The Significance of Market Society
The short essay below is taken from the last few pages of my theory of interpersonal action, recently published at Liberty.me
The theory of interpersonal action is a proposed application of Misesian praxeology to the “interpersonal” realm of human action. This means that rather than focusing on market phenomena, the theory is primarily focused on “direct” person-to-person social interaction.
Libertarian social theory has tended to study social phenomena from two distinct angles. On the one hand, libertarians study market phenomena in terms of regularity and cause-and-effect laws. In this realm of human conduct, libertarians search for scientific laws, and they claim to have discovered unique insights into the causes of various economic phenomena such as booms, busts, unemployment, etc. On the other hand, libertarians study the realm of social interaction in which market phenomena do not appear as a branch of ethics. In this realm of human conduct, libertarians search not for scientific cause-and-effect laws, but instead seek to establish the basis of just and unjust conduct; of ethical and unethical conduct; of moral and immoral conduct, etc.
Because this dualistic scholarship approach has never been effectively questioned—study market-related conduct in terms of regularity; study non-market-related conduct in terms of justice or morality—there has been very little study of non-market social interaction in terms of regularity and scientific laws. In short, there have been few attempts to extend the Misesian conception of praxeology—as a value-free, nonnormative discipline—into the areas of social interaction in which market phenomena do not appear.
The theory of interpersonal action is one such attempt. The essay below is Part 3 of the above-referenced paper and discusses the conclusions and insights that may be gleaned from the first two parts of the paper.
Introduction to the Theory of Interpersonal Action
Part 3 – Interpretation
The theory of interpersonal action explains the libertarian preference for market society in terms of the structure (the categories) of consciousness (what Mises referred to as the structure or categories of action). Libertarian economic theory explains the preference for market society in terms of the abundance or paucity of goods, the efficiency or inefficiency of the distribution of goods, and the impact on standards of living resulting from policies intended to restrict or influence market transactions. Libertarian ethics theory explains the preference for market society in terms of ethical conduct. Market society is the corollary of good or just social conduct; the command society is the corollary of evil or unjust social conduct.
The theory of interpersonal action provides an explanation of the libertarian preference for market society that is independent of the material (the “economic”) circumstances of any individual or society. It also provides an explanation of the libertarian preference for market society that is independent of social analysis from an ethical or moral point of view. The significance of the market society is that it is a technique or method for conducting social interaction without engaging in interpersonal action. As market society evolves and expands—beginning with the simple posting of prices, evolving to the introduction of mechanical and electronic vending machines, and evolving further to electronic commerce—the individual is ever more enabled to conduct social exchanges without engaging in interpersonal action. As the market evolves and expands, methods of social interaction that do not require interpersonal action evolve and expand. The individual interacts with posted prices, with automated vending machines, and with computer technology.
From an objective point of view (from the point of view of an observer of the market as a whole), the individual (A) who interacts with market technology engages in social interaction, because other people (B) come into contact with this same technology at an earlier or later time. At some point in time, person B posts the price that actor A now observes; at some point in time, person B re-fills the vending machine that actor A now uses; at some point in time, person B fulfills the Internet order that actor A now places. However, from the point of view of actor A at the time of his action, each of these transactions or interactions may be conducted without reference to the mind or consciousness of another person. In one sense (in the objective sense) the actor who interacts with market technology is engaged in social interaction. In another sense (in the subjective sense) the actor who interacts with market technology is not engaged in social interaction; he interacts with an inanimate object. The significance of market society is that it is a technique for engaging in social interaction without engaging in interpersonal action. And this is the basis for the libertarian preference for the market society. Market technology—the price system, automated transactions, electronic communications and transactions, etc.—is a method by which an individual may avoid the dissatisfaction or unhappiness inherent in interpersonal action while still enjoying the benefits of social interaction and social exchange.
The theory does not imply that one ought or ought not engage in interpersonal action. Instead, it implies that the libertarian preference for market society has a basis in the categories of consciousness (categories of action). Referring to the categories of his consciousness, an actor may come to associate various actions with a given category of action. For example, an actor may associate the action of eating ice cream with satisfaction or happiness, while the same actor may associate the action of interacting with another person (interpersonal action) with dissatisfaction or unhappiness.
It is not maintained that an actor must associate any particular kind of action with a particular category of action; it is only maintained that he may do so. If conscious actors do indeed make these kinds of associations, this may explain why they choose or prefer some methods of social interaction over others, and why they believe that some developments in society constitute “progress” while other developments in society constitute “decline” or “decay.”
