Lecture #6, Cause and Effect
Human Action Principles
February 26th, 1995
Lecture Number Six
Welcome to the continuation of Principles of Human Action. This seminar is designed to give you a maximum understanding of causality, causation, cause and effect, different ways of saying the same thing. So, when I say causality that’s shortcut for cause and effect. We’re going to give you a maximum understanding of causality with a minimum investment of your time.
Now, with this promise in mind, I’m going to take about five minutes to discuss the dominant social issues in the western world during the past 500 years. I’m going to cover each century in approximately one minute. Now, dear friends, you will not want your mind to be wandering during any part of this five-minute discussion, because if you’re tuned out even for one minute, you could very well miss what was going on for a hundred years.
I will start with the 200-year period known as the 16th and 17th centuries. The dominant issue during this time was religion versus religion. What was going on during this period is essentially each religious leader claimed that they had been given special divine guidance to preach the commands of the creator of the universe. But the religious leaders could not agree on just what were the exact statements and commands of the creator.
One leader for example said, well, God commands this. Another said, no, God commands this. Another said, you’re both wrong, God commands this. And when there was some agreement on the actual words of God, there was seldom any agreement at all on how to correctly interpret these words. Therefore, the main issues of the time concerned such questions as, well, how does one recognize the authentic word of God? How can one identify a divine law? Who has actually been authorized by God to speak on God’s behalf? And, could the one in fact claiming to be authorized instead be an imposter? These were the issues for 200 years. These were the major controversies, and they all sprang from these questions.
And to give you some feel for just how long 200 years is, it’s been just a little over two centuries since the American revolution. So, for roughly that period of time this was the main controversy. Finally, the great controversy over religion lost its dominance during the following 200-year period of the 18th and 19th centuries. There was a new issue, it was this: it was absolute monarchy versus representative government.
During the 18th and 19th centuries the major controversy no longer involved disputes over the kind of religion one should obey; it shifted to disputes over the kind of government one should obey. Some people were convinced that the king should have absolute total authority to rule his subjects. Others were just as convinced that the rulership of the subjects should be turned over to representatives who would be elected by some of the subjects.
In other words, should those who rule be determined by hereditary birth, or should they be determined by election? And so, the controversy was not over should we be ruled by rulers, rather it was over the kind of rulership. The controversy finally subsided as a system of representative government replaced the system of absolute monarchy, first in North America and later in the greater part of Western Europe.
Now, that covers the major controversies for 400 of the past 500 years. What do you think has been the dominant social and political issue of the 20th century, and what might we expect it to be in the 21st century? Well, in our time there is a dominant controversy that eclipses in scope and magnitude all other social controversies. The dominant social issue of the 20th and 21st centuries will be the win-win society, or a free society, versus the win-lose society, the unfree society.
This controversy has only two positions. Position one is the least popular. Position one says, the advocates of a win-win society, that is a free society, believe society is best served when every individual has the freedom to buy and sell products. That is not a popular view. That is not a popular position. Position two is the most popular – the advocates of the win-lose society, or the unfree society, believe society is best served when every individual does not have the freedom to buy and sell products.
At first glance this may not sound like a large controversy, but ladies and gentlemen, the outcome of this controversy will have a greater impact upon our future than any other controversy in history. That’s how large it is. The outcome will in fact determine if there is, in the long run, any future for humans on this planet at all. That’s how large this controversy is.
The question we are here to determine is this: Can we arrive at not merely an arbitrary, opinionated answer, but can we arrive at a truly scientific answer? Should you support, in other words, a win-win society or a win-lose society? Now, of course everyone has to live somewhere. Is it better to live in a win-win society or a win-lose society? I will define these terms later, but for now, a win-win society is a free society, and a win-lose society is an unfree society. We’ll have much more to say about this as we continue.
During our last meeting, I made an outrageous statement, namely, that all opinions are worthless. Now, since all of you have opinions, and many opinions on many subjects, how many of you were offended by this? Be honest, come on, you harbor some deep-seated resentment. No, I’m sure you didn’t. What does this mean? It means that they are worthless if your aim is to build major solutions to major problems – all opinions are worthless. You can’t build the Golden Gate Bridge on opinions. You can’t get to the moon, my friend, on opinions. You can’t get off the ground. You can’t even crash if all you have is opinions because in order to crash you’ve got to be able to get off the ground.
You can’t build world peace on opinions either. That’s why the peace marches always fail, that’s why the anti-war activists fail. We must go then beyond popular opinion, popular superstition, popular dogma. If I can keep entertaining you, which means I can gain your attention, I can also show you how to do this. Now this will not be easy, because not one of you in the room is used to sitting for an entire day listening to somebody else talk. In your own sphere of influence, most of you are the dominant talkers.
