My Take on the ABCT: Objections Considered

Referring to the ideas presented in My Take on the ABCT (Simple Version) and My Take on the ABCT (Complex Version), a Mises Forum member wrote...

Wrong. What you're describing is a credit cycle. It implies that all the government needs to do is to keep interest rates low. During a boom/bust cycle, the fundamental changes are not in interest rates, but in the productive structure of the economy.

An increase in the money supply does not cause a crisis. If the money supply increased equally across all sectors of the economy, there would not be any malinvestment, only price inflation.

What does cause a crisis is a decrease of the interest rate without an increase in the supply of savings. This decrease in the interest rate has to be funded by having new credit created. This funds special high cost projects. It funds the purchase of machinery, land, factories, houses, apartment buildings, vehicles, and other capital and durable consumer goods. In Austrian terms, durable consumer goods and capital goods are called "higher order goods." This increase in the purchase of higher order goods stimulates the production of said goods. Companies which produce these goods experience higher profits, attract more investors, hire more workers, and raise wages. In essence, they buy up resources which would be used by lower order industries. However, since people's time preferences have not changed or have changed very little, they will consume more than they did before, thereby reallocating their money to lower order industries. These lower order industries (e.g. retail) then experience higher profits and are able to attract more investors, pay higher wages, hire more workers, and bid away resources from higher order industries. This causes higher order industries to be less and less profitable, forcing them to lower wages and/or lay off workers while returning less profits to their investors. Lower profits means less consumption, which then means lower profits for lower order industries which produce consumption (lower order) goods. These lower order industries are then forced to continue the cycle by lowering wages, laying off workers, and returning less profits to their investors. Unemployment increases and consumption falls while the malinvestments made during the boom are liquidated and credit contracts.

My Reply..

Regarding lower interest rates inducing the purchase of more truly higher order goods, that is exactly what I meant when I wrote,

3. Interest Rate Decrease, which causes a general

4. (a) Longer Term Investment Increase, and, aided by 2(b), a (b) Sharp Demand for Particular Assets Increase, the first of which causes a general

"Longer Term Investment" implies a lengthening of the chain of production; that is, adding more links (more higher order goods).  I didn't want to write that out, because I thought it would be obvious, and I wanted to keep it from getting any more complicated than it already was.

 

However, since people's time preferences have not changed or have changed very little, they will consume more than they did before, thereby reallocating their money to lower order industries. These lower order industries (e.g. retail) then experience higher profits and are able to attract more investors, pay higher wages, hire more workers, and bid away resources from higher order industries. This causes higher order industries to be less and less profitable, forcing them to lower wages and/or lay off workers while returning less profits to their investors.

 

It seems to me that the increase in spending of wage earners would play itself out mostly in price inflation, not in a dramatic shift in the structure of production.  Industries that make goods of the first order (retail) get higher profits.  They use those higher profits to bid up prices of goods of the second order, giving the industries that produce them higher profits.  Those industries in turn use their higher profits to bid up prices of goods of the third order and so on.

Let's say the increased spending of wage-earners gives Wal-Mart higher profits, but not the company that makes the wheels for the toy cars that it sells.  Wal-Mart and the Toy Wheel Company both go onto the brick market.  Wal-Mart's enhanced purchasing power bids up the price of the bricks.  The Toy Wheel Company must pay more for the bricks than it otherwise would have, so it does indeed take a hit.  But Wal-Mart takes hits too.  First of all, it's not the only retailer that has more purchasing power.  So Rite-Aid and Target also bid for the bricks, and the price of bricks rises for retailers too.  Of course, considering only this much, they are still much better off than the higher order producers, because the latter don't have the higher profits of the former... YET.  I say yet, because Target is not only in the market for bricks with its enhanced purchasing power.  It's also in the market for toy cars, as are Toys R Us, Costco, Walgreens, and lots of other retailers who've experienced the same boom as Wal-Mart.  So the prices of toy cars get bid up.  The toy car companies, flush with profits, then bid up prices on toy wheels.  And the poor old Toy Wheel Company eventually gets its higher profits too.  Of course they get it later, which means the process does benefit the lower order producers more.  But it doesn't seem to be enough of a shift in fortunes to completely explain such a calamitous bust.