If a person associates interpersonal action with dissatisfaction or unhappiness, and if he associates methods of social interaction that do not entail interpersonal action with satisfaction or happiness, then he may interpret a situation in society in which market technology is expanding as “social progress,” and he may interpret a situation in society in which market technology is contracting as “social decay” or “social decline.”
Our thesis is that the phenomenon we have historically referred to as “market society” or as the “evolution of market society” is the development of forms of social interaction that do not require interpersonal action. According to this interpretation then, the phenomenon of prices (“market prices”) is a historical example of this development and evolution, but not an essential characteristic of it. The introduction or emergence of prices (“the price system”) was, according to our interpretation, one concrete historical instance of a broader phenomenon: the development and evolution of forms of social interaction that obviate the need for interpersonal action.
From this point of view, the significance of prices is not their role in allocating goods and services spatially and temporally among various people. Rather, the significance of prices is to be seen in the role they play in the consciousness of the actor who posts or observes a price. The one who posts a price may do so without engaging in interpersonal action. Similarly, the one who observes a price may do so without engaging in interpersonal action. The written price thus enables social interaction to occur without interpersonal action. Seen in this light, the “price system” is a historical example of a broader evolutionary process in which forms of social interaction are developed that obviate the need for interpersonal action. From this point of view, the price system is not significant because its utilization leads to greater material well-being. Instead, the price system is significant because the actor who employs it as a method of social interaction may consider it more personally satisfying than “direct” interpersonal action. The actor may associate the written price, qua perceptual object, with the category of satisfaction, and he may associate the mind of another person, qua nonperceptual presence, with the category of dissatisfaction. The actor may therefore tend to choose social interaction via the price system as it seems to him personally satisfying, and he may tend to avoid social interaction via interpersonal action as it seems to him personally unsatisfying.
Interpretation of Social Evolution
A recurring theme of libertarian social theory is the relationship between the self-interested actions of individuals, the expansion of market phenomena, and the improvement in mankind’s condition.
Consider Adam Smith’s invisible-hand metaphor:
As every individual, therefore, endeavors as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of the greatest value; every individual necessarily labors to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. (AS-456)
The individual, pursuing only his own gain, unintentionally also “promotes the public interest.” If we consider Carl Menger’s explanation of the origin of money, the same notion is present:
As each economizing individual becomes increasingly more aware of his economic interest, he is led by this interest, without any agreement, without legislative compulsion, and even without regard to the public interest, to give his commodities in exchange for other, more saleable, commodities, even if he does not need them for any immediate consumption purpose. With economic progress, therefore, we can everywhere observe the phenomenon of a certain number of goods, especially those that are most easily saleable at a given time and place, becoming, under the powerful influence of custom, acceptable to everyone in trade, and thus capable of being given in exchange for any other commodity. These goods were called “Geld” by our ancestors, a term derived from “gelten” which means to compensate or pay. Hence the term “Geld” in our language designates the means of payment as such.(POE-260)
Both of these passages conceive a relationship between self-interested individual action and some economic or market-related benefit to society. In Smith’s case, the benefit is the increase in the revenue or capital of society, and in Menger’s case, the benefit resulting from self-interested individual action is the emergence and evolution of money. The two essential components of this kind of theory are: 1) the concept of individual, self-interested action, and 2) a social benefit that results from this self-interested action but which was not the intention of the actor performing the action. Mises too provides an account of social evolution based on self-interested action:
The task with which science is faced in respect of the origins of society can only consist in the demonstration of those factors which can and must result in association and its progressive intensification. Praxeology solves the problem. If and as far as labor under the division of labor is more productive than isolated labor, and if and as far as man is able to realize this fact, human action itself tends toward cooperation and association; man becomes a social being not in sacrificing his own concerns for the sake of a mythical Moloch, society, but in aiming at an improvement in his own welfare. Experience teaches that this condition—higher productivity achieved under the division of labor—is present because its cause—the inborn inequality of men and the inequality in the geographical distribution of the natural factors of production—is real. Thus we are in a position to comprehend the course of social evolution. (HA-160)
For Smith, the individual, in increasing the value of his capital, unintentionally increases the revenue of society. For Menger, the individual, in trading for more marketable goods, unintentionally fosters the development of money. For Mises, the individual, in recognizing the higher productivity of his labor under the division of labor, is led to intensify association and social cooperation. Thus, an important focus of libertarian social theory is the relationship between individual action and the evolution of the market. The question is: what factors within the conscious field of the individual actor steer him toward those actions that constitute the market? The present theory suggests an answer to this question that is independent of historically-conceived market phenomena such as capital, labor, revenue, money, productivity, division of labor, interest, etc.