All dominant talkers have this in common: It is very difficult for them to listen to anyone else talk. In my own case, my wife will tell you that I’m a dominant talker and that I’m also a very poor listener, especially in social situations. And she’s right! What can I say? The older I get, the poorer I become at conversation. And part of the difficulty is that in the 20th century of America it is considered, as all of you know, impolite in social situations to talk about anything beyond trivial subjects. Is this true? You bet.
Well, it is okay to talk about, at your parties you can talk about the latest movies that you’ve seen, and compare your critiques with others.’ That’s really interesting. If you’re a movie buff you can talk about all of the old classic movies. You can sit for hours dissecting the late Orson Welles’ masterpiece, Citizen Kane, which I’m sure all of you have done at some time. You can talk about sports, any sport – sports – that’s always a safe subject. You can talk about – you name it, raising roses, raising pigeons, raising babies – any of these.
But the one thing you must never, never talk about is any subject that touches on or even comes close to a discussion of your most fundamental beliefs on anything. Fundamental principles, ideas, concepts, positions are taboo subjects in all social situations. All discussions of all doctrines are off limits. They are outside of the sphere of proper conversation.
In contrast, in this seminar, I’m here to give you something so valuable we can’t even tell you in advance what it is because you would not want it. Now one reason you wouldn’t want it is because you wouldn’t think you’d need it, especially if your self-image is, I’m educated, I’m intelligent, and I’m successful. If you see yourself as any of these or all of these, you’ll think, well, I don’t need that.
All right, what are we presenting or what are we giving you here? The principles seminar presents you with a science on the qualitative analysis of social doctrines. Well, who needs that, why would I want that? What is it, anyhow?
My friends, if I can deliver this science to you, that means you will have the knowledge and understanding to test the quality of all social doctrines to determine if they are either true doctrines or false doctrines. If you can get it, it means your understanding of social causality and social issues will be more advanced than anyone who lacks this understanding, which is nearly everyone. But you can only gain this understanding if I can entertain you. If I can keep entertaining you, you will get it.
But, dear friends, if I fail to entertain you, what will you do? If you’re not being entertained, what will everybody do? What’s the popular term? You will tune out and as soon as you tune out you will not get it even if you have an IQ of 300 and you have 12 PhDs. I won’t ask for a show of hands who falls into this category.
To be a successful educator you must first be a successful entertainer. I’m here to entertain you with principles and laws of human action; I’m not here to train you but to educate you. I will leave the training to the colleges and the universities. They are almost entirely devoted to training. But that’s okay, I didn’t say there was anything wrong with it; I didn’t say training was wrong. A trained person, if he or she has useful skills, can often provide more value to society than an untrained person. Training can be a good thing, but it’s not education.
To be educated you must understand causality. To understand causality, you must understand natural principles and natural laws. There is no other avenue to understanding. There are many avenues to training. The law of human action says what? You choose to act to do what? Anyone? Benefit yourself? Yes, what’s the language we use in this seminar? We act to do what? It’s called the law of human action. We act to attain something – greater satisfaction.
A controversy about which we’re dealing with is this. Are we going to have a win-win society or a win-lose society? Are humans going to see greater satisfaction by building a win-win society or a win-lose society? And so in your quest for greater satisfaction, the question is, that we’re going to talk about in this lecture is, should you have the freedom to produce products, sell products, and buy products? Some people say yes, yes you should. Or, in contrast, should this freedom for perhaps some maybe equitable or rational reason be revoked, withdrawn, taken away from you? Many good people say, yes, it should. Is one opinion better than the other?
Let’s begin our search for a scientific answer to the dominant issue of the 20th and 21st centuries with an elemental question, namely, why should humans produce any products at all? Well, I can think of some benefits to be gained by ending all production of all products. The benefits are largely hidden from view. Almost overnight you could end air pollution, water pollution, soil pollution, noise pollution. All disputes between labor and management would abruptly end, all consumer complaints would halt. All complaints over communication, transportation would cease.
But of course, putting an end to all production of goods and services would not put an end to people’s complaints, would it? They would merely change the kind of complaint, wouldn’t they? The answer to the question, why should humans produce any products at all, can be answered with another question. Well, if humans do not produce products, then who will?