Do you think that people, after getting raises, tend to borrow more in absolute terms?  For example let's say a spendthrift who always borrows up to the hilt gets a raise.  Wouldn't he then borrow up to his new, higher hilt?  If so, then wouldn't this create an upward pressure on interest rates?  And if so, wouldn't an increased interest rate make production processes which were just barely viable under a previous lower interest rate no longer viable?

I know a sustainable economy is at bottom about there being enough savings to see through the production processes.  I just think that the way that fact expresses itself is through the interest rate.  If society's average time preference was actually higher, and therefore the wage earners, after getting a raise didn't borrow more, then the interest rate would stay low, justified by the increased savings, and the longer-term investment projects would see fruition.  But in the case of artificial credit expansion inducing the interest rate lower, the time preference is most likely not higher.  And this will express itself when the interest rates go back up to normal.

Furthermore, it's hard to imagine the housing bubble fitting the picture of producers investing heavily in higher order goods, only to have factors of production bid away from them later.  This would mean home owners invested too heavily in the capital good of "house-which-will-mature-into-a-house-in-the-future".  Were the factors of production of this process bid away from homeowners, thereby reducing their profits and making the production process non-viable?    But once the house is built, the only complementary factors of production necessary for turning the house into a future-house are time and maintenance expenses.  Obviously time can't be "bid away", so did housing prices collapse because the homeowners suddenly couldn't afford the basic upkeep of their homes anymore (minimal roofing requirements, etc)?  That seems extremely unlikely.

 

My Take on the ABCT (Complex Version)

Business Cycle Stages

1. Money Supply Increase causes a general

2. (a) Credit Supply Increase and an ongoing (b) Purchasing Power of Money Decrease.  2(a) causes a general

3. Interest Rate Decrease, which causes a general

4. (a) Longer Term Investment Increase, and, aided by 2(b), a (b) Sharp Demand for Particular Assets Increase. 4(a) causes a general

5. (a) Demand for Factors of Production Increase.  4(b) causes a (b) Sharp Particular Asset Price Increase.  5(a) causes a general

6. (a) Wage Rate Increase and (b) Capital Goods & Land Price Increase.  6(a) causes a general

7. Credit Demand Increase, which causes a general

8. Interest Rate Increase, which, along with 6(a) and (b), causes a general

9. (a) Longer Term Investment Decrease back to normal, and along with the completion of 2(b), a (b) Sharp Demand for Particular Assets Decrease,  all of which which cause a general

10. (a) Wage Rates Decrease, a (b) Capital Goods & Land Price Decrease and a(c) Sharp Particular Asset Price Decrease all back to the normal level (although adjusted for the new level of the money supply).

The above describes a finite expansion of the money supply.  There is nothing inherently circular about this progressive response to artificial money and credit expansion.  The theory might even be called the Austrian Business Blip Theory (ABBT) were it not for the government's recurrent interventions into the markets for money and credit.

Causal Explanations

1 to 2(a). The money supply increase in the present system is in the form of bank money.  This bank money is made available as new and additional credit.

1 to 2(b).  The new and additional money is progressively distributed throughout society, bidding up prices as it goes along, and thereby progressively reducing the purchasing power of any given currency amount. 

2(a) to 3. The interest rate is the price of credit.  Increases in supply cause decreases in price.  Therefore, a general increase in the supply of credit will cause a general decrease in interest rates.

 

3 to 4(a). The lower the interest rate, the more viable are longer term projects funded by investment borrowing.