The Relationship between the Theory of Interpersonal Action and Libertarian Social Theory
One of the central concerns of libertarian social theory, as distinct from libertarian economics, is the use of coercion in social exchange. Coercion as we define it is distinct from other forms of harm such as violence, assault, and aggression. By “coercion” we mean a specific kind of trade or exchange. When I coerce someone, I take something (X) away from another person (or threaten to do so), with the intention of offering X back to that person in an exchange for something I want. In the prototypical coercive exchange, I point a gun at another person (B) and exclaim: “Give me Y or I’ll shoot.” My goal in such an exchange is to obtain Y by offering X (in this case, B‘s well-being) to person B in exchange. As I believe that B already has X (as I believe B already has his well-being), I take X away from B, or threaten to do so, and then offer X back to B in exchange for Y, my ultimate goal. This is the universal form of the coercive exchange.
The coercive exchange is central to libertarian social theory because it is the primary means by which nonlibertarian society prevents libertarian society from emerging. Libertarian society is not prevented by daily acts of violence against libertarians. Libertarian society is prevented by means of coercive exchanges. The nonlibertarian (A) wants Y (generally, for the libertarian to obey all the rules of nonlibertarian society). The libertarian (B) wants X (generally to avoid physical harm and imprisonment). As A believes B already has X (i.e., as the nonlibertarian believes that the libertarian is not currently suffering harm and/or is not currently imprisoned), A threatens to take X away from B, and then offers X back to B in exchange for Y. Thus, nonlibertarian society is maintained, and libertarian society prevented, by means of coercive exchanges.
To conduct a coercive exchange, I must locate, in the field of my consciousness, another being possessing the same categories of consciousness as myself (i.e., an entity “possessing” the categories of happiness/unhappiness, pleasure/pain, satisfaction/dissatisfaction, etc.). Knowing how these categories function in my own consciousness, I intend to apply this knowledge toward the manipulation of these same categories in B‘s consciousness, in order to attain some goal of mine. To do so, I must locate within the field of my consciousness, being B, a being in possession of the same consciousness categories I possess. The “locating” or “appearance” of another consciousness B, within the field of my own consciousness, is the essential characteristic of (is our definition of) interpersonal action. And thus, for me, A, the means of coercion necessarily requires interpersonal action. To conduct a coercive exchange I must locate another consciousness (another consciousness must “appear”) within my conscious field.
(It is important to remember that we are here referring to a subjective and not an objective “location” of another consciousness. In our meaning, I “locate” another consciousness not by ascertaining the spatial coordinates of another human body; rather I “locate” another consciousness in the subjective sense when another consciousness appears in some part of my conscious field. Furthermore, the other consciousness does not appear to me in the observational sense just as the back of the wall does not appear to me in the observational sense. The other consciousness appears as an unperceived presence, i.e., as something co-present with my current perceptions, observations, or sensations.)
To the extent I socially interact via market technology (as distinct from interpersonal action), another consciousness does not appear within my conscious field. As coercion requires the appearance of another consciousness within my conscious field, social interaction via market technology precludes coercion in the subjective sense (i.e., when I’m interacting with a written price, with a vending machine, or with a computer, I am not engaged in interpersonal action, and thus, not engaged in coercion in the subjective sense). An expansion of social interaction via market technology implies a correlative contraction in interpersonal action, the prerequisite or necessary condition of coercion.
The present theory provides a new insight into the relationship between the market on the one hand, and the notion of “coerced” versus “uncoerced” exchanges on the other hand. How is the market related to the diminishment of coerced exchanges? Our answer is that in a market exchange the coerced/uncoerced distinction does not apply because we define market exchange as social interaction that does not entail interpersonal action. Thus, social interaction via market technology tends to diminish coercive exchanges because in a market exchange there is no interpersonal action and therefore coercion, as we define it, cannot occur. Expansion of the market system diminishes coercive exchanges by replacing interpersonal action with forms of social interaction that do not entail interpersonal action, and in which therefore, the phenomenon of coercion cannot arise.
Adam Knott's writings in praxeology and panarchy