Well, the question answers itself – nobody will produce products. Where nobody is the producer, there will be an abundance of no products to consume. In raw nature you find one thing in abundance: scarcity. Nature provides humans with resources but never products. And so if there’s anyone waiting for nature to provide him with a product, forget it. There’s an old Chinese proverb you’ve probably heard by this time. It goes this way: “Hungry man with open mouth wait a long time for roast duck to fly in.” Admittedly my Chinese accent is poor, if any of you have Chinese ancestry forgive me.
Nature is so stingy she won’t give us one lousy product. This leaves us with a primary task. The primary human task is to apply reason to produce products. Primary means first in importance. If any other goal is primary, humans will starve to death, not figuratively but literally. Now when this is pointed out, few will challenge it. It would not be difficult to get the advocates, for example, of a win-win society and a win-lose society to agree that our primary task is to use our reason to produce products.
The controversy surrounds this question: What social system will most effectively, efficiently and fairly enable humans to pursue their primary task? Well, let’s examine the only four ways to gain access to any product. More than any other factor, how you come into possession of products will determine who you are. Who are you? It defines you in an indelible way.
To survive of course, you must gain sustenance – every adult knows this. One of the first problems you have as an adult is how will you gain sustenance. You must acquire the means. Of course, to acquire the means to survival, you don’t really have any choice; you take whatever your parents or other adults dish out or you starve.
Once you are an adult, you have four means to sustenance. They are: One, produce for your sustenance, two, beg for your sustenance, three, defraud for your sustenance and four, steal for your sustenance. This covers all possibilities. As you can see, more than any other consideration, exactly how an individual gains his sustenance will determine the quality of his character.
Every society is made up of individuals. The most common means used by individuals to gain their sustenance determines the nature of the entire society. A society where most people gain sustenance through production of products is clearly in sharp contrast with a society where most of the people gain sustenance through the theft of products.
But to talk about character at this point, we’re getting a little bit ahead of our foundation. Let’s take a neutral view on each of these four means to acquiring products. They are neither good nor bad, right nor wrong – we’re going neutral on this. Eliminate your bias that you have against or for any of these.
One of the very first problems I encounter in presenting a scientific analysis of this controversy between the advocates of the free and the unfree society, is that you come into the seminar with a lifetime collection of largely unconfirmed opinions on all of these positions – unverified. These opinions may even take the form of certain premises upon which you base your conclusions every day, and your actions.
To become a successful scientist, which I would like you to do in this seminar, you must continually ask yourself, what is the quality of your premises? The highest quality premises are those that can be shown to most closely describe reality. If we are true scientists, we aim to discover closer and closer approximations of reality. If our science reveals a superior view of reality, we must be ready to scrap the old and now inferior view, no matter how devoted we may be to our belief in the old view.
Now to illustrate a point, let’s talk about your opinions on the social system known as involuntary servitude, or slavery. All of you have most likely been indoctrinated with a strong bias against the system of institutionalized slavery. Well, let’s find out the direction of your bias. If you are an advocate of slave labor, please signify by raising your right hand. If you’re an advocate of slave labor, please raise your right – your left hand is all right. For the record, I see no hands. All right, be honest, one hand? Was that a hand? All right, we have one person, an advocate of slavery. Anyone else? Just one?
In contrast, if you are opposed to slave labor, signify by raising your right hand. For the record, that’s not everybody but nearly everybody, about 85 percent. Let’s see if you fall into this category. How many aren’t sure? Let me see, one person – not sure. Okay. Maybe you fall into this category, because some of you haven’t raised your hand at all. How many of you just don’t care, I couldn’t care less, buddy. And that would be the answer for most of the five billion people. The more important the question, the less likely it ever gets asked.
Nearly all of us have been indoctrinated with a bias against slavery. The point is, if you oppose slavery, you do not likely oppose it on scientific or rational grounds, but you oppose it on what grounds? Moral grounds, ethical grounds. As an exercise I want you to eliminate your opposition to slavery on moral grounds. This means you can no longer oppose slavery simply because some authority you’ve accepted, probably in your youth, claimed that slavery is immoral. But your exercise is to still oppose slavery. What then would be the basis of your opposition?
Consider writing this essay. Even though slave labor is both moral and humane, nevertheless, I am opposed to slavery on the following grounds – write me an essay. Now, if you believe slavery is moral and humane, you will not even oppose slavery out of a feeling of compassion for the slave, will you, because you believe it’s moral and humane. If there was time to work on this exercise, and there’s not, could you arrive at a scientific argument against slavery? That would be your assignment. If you could work on it, I would have each of you read the paper the next day, your own paper, your own thoughts, on giving us a scientific reason to oppose slavery. Not a moral reason.