 

2(b) and 3 to 4(b).  Because the currency unit gets a smaller return (the low interest rate), and is also losing purchasing power (higher prices), it becomes less attractive as a means of saving than certain other asset classes (like houses).  Here's my attempt to grapple with asset bubble theory:

In any given market condition, there will generally be one asset which is optimal for longer-term saving, due to a good level of and balance between purchasing power storage and liquidity; also there will be one asset optimal for shorter-term saving due to the same considerations, but leaning more toward liquidity.  Of course, nothing says people must have only two such categories.  Savers may have a diverse spectrum of savings desired for their various balances between purchasing power storage and liquidity.  And often, the optimal asset for several different categories will be the same: the common currency.

If the currency is being devalued at a certain small rate, it might then become less attractive as a means of extremely long-term saving than some other asset class, which has a lower rate of real depreciation than other asset classes.  Then if the currency is devalued faster, it might then become less attractive as a means of mid-term savings than that same asset class.  And if it is devalued faster still, it might become less attractive as a means of short-term savings than that asset class.

So in an asset bubble, over-and-above the appreciation due to monetary expansion, there is a premium given to certain assets by virtue of their role, not just as a good, but as a store of purchasing power.  Certain assets are better stores of purchasing power than others.  Savers realize this and buy up those assets, increasing the prices of those assets and thereby sending the market a signal regarding the superior money-ish (in terms of storing purchasing power) qualities of that particular class of asset to other savers, who also pile in.  Thus whatever is seen as a superior means of saving will have its value spiral upwards, due to the tremendous demand brought about by all of society replacing money with it for a certain portion of their savings.

 

4(a) to 5. Longer term production processes generally require more labor and goods than shorter term production processes.

5 to 6. Wage rates are the price of labor.  Increases in demand cause increases in price.  Therefore, a general increase in the demand for labor will cause a general increase in wage rates.  Also, an increase in demand for capital goods will cause an increase in the prices of capital goods.

6(a) to 7. This is my own either new or independently formulated contribution.  I've been avidly reading works and listening to lectures to try to understand the ABCT.  It was tough at first, partially because I was trying to foist up price inflation as the dominant element in my understanding of it.  It only started making sense when I let that drop and read and listened more carefully; this led me to realize that what the theory was chiefly concerned with was not price inflation but artificial credit expansion and its temporary effect on the interest rate.

Then it all started to click, but still only incompletely.  In expositions of the theory, the explanation of the boom phase generally made sense to me, but things would always get muddy concerning how the boom became a bust.  Often the explanation would focus on why the bust was, according to capital theory, inevitable, as demonstrated by Hayekian triangles, and Bohm-Bawerkian insights into what the interest rate represents.  I in no way doubt the veracity of these analyses, but I couldn't see the concrete human motivations and actions that actually embody the turn from boom to bust.  Even when those concrete motivations and actions were mentioned, the causal links didn't quite make sense to me.  For example, I would often read that workers, after getting their raises in stage 6, would (a.) go out and spend their additional money, and that would bring their savings and consumption back to their normal ratio according to their time preference and that this led to (b.) not enough savings being available to see all the long term projects in stage 4 to their completion.  But in everything I've read or listened to, it's never been explained (at least for my understanding) exactly how (a.) leads to (b.).  Again, I in no way doubted that it does happen; it seems theoretically necessary.  But how?

Then, motivated by a recent Mises Forums post asking for a concise explanation of the ABCT, I started trying to construct the above step-by-step explication.  I tried to make it as clear and direct as possible.  But, I kept getting stuck at stage 7.  I kept asking myself, "what is the bridge from 6 to 8?"  Then I thought, "stage 8 is just the opposite of stage 3.  Just as an increase in the supply of credit brought about lower interest rates, higher interest rates must come about from either a decrease in the supply of credit or an increase in the demand for credit."  Then it finally hit me: the savings-to-consumption ratio is indeed essentially what determines the interest rate, but not immediately so.  The concrete human action that embodies the reestablishment of the normal savings--to-consumption ratio is more borrowing.  People generally have an income-to-debt ratio they're comfortable with, according to their time preference.  If they get a raise, they don't suddenly become more thrifty than before; so they borrow more, generally in proportion to the increase in their wages.  Regarding this, know I could very well be wrong, or I could be right and silly at the same time, if that was what ABCT scholars were saying all along, and I was just dull to it.  In any case, I thought I'd share my thoughts on this.

