organisation set up
by people to organise their taking of the property of others. 'Economically
speaking', the only relevant action of organisations of either type is to
effect a redistribution of property. Therefore -- or so the argument goes
--, we should judge them 'economically' only by considering their efficacy
and costs in bringing about a desired redistribution. We should not judge them 'morally' by
considering how they bring it about.
It is a truism that for every
person there are some needs which he can satisfy more efficiently by taking the
property of others than by his own production-and-exchange or by relying on the
charity of others. There is always a public that stands to gain from a taking.
If that public is large enough and sufficiently devoid of a moral sense it
readily will give political legitimacy to the view that the organised taking of the
property of others is a more efficient way of satisfying their needs than
relying on the charity of those others.
course, that view rapidly loses its credibility once we start considering the
effects of such takings in the long run. However, as one of the great 'technical'
economists and self-confessed immoralist, J.M. Keynes, consoled his followers:
'In the long run we are all dead.' Moreover, throughout history, it has been
understood by rulers that occasional acts of temporary self-restraint on their
part will give producers sufficient hope to increase production again by so much
that soon increased predation again will become profitable. Exploiting
people--or, to use the current euphemism, 'human resources management'--is an
art with a long pedigree.
the best book of economic principles is Murray N. Rothbard's Man, Economy,
and State: A Treatise on Economic Principles. (2 volumes.) Princeton, NJ: D.
Van Nostrand Co., 1962. Reissue, Los Angeles: Nash Publishing Co., 1970. New
York: New York University Press, 1979. Auburn University, Alabama: The Ludwig
von Mises Institute, 1993. A new edition is being prepared by the Ludwig
von Mises Institute in Auburn, Alabama. .