Why it is important to be able to do this will come later. As you know from your study of history, both animals and humans have been the subjects of forced labor for the purpose of producing goods and services. Since our ancient ancestors first discovered how to domesticate animals, they have indeed become an important factor leading to a significant increase in the production of products, as all of you know.
When a man subdues an animal, it is to increase man’s level of satisfaction, and not to increase the level of satisfaction of the animal. When you were a child, you first observed the dramatic differences between animals and humans. You could easily see that your dog and cat possessed little ability to think, understand, communicate, store knowledge. While taming and training your animals, you gained perhaps an emotional attachment to them.
But you finally came to realize that there was an unbridgeable gulf that separated you from your animals. An animal’s goals are genetically limited to the satisfaction of his appetites for food, sex, and protection from the elements. In sharp contrast, if human goals are limited to the quest for food, sex and protection, then civilization never could have emerged.
Over the millennia, our ancestors did not limit their efforts to the domestication of animals alone. Man has actively sought to domesticate his fellow man. The same whip that compels an ox to pull a wagon across the land, can compel a galley slave to row a ship across the sea. With the leverage of a whip, you can force a human barge hauler to work like a beast of burden. If you haven’t seen this done in life, you’ve seen it done in the movies, and the portrayal is accurate.
Well, ladies and gentlemen, I have this question for you. Is there anything wrong with this? Why shouldn’t you force men and women to serve you in your quest for greater satisfaction? Can you identify a scientific, a rational reason for humans not to subject their fellow humans to forced labor? The males among our primitive ancestors for the most part did not make a distinction between their property in women, children and slaves on the one hand, and their property in cattle and other domestic animals on the other hand.
But over a period of time an evolutionary social change took place as our primitive ancestors improved their understanding of, guess what? Social causality. Slave owners were trying to gain services from their slaves that they could not gain from their draft and pack animals. It was discovered in many different places at many different times that if you loosen the slave’s chains, something always happens. They will produce higher quality goods and services. This remarkable discovery was the beginning of an evolutionary social trend that will end with the final obsolescence of the institution of slavery.
This discovery can be generalized into a principle of human action. It is this: As humans increase their demands for the highest quality products at the lowest prices, the efficiency of slavery as a means to this end decreases. As consumers elevate their aims toward greater satisfaction through higher quality and higher quantity production, the old incentive system based upon the slave’s fear of punishment no longer works.
The incentive mechanism imposed by the whip becomes obsolete. It is replaced with a new incentive, nourished by the slave’s self-interest. The slave masters of long ago achieved a positive change in the entire social system by appealing to something the slave possessed that the beast of burden does not. They provided the slave with human incentives instead of with ox-like incentives.
To improve the slave’s incentive, the master may remove the slave’s iron shackles. He may remove the fetters that tie the slave. The slave is no longer then, please note, prevented from running away by being chained and guarded. The slave master may stop using the whip as the prime source of incentive altogether. They just put the whip away. Historically, for humans these are not small changes. A social relationship is evolving between the slave master and his slave.
And so the iron chain that ties the slave to his master is replaced with a social tie. This is an evolutionary transition, and a necessary step in human progress toward the ultimate liberation of all slaves. When the slave’s chains are loosened, his ability to make choices has increased. To understand what is going on today in this world, it is necessary for you to understand what caused the abolition of slavery and serfdom in the western world.
The institution of slavery was dominant in the west for – do you know how long? For at least a thousand years. Today the educated classes for the most part have accepted as mythological an erroneous explanation of what caused the disappearance of slavery in the west. A common belief is that slavery was abolished by the anti-slavery teachings of theologians and moralists. But among the teachers of religion and ethics, if you look at it and read the history, you will find there were just as many eloquent defenders of outright slavery as there were opponents.
What then caused the demise of slavery in the west – write me an essay. Remember, these are all rhetorical essays, but wouldn’t that be a good essay for you especially if you’re a college graduate. Here is what happened. The institution of slave labor disappeared for one reason. Slave labor could not compete with free labor. A new system of social organization was beginning to evolve that led to the obsolescence of slavery. This new social organization was derived from an increase in the freedom of individuals to buy and sell. Where there is the freedom to buy and sell, there is a free market system, and the laborers are all free.
Whenever the goal of production is the highest quality product at the lowest price, then free labor will always out-produce slave labor. At no time or place in history was it ever possible for, let’s say, a factory employing slave labor to compete in the market with a factory that employed free labor. This will always be true. When you treat a man like an ox, the best you will be able to squeeze out of him will be an ox-like performance. This will always be true. An ox-like performance will never achieve the highest quality product at the lowest price – not this year, not in a thousand years.