7 to 8. This increased demand for credit then raises interest rates.

8 and 5(b) to 9(a). The higher interest rates, along with the increased factors of production prices (6),  cause the long-term projects from stage 4 to no longer be viable.  Boom gives way to bust, as businesses rush to reallocate resources away from the non-viable longer term ventures to viable shorter-term ventures.

8 and the completion of 2(b) to 9(b).  An increase in the money supply must be finite (or at least abbreviated), or else hyperinflation will result.  Any finite increase in the money supply will cause a finite increase in prices.  The new money will progressively bid up prices, but eventually the new money will reach all sectors, and then prices will stop generally rising.  Thus, the money will stop losing purchasing power (and actually start gaining purchasing power, as money naturally does in a market), while the particular assets that had replaced money as a means of saving start to depreciate (as real assets tend to).  These changes, along with the increase in the rate of interest, reestablish money's attractiveness as a means of saving.

9(a) to 10(a) and (b).  Businesses reallocate resources back to shorter-term production processes, reducing demand for factors of production.  This decrease in demand causes a decrease in the prices of factors of production, although to a higher level than before the monetary expansion.

9(b) to 10(c).  Savers flock out of the asset classes they had flocked into, and back into money.  This drop in demand causes the prices of those assets to plummet.

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Related Posts

My Take on the ABCT (Simple Version)

My Take on the ABCT: Objections Considered

My Take on the ABCT (Simple Version)

 

Below is my take on the Austrian Business Cycle Theory.

Stages

1. Money Supply Increase causes a general

2. Credit Supply Increase, which causes a general

3. Interest Rate Decrease, which causes a general

4. Longer Term Investment Increase, which causes a general

5. (a) Demand for Labor Increase and (b) Demand for Capital Goods Increase, which cause a general

6. (a) Wage Rate Increase and (b) Capital Goods Price Increase, the first of which causes a general

7. Credit Demand Increase, which causes a general

8. Interest Rate Increase, which, along with 5(b), causes a general

9. Longer Term Investment Decrease back to normal

There is nothing inherently circular about this progressive response to artificial credit expansion.  The theory might even be called the Austrian Business Blip Theory (ABBT) were it not for the government's recurrent interventions into the markets for money and credit.

Causal Explanations

1-2. The money supply increase in the present system is in the form of bank money.  This bank money is made available as new and additional credit.

2-3. The interest rate is the price of credit.  Increases in supply cause decreases in price.  Therefore, a general increase in the supply of credit will cause a general decrease in interest rates.

3-4. The lower the interest rate, the more viable are longer term projects funded by investment borrowing.

4-5. Longer term production processes generally require more labor and goods than shorter term production processes.

5-6. Wage rates are the price of labor.  Increases in demand cause increases in price.  Therefore, a general increase in the demand for labor will cause a general increase in wage rates.

6-7. This is my own either new or independently formulated contribution.  I've been avidly reading works and listening to lectures to try to understand the ABCT.  It was tough at first, partially because I was trying to foist up price inflation as the dominant element in my understanding of it.  It only started making sense when I let that drop and read and listened more carefully; this led me to realize that what the theory was chiefly concerned with was not price inflation but artificial credit expansion and its temporary effect on the interest rate.