Well, the system of slavery has many built-in problems that always lead to high cost, inefficient production. Wherever there is a system of slavery, there is always a necessary high overhead expense of guarding the slave. The guards are expensive, security is expensive, slave quarters are expensive to maintain. It is much cheaper to feed and guard an ox than it is to feed and guard a slave.
Furthermore, the ox is much stronger than even the strongest slave. To treat a man as a beast of burden is inefficient because of the low yield per unit of cost expended as compared with a higher yield from the domestic animal. The point is this: If you expect to acquire human-like performances from a slave laborer, then you must first provide him with human-like incentives.
If your goal as an employer is to obtain high quantity, high quality production, then this goal will never be obtained with a whip. As soon as your goal becomes high quantity, high quality production, you are left with one means. Here is what you must do, but this is only true if you want high quality products at a low price, here is what you must do. You must interest the worker by offering him some form of positive compensation for his productivity, instead of negative compensation. You won’t get shot next week if you meet the quota – that’s a pretty negative compensation.
Instead of punishing the slave laborer for his poor performance, you adopt a revolutionary method, and it was revolutionary when it was adopted, of motivation. You offer the free laborer rewards for his skill, imagination, diligence, high-performance. And so the rational reason for the entrepreneur to do this is that they can never obtain from a slave laborer the quantity and quality of performance that they will get from a free laborer.
But please note, prior to this new understanding of causality, it was assumed that the slave laborer who was not paid the market price for his labor would be the cheapest source of labor. This was assumed. Sure, it must be the cheapest source because we’re not paying him anything. And it was believed that the free laborer, or free man, called the freeman, who sells his labor on the open market, would be the most expensive source of labor. This was believed.
The discovery that this was not true led to a social evolution that has changed the entire social structure. It was finally understood that wherever the goal of production is to produce the highest quality product at the lowest price, then any enterprise that employs this seemingly cheap labor of slaves cannot compete with the enterprise that employs free laborers who are paid an agreed compensation for their labor.
This profound discovery of causality led to a social evolution that has caused all systems of compulsory labor to disappear from the western world. Not the eastern world, but from the western world. A new social system evolved in the west, built upon a simple concept: The freedom to buy and sell.
And so, the slave labor system was obsoleted by the free market system. In sharp contrast to what really happened, what does the average educated man and woman believe? They believe the institution of slave labor, bonded labor, serf labor, was ended by the moral persuasion of theologians and politicians who fought for the end of slavery on humanitarian and moral grounds. My friends, this never happened.
The evolutionary advance of the free market led to the evolutionary retreat and demise of bonded slavery. Were it not for the evolution of the free market, bonded slavery might still prevail in the west. And so, free labor replaced slave labor not because free labor is morally superior to slave labor, but because free labor is efficiently superior to slave labor. Note the distinction – it is very important.
You see, it was only after slave labor fell into disuse that it became popular for theologians and politicians to oppose slavery on humanitarian and moral grounds. As a result of this, all of you have been indoctrinated to oppose slavery for humanitarian and moral reasons. But to oppose slavery is not the same as to understand a scientific theory on the causes of slavery. I hope you will see the distinction before this seminar is over.
And to be against slavery is not the same as to know how to attenuate slavery. Attenuate means what? All of you who did not come in as a scientist already and know this word, attenuate means what? To reduce in intensity, to make thin. To be against slavery is not the same as to know how to attenuate slavery, until it finally passes into disuse, as the means to the production of goods and services.
Nearly everyone is against slavery, as they are against what? War and yellow fever. Who do you know who is for yellow fever? There are no tea or coffee klatches for the friends of yellow fever. But to merely be against any harmful effect that you dislike will not reveal its cause or end its destruction. As everyone is against slavery, so is everyone for freedom.
I like to point out that the literature of every nation is filled with the accounts of patriots who fought and died in their pursuit of freedom, but nowhere in this literature will you find an account of any patriot who defined freedom before they fought for it or died for it. One of the highest prices of course you can pay for something is your life. If the price is your life, then you ought to know what you are buying for such a very high price. Does that make sense?
If it is freedom you are buying, then in your own interest you ought to be able to define the very thing you are paying for with your life. Does that seem reasonable? If I’m going to give my life up for this, I’d better know what I’m giving it up for. The man who has just sacrificed his life toward a goal he cannot define has made a serious mistake from which there will be no recovery. Through all of history, men have aimed at what they have called freedom, but more often than not their actions have caused slavery and the destruction of freedom.
When the means you have chosen actually causes the exact opposite of your intended goal, that is the highest attainment of failure I can think of. That is the optimization of failure, by the numbers, as they say in the military. When you keep choosing the wrong means, it’s time to get some help. Does that follow? When you keep choosing the wrong means, you need some help.
And so it’s time to take the guesswork out of the selection process. It’s time to turn to science, and build a science of means. Meaning, how can we choose a true means that will enable us to get where we want to go? That’s what this science of human action, called optimization theory, is all about. A reason to build a science in the first place is to improve your track record at successfully attaining your goals. When the goal has been freedom, something has been missing.
There has been, for example, no scientific theory on the cause of freedom. And if you will accept the idea that freedom and slavery are opposite concepts, then something else has been missing. There has been no scientific theory on the cause of slavery, either. And when you’re missing science, one of the things you are missing is a foundation of precise definitions.
In order to build a science on the cause of both freedom and slavery, it is essential to construct a precise definition of the terms freedom and slavery. Now both the term freedom and slavery have been in your vocabulary since you were a child. How would you define these terms today? Well, let’s start with slavery.
When an American thinks of slavery, the image that is conjured up is perhaps the African slave on the southern plantation, this may come to mind. Or perhaps the galley slave rowing across the Mediterranean Sea, chained to the oars, whipped by the strong arm of the slave master. But these are the effects of slavery, and an image is not a definition – an image is not a definition.
Let’s start to solve this problem of how to come up with this scientifically precise definition of slavery by identifying where slavery is derived. What is the derivation of slavery? Slavery is the derivative of the minimization of choice. If you are unfortunate enough to be a galley slave, your choices are so minimal, there is hardly any left at all. If you complain, you will probably be whipped. If you escape over the side you will drown in the sea.
In contrast, what then is the derivative of freedom? Freedom is the derivative of the optimization of choice. It should come as no surprise – it’s the antonym of slavery. If you have optimum choice, then clearly you are not a galley slave, since no one would volunteer for such a dismal existence. If you were a volunteer, then of course they wouldn’t have to chain you to the oars.
Now, in order to build a science on the cause of slavery, we need a precise definition of slavery. Where do we go for such a definition? First of all, let me ask you this question: What is the main purpose of a dictionary? We could go to the dictionary for our definition, but there is a problem with doing this. What is it? Most people believe incorrectly that the main purpose of a dictionary is to define words. That is totally erroneous.
The main aim and function of a dictionary, raise your hand if you think you know. Okay, we have half a dozen people. You can compare your answer now with mine. If we had time each of the six of you would tell the whole class what you believe it to be. A dictionary has one prime purpose: to record the common usages of words. If it’s an unabridged dictionary, so-called, it will also record what other words? It will record the uncommon words. Slang may or may not be common. It will record the uncommon usages, such as the various esoteric usages, the various archaic usages.
My Webster’s Dictionary says, slavery quote, “is submission to a dominating influence. The state of a person who is the personal property of another.” unquote. But these common usages are inadequate for our scientific purposes. Let’s begin with this question: If your goal is to enslave your fellow man, what kind of human actions would you take? Well this is a simplex problem to solve, because there is only one thing you have to do which means there is only one action you have to take.
If your goal is to enslave your fellow man, then the problem you must solve is how to accomplish interventionism. Now, earlier I gave you this definition of interventionism. This will be one of the single most fundamental definitions in this seminar. I’ve now improved the quality as I was making slides up for this lecture. I improved the quality of the definition, so the one I gave you earlier, which I’ve used for fifteen years or more, I’ve now improved. I think it’s an improvement. So if you ever were to compare those two you’d find they’re slightly different.
Now, you can take this one down. Anyhow, here is the definition of interventionism. Interventionism is any imposed interference with the production, distribution and consumption of any product derived through market exchange. Now, you’ll have plenty of opportunity to get this definition if you don’t get it now, because I’ll keep coming back to it again and again. The important thing is, it is precise. If you ever have any question about any definition, if you’d like clarity about it, those are all proper questions to ask. Especially if it’s a fundamental principle or law, a proper question to entertain is always, you want more information on that if in any way it’s not clear or if it’s imprecise to you.
And so, what does interventionism do? It forces humans to in some way change the way they produce, distribute, and consume products. Every act of interventionism involves one thing: the confiscation of human choice. It’s gone. I said earlier that slavery is the derivative of the minimization of choice. When you confiscate someone’s choices you minimize those choices.