Then it all started to click, but still only incompletely.  In expositions of the theory, the explanation of the boom phase generally made sense to me, but things would always get muddy concerning how the boom became a bust.  Often the explanation would focus on why the bust was, according to capital theory, inevitable, with Hayekian triangles, and Bohm-Bawerkian insights into what the interest rate represents.  I in no way doubt the veracity of these analyses, but too often the concrete human motivations and actions that actually embody the turn from boom to bust was left out.  Even when those concrete motivations and actions were present, the causal links didn't quite make sense to me.  For example, I would often read that workers, after getting their raises in stage 6, would (a.) go out and spend their additional money, and that would bring their savings and consumption back to their normal ratio according to their time preference and that this led to (b.) not enough savings being available to see all the long term projects in stage 4 to their completion.  But in everything I've read or listened to, it's never been explained (at least for my understanding) exactly how (a.) leads to (b.).  Again, I in no way doubted that it does happen; it seems theoretically necessary.  But how?

Then, motivated by the recent post asking for a concise explanation of the ABCT, I started trying to construct the above step-by-step explication.  I tried to make it as clear and direct as possible.  But, I kept getting stuck at stage 7.  I kept asking myself, "what is the bridge from 6 to 8?"  Then I thought, "stage 8 is just the opposite of stage 3.  Just as an increase in the supply of credit brought about lower interest rates, higher interest rates must come about from either a decrease in the supply of credit or an increase in the demand for credit."  Then it finally hit me: the savings-to-consumption ratio is indeed essentially what determines the interest rate, but not immediately so.  The concrete human action that embodies the reestablishment of the normal savings--to-consumption ratio is more borrowing.  People generally have an income-to-debt ratio they're comfortable with, according to their time preference.  If they get a raise, they don't suddenly become more thrifty than before; so they borrow more, generally in proportion to the increase in their wages.

7-8. This increased demand for credit then raises the interest rate, which causes, along with the increased capital goods prices (6b),...

8-9. the long-term projects from stage 4 to no longer be profitable.  Boom gives way to bust.

Regarding the 6-7 analysis, I know I could very well be wrong.  Or I could be right and silly at the same time, if that was what ABCT scholars were saying all along, and I was just dull to it.  In any case, I thought I'd share my thought processes with you, my fellow travelers, who are also trying to teach themselves economics (and political philosophy, history, etc.) as best they can.

I would very much like to hear any comments and corrections you would like to offer.

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Related Posts

My Take on the ABCT (Complex Version)

My Take on the ABCT: Objections Considered

 

Natural Morality: Objections Considered

Isn't utilitarian consequentialism, the greatest happiness for the greatest number, more rational than deontological natural ethics?

Why should the outcome of "the greatest happiness for the greatest number", out of infinite others, be the preferred one to any given individual?  A great many people are in situations in which optimal societal utility would mean a sub-optimal personal utility.  Why shouldn't they just continue to lobby for their government subsidies, or continue their reigns in impunity as rapacious Big Men in African "republics"?  Why should THEY follow YOUR ideal?

If social optimization is your end, be aware that your political framework is just as much the product of overcooked philosophizing as any other.  There was a time when that utilitarian-consequentialist worldview, which you may think is just the "natural way of thinking of things", was nothing more than a glimmer in the eye of Jeremy Bentham.  Via John Stuart Mill it subsequently captured the fancy of western academia, from there it permeated the ranks of opinion-molding hacks (journalists and public school teachers), and then became the received wisdom of mainstream thought.  Such is the way a great many unmoored doctrines evolve into "just plain common sense."

Who decides it's wrongful?  Isn't that just a matter of opinion?

Morality is indeed a matter of subjectivity, but not of whim.  Anyone who witnesses a killing over, for example, professional jealousy who doesn't reflexively deem that act as wrong is either rationalizing or has a clinical condition.  Anyone who witnesses a man killing another in retaliation for the rape and killing of his daughter will similarly reflexively deem that act as right.  That gut instinct is ingrained in our psyche.  Since lies within us, it is subjective.  But since it is involuntary and intrinsic, it is also natural and more "true" than any other rationalized system of right and wrong one's reason might come up with.