All right, I’ve laid the groundwork for a precise definition of slavery. A precise definition gives one and only one exact meaning to the term being defined. This definition of slavery does not say slavery is good or bad, moral or immoral, right or wrong. In other words, it makes no value judgment on slavery, certainly at this point. This is merely a definition. We haven’t said slavery is good or bad, right or wrong.
Slavery exists where the individual’s discretion to choose is confiscated by interventionism. All right, if slavery exists where your discretion to choose has been confiscated from you by means of interventionism, then where does freedom exist? Now that we have a precise definition of slavery, if we look for a precise antonym of slavery we will have a precise definition of freedom.
As you know, antonym is a Greek term for opposite. If we had the time, I would let each one of you take a shot at defining freedom on your own. Here is the antonym of slavery: Freedom exists where the individual’s discretion to choose is not confiscated by interventionism. Again note, there is nothing in either the definition of slavery or the definition of freedom that suggests that either one is desirable or undesirable. Do all of you see that?
Now, I stated at the beginning of this lecture that the dominant social issue of the 20th and the 21st centuries is the win-win society or free society, versus the win-lose society or unfree society. The controversy concerns two contrasting systems of social organization. Ladies and gentlemen, the characteristic feature of a win-win society is that it is a free society.
A win-win society exists where the following seven social conditions prevail. One, in a win-win society, anyone at any time can choose to produce products.
Two, in a win-win society, any producer is free to produce any product. Three, in a win-win society, any producer is free to engage any interested participant in the production. Four, in a win-win society, any producer is free to select any available production site. Five, in a win-win society, any producer is free to purchase any tools and raw materials. Six, in a win-win society or free society, any producer can offer to sell his product at any price. Seven, in a win-win society, any producer can choose any method of sales and distribution.
Now, the essential feature of all seven of these social conditions – social conditions, don’t lose sight of that – the essential feature of a win-win society can be summarized in this sentence; the win-win society exists where all individual have the unrestricted freedom to buy and sell. The choices of producers, sellers and buyers are maximized.
The maximization of individual choice gives birth to a free society and a free society is a win-win society. This is a social system with a unique advantage. A win-win society is the only system of social organization that optimizes the individual’s freedom of choice.
And where you have the optimization of individual choice, there can be no slave labor, only free labor. Now for reasons yet to be explained, the win-win society is the only social system that can optimize both social order and social cooperation. The main facilitators of order and cooperation in a win-win society are entrepreneurs, technologists, and investors. Don’t lose sight of that – the main facilitators of order in a free society are entrepreneurs, technologists and investors.
The entrepreneur governs and coordinates the essential elements of production, tools, materials, land, labor. The aim of every entrepreneurial venture is identical, which is to produce a product that will satisfy the consumer’s most urgent demands for greater satisfaction. The law of human action tells you every consumer consumes for one reason, to attain what? Greater satisfaction.
In a free society the consumer is king. The entrepreneur serves the consumer. A simple analogy explains the relationship between entrepreneurs and consumers in a win-win society, it is named a win-win society because it optimizes win-win relationships.
A win-win society can only exist where there is a free society. In such a society the entrepreneur is like the helmsman who steers a ship. It is important to note that while the helmsman’s job is to steer the ship, his job is not to set the ship’s course. That is the sole job of whom? Who sets the ship’s course on a ship? The captain. The captain determines the destination of the ship, not the helmsman and not the navigator. The navigator merely tells the captain if he is on course, but does not set the course.
In a free society with its free market the entrepreneur is a steersman only who is bound to obey unconditionally the orders of the captain and the captain is supreme. In a free society, in a win-win society guess who the captain is? The captain is the consumer. The entrepreneur is a steersman or governor at the company’s helm, but he does not determine what products will be produced. That determination is made by captain consumer.
Now it’s important to emphasize that entrepreneurs do not produce for their own consumption; they produce products for the consumption of the consumer. If those consumers reject the products offered by them, by the entrepreneurs, the entrepreneurs cannot recover their production costs. That is bad news, especially if you are the entrepreneur.
This represents a catastrophe for the entrepreneur. To avoid this, they must continually meet the always changing demands of the consumers. If they do not, they will be replaced by other entrepreneurs who can satisfy the consumers.
Now most people have completely failed to observe that where there is the freedom to buy and sell, the real bosses of the marketplace are not entrepreneurs, but they are the consumers. By merely buying or not buying, they alone decide what will be produced in what quantity and quality and who will produce it.
The consumer can make poor men rich and rich men poor. The consumer is an unpredictable buyer, always. They do not give a damn about the past merit of those who served him yesterday. Today is a new day for the consumer. When a better product hits the market, the consumer will quickly desert the old product.