I just know that for morality to matter, there would need to be a God to enforce it. 

No, for morality to matter, there need only be one's own natural and involuntary sense of right and wrong, and the inner strength to follow it.  Morality wasn't invented by organized religion.  Many precepts of religion are mere reflections of a powerful sense of right and wrong that was written in our hearts long before the idea of a god was stamped in our brains.

I don't rely on my emotions to make all my decisions for me.

Yes you do.  You use your reason to decide the means; but your emotions decide the ultimate ends of all your decisions for you.  How else could it be?  You use your reason to discern "I want A because it will get me B" and "I want B because it will get me C".  But when this process comes down to your ultimate goals, of what use is your reason?  Is your reason going to help you decide, "I want this ultimate goal, because it will get me this other thing"?  Then it's not an ultimate goal.  Like David Hume said, reason is the slave of the passions.  Some passions are less hot than others; but they are passions nonetheless.  I'll take your word for it that you are as conscience-free as you profess (I don't know, maybe you have Aspberger's, like the other moral nihilist I debated here).  But most people do have consciences.  The moral choices those people make are indeed ultimately motivated by a passion.  However, your own striving for "effectiveness" is just as much ultimately motivated by a passion as its ultimate end: a primal urge for self-preservation and self-promotion.

This proves nothing but that people have a psychological tendency to moralize

That these moral urges are the results of an inherent tendency is what makes them natural in the Aristotelean sense.  Therefore, the rights conferred in response to these urges in the minds of the people who feel these urges are natural rights.

These "rights" aren't objectively 'true' or 'binding'.

It is "binding" to those who heed the natural moral urges.  It is not effectively binding to those who do not.  When A says B ought not to brutalize C, of course it's a subjective statement.  Morality, like all values, arises subjectively, but can be objectively observed.  The statement, "B is evil" of course is not true on a universal materialist level.  He is not "evil" to a banana slug or to a lump of coal or to you.  Natural rights are indeed subjective; that does not make them unnatural, non-rights, or unreal.

So this is basically an appeal to emotions .

I am completely aware and completely comfortable with my grounding morality in the emotions.  David Hume, to my mind, proved that morality can only have its ultimate source in primary passions, and not in reason...

“This is the second part of our argument; and if it can be made evident, we may conclude, that morality is not an object of reason. But can there be any difficulty in proving, that vice and virtue are not matters of fact, whose existence we can infer by reason? Take any action allow’d to be vicious: Wilful murder, for instance. Examine it in all lights, and see if you can find that matter of fact, or real existence, which you call vice. In which-ever way you take it, you find only certain passions, motives, volitions and thoughts. There is no other matter of fact in the case. The vice entirely escapes you, as long as you consider the object. You never can find it, till you turn your reflection into your own breast, and find a sentiment of disapprobation, which arises in you, towards this action. Here is a matter of fact; but `tis the object of feeling, not of reason. It lies in yourself, not in the object. So that when you pronounce any action or character to be vicious, you mean nothing, but that from the constitution of your nature you have a feeling or sentiment of blame from the contemplation of it.”

That morality is grounded in emotion does not make it any less important, real, or natural.  That is because we humans have an inborn tendency toward certain common moral urges.  So I with my natural moral urges can talk meaningfully to another human who, by virtue of being human (and not having Aspberger's), has similar urges.  That is what people without neurological disorders do when they talk to each other about natural rights.

Having a 'moral' sense - a sense that certain things are socially/interpersonally acceptable - is not 'irrational'.  It seems to be a fact of biology.  But the sorts of statements these feelings motivate people to make - saying, for example, "You should not do that" are literally false.  And you can not find coherent fault with someone for rejecting the values which underly the judgement.  Morality literally has no claim on anyone who disagrees with you - and since categorical imperatives are fundamentally impossible, all morality (libertarian or otherwise) at best amounts to fiction or propaganda.

That such statements are subjective does not make them false: in fact it is not even appropriate to ask whether they are true or false, anymore than asking if, "that puppy is cuter than the other one" is objectively true or false.  When most people say, "you should not do that", they basically mean, "I feel that what you're doing is wrong," not "that action is objectively, and somehow cosmically, wrong".  Yes, a good number of libertarians try to make out natural rights to be Kantian categorical imperatives; and I agree with you that they are incorrect in that.  But to dismiss all moral judgments as based on Kantian nonsense is ridiculous.

even though moral feelings are real, they are intrinsically personal feelings among specific people.  And it is simply not plausible to state that all people having a moral feeling must share the same basic principles or conclusions.  Not on sheer logic, and certainly not empirically.  Which means that whatever is wrong with communists consequentially, their moral theory is not any more or less 'true' than the libertarian one.

Almost everybody feels that murder, rape, plunder, and enslavement are wrong: that much is empirically clear.  And each one of those mental concepts entails a sense of property rights.  Those who participate in or support murder, rape, plunder, and enslavement either are abnormal or bury those feelings for the sake of their own aggrandizement.  Communists fit the latter category.

Values entailing some sense of liberty, property, equality, fairness are basically normal among human beings, but their proportions and entailments vary greatly.  And you can not rationally call this 'wrong' - a freakish idolatry of property or equality is not implied by having an intrinsic sense that these values are valuable.

Yes, I can, because "wrong" is subjective.  I am sincerely and spontaneously outraged when I think about seizures of property.  Therefore, I say that it is wrong.  A communist may say the same about me holding private property.  But I strongly suspect he would be posturing when doing so.  Revulsion toward plunder is natural and near-universal.  Revulsion toward private property is neither, and is generally only to  be found among the theory class who would personally benefit from their theories taking hold.

Also, notice that almost everybody feels that murder in the name of 'your country' is thoroughly legitimate...so maybe it is ?

Humans shove aside their moral code when in situations of extremity ("lifeboat situations"): this is not proof that the moral code does not exist, only that people will act immorally (commit "necessary evils") in conditions of extremity.

And almost everybody feels killing innocents in war is a necessary evil.  This is one of the innumerable examples of the state having convinced most of humanity (through public school and mainstream media indoctrination) that society is in a perpetual "lifeboat situation" in which a great many "necessary evils" must be committed by the state, else the "lifeboat" of society will keel over and everybody will drown.  This is a lie.  More consistent adherence to morality would emerge should this lie be exposed.

 

Effectiveness is not a question of passions.  It is a question of "what is ultimately going to happen here and is this in my interest?" 

How do you ultimately arrive at what is in your interest?  What decides the end, the progress toward which is your very metric of effectiveness?  Is it reason?  Again, reason can have nothing to say about ultimate ends.  If your ultimate interest, the progress toward which you use as your metric of effectiveness, is self-preservation, then it is your passions that dictated that.  You're psyche didn't conclude with reasoning, "My ultimate interest is self-preservation, BECAUSE of X."  That would be a contradiction, since the "because of X" implies that "X" is your ultimate interest.  You still seem to think that only hot passions qualify as passions.  Passions are the unreasoned ultimate ends which, of logical necessity, MUST be the motivation of every reasoning act we do.

You say in another post that you would strangle another man if you reasoned that was necessary for your interest.  And I'm sure you would do so with calm deliberation.  But let's follow the causal path of your motivation:  you kill A, because if you don't he might kill you.  That part uses reason.  It is imperative that you not let him kill you, because that would mean your death.  That part uses reason.  You don't want to die, because that would mean oblivion.  That part uses reason.  You don't want oblivion because...  because why?  No "because".  You just DON'T.  That part of you that determines "avoidance of oblivion" as your ultimate end is not reason, since there's no "because" or "therefore" involved.  That part is a passion: an unrationalized primal urge.

 

 

But why make a primal urge like morals and emotions the foundation of your personal philosophy?  Why not make it the higher level of dispassionate reasoning only humans are capable of.

I'm interested in what's true about human nature, not inventing personal philosophies that please me.

 

Just because my reasoning at some level is based on an instinct does not mean I'm better off not reasoning at all.

I'm not advocating rampant impulsiveness.  Your confusing the distinction between passion and reason with the distinction between low time preference and high time preference (which you'll learn about in your forthcoming AE studies).  The cool-headed long-term investor is no less ultimately impelled by his passions than the spendthrift hedonist.  The difference is that the former is impelled more strongly by urges to provide for the future: but it is still an urge that impels him.  Longer-term investment generally necessitates longer chains of reasoning.  But that does NOT mean he reasons for the sake of reasoning.  His reasoning is still motivated entirely by his passions: those passions just have longer-term objects.

 

It's only because I try to reason things out that I'm able to control myself.

What might keep you from stealing candy from a baby?  "Reasoning things out"?  How does that come about?  You feel an urge to snatch the candy.  But then you reason, "If I do so, I (a) might be struck by the mother's purse, (b) be seen by my colleagues who will then ostracize me, or (c) be pestered by one of those pesty irrational feelings of guilt that I haven't quite purged yet."  Those are statements of fact which your reasoning power is able to glean.  But ultimately why do you refrain from candy-theft in response to them?  If (a) does the trick, ultimately that stems from an unreasoned urge for self-preservation.  If (b), ultimately that stems from an unreasoned urge for self-promotion.  If (c), ultimately that stems from an unreasoned urge for doing right by others.

Self-restraint, like all acts (whether of commission or omission), may utilize reason, but they are ultimately impelled by the passions.

 

 

 

Natural Morality

 

Let us say you witness a little girl being brutalized in a dark alley.  Something within you would cry out that that is wrong.  You wouldn't deduce from premises that  it is wrong.  You would just feel it.  An urge would well up inside you to do something about it, even if such action would considerably risk your life and limb.  For example, you might feel a powerful urge to call for help, even though this might raise a small chance that the brutalizer would hear you and try to violently silence you.  That urge is not rationally egoistic.  Helping the little girl would not "serve you"; it would endanger you.  Yet the urge to do so would be there, nonetheless.  That is morality.  What aspect of the brutalizer's assault would engender such a potentially self-sacrificing urge?  It is not that in a society in which such violence is done with impunity, you yourself or someone who benefits you might end up being harmed.  It is a primary urge that cries out, without any argumentative grounding, "it is wrong for him to do that to her body."  That natural, internal moral imperative is what I call a property right: the inherent "ought" that lies with all of us regarding what, for example, a little girl can do with her body, and what other people can't.

Of course, property rights don't exist as ghostly connections between a human and an object.  They are not "natural" in the sense that they are a material body or force.  They are natural in that they are not artificial or customary.  The same basic principle goes for property outside of one's body.

Were you to watch a sculptor, who saved up and bought his own materials, painstaking make a beautiful bust of an Olympian god over the course of several days, and then see another man come up, shove the sculptor aside, and run off with the bust, something inside you would say, "that was FUCKED up."  You would feel a strong desire to see the bust returned to the sculptor.  In that urge is implied the notion that the sculptor was the bust's rightful owner.  Again, the property right resides within your psyche, as it would within most anyone who witnessed such an act.

SIDE NOTE: Now obviously these moral urges would not be as strong, if existent at all, within the brutalizer and the thief.  They either ignore or sufficiently quiet those moral urges (in which case they are immoral, compared to the general tendency of mankind), are overwhelmed by countervailing passions (in which case they are disturbed, compared to the general tendency of mankind), or are pathologically devoid of empathy (in which case they are amoral and psychotic, compared to the general tendency of mankind).

All such instances (and any honest reflection on what one's own feelings would be in such situations) offer a surfeit of evidence of a moral code, written in our nature.

Natural Morality: Objections Considered