The consumer only has one market goal, what is that? Greater satisfaction, all consumers have that goal. The fact that an entrepreneur may have his entire life and everything he owns invested in the product is of no concern to the callous consumer. The fact that all of the entrepreneur’s employees will soon be out of a job is of no concern whatsoever to the selfish consumer. It can’t be any other way.
The law of human action tells us the consumer is always after greater satisfaction which means as a buyer, he is always after a special goal, the highest quality product at the lowest price. The consumer then is the unsympathetic captain of the free market who bosses the course of all production. Therefore, I call them collectively, the consumer bosses, consumer-bosses.
His choice of products is the human action that determines which workers will be hired, what raw materials, what land, what production facilities will be used. What ad agencies and commercial artists will be hired. All of the human actions take place where there is a free marketplace.
And where there is a free marketplace, there will always be an incentive among entrepreneurs, technologists, and investors to produce the highest quality products at the lowest price. The common name for this incentive is another loaded word – now be careful of all loaded words. Treat all loaded words as neutral until we get a chance to talk about them, one of the most emotionally charged words in the English language or any language is the word profit, P-R-O-F-I-T.
In this seminar, however, we will examine the principle of profit not from an emotional perspective, but rather from a scientific perspective. The fact that almost everyone has missed is this: If the entrepreneur did not have entrepreneurial profit as his goal, do you know what he could do? He could just go ahead and produce any old product that he wanted and not give a damn about what the consumer bosses wanted. Do you see that? Just produce any old damn thing where profit is not your goal.
The profit motive forces the entrepreneur in a non-coercive way to strive to achieve the highest quality product at the lowest price. If the entrepreneur fails to obey the commands of the consumer bosses, then they will switch their market votes to some other entrepreneur’s products. Through this means the consumer bosses determine the entire spectrum of business activity by their never ending demands to be served with better and better products for less and less money.
Now if you are an entrepreneur in a free society and you ignore these consumer demands in the democracy of the marketplace, you will be voted right out of business. Now ladies and gentlemen, I would like to give you a brief introduction to the win-lose society, which is an unfree society.
The reason it is an unfree society is because the freedom to buy and sell has been revoked. The mechanism of revocation is the political apparatus known as bureaucratic interventionism. During a later lecture I will give you a scientific analysis of the system of bureaucratic interventionism in depth. However, for now, in a few words I will state the position of the interventionist.
It’s simple – the advocates of bureaucratic interventionism claim that in the interest of the people to attain the greatest good for the greatest number – you’ve heard that one before? – these seven freedoms of a win-win society should be denied to the individual all together or they should be severely restricted.
The interventionist claims that it is best for the people when the appropriate bureaucratic agencies interfere with the production, distribution, and consumption of all products. In sharp contrast, the non-interventionist claims that well, it’s best for the people when none of the bureaucratic agencies interfere with the production, distribution and consumption of all products.
All right, who is right? There are many opinions on who is right, but opinions are, again, useless. To improve on opinions, again, and it may sound like a broken record, but you are going to keep hearing this record because it is the main thing missing. To improve on opinions we have to turn to what? Science, more science, and better science.
Can then science give us an answer? Because if science can’t give us an answer and non-science can’t give us an answer, there is no answer because that covers all possibilities. Either your answer is scientific or it’s non-scientific; there is no other possibility.
The question can be reduced to this: who should be the boss in society? Should the consumer be boss or should the bureaucrat be boss? In a win-win or free society, the consumer is boss. In a win-lose or unfree society, the bureaucrat is boss.
And so the question arises should the consumer be allowed to be boss? Should individuals have the complete freedom to buy and sell, yes or no? I will demonstrate this issue is the only issue that counts. All other social issues are subordinate in importance to this one, and yet worded in this language, the issue doesn’t sound very dramatic and how can I entertain you if it doesn’t sound dramatic?
As I explain its significance, the drama will unfold. The issue can be restated, it’s where I started, the issue is this, the dominant issue of the 20th and the 21st centuries, the win-win society versus the win-lose society, the free society versus the unfree society.
All win-lose societies have become both win-lose and unfree for the same reason. They become win-lose and unfree through the exercise of interventionism. I will define it for you; interventionism is any imposed interference with the production, the distribution, or the consumption of any product derived through market exchange.
A common example of interventionism would be any politically enforced price control. When the political bureaucracy forces an entrepreneur to sell his product at a price not of his own choosing, this is a blatant act of interventionism. In this example there is an imposed interference with the distribution of products. The entrepreneur is forced to distribute his products at some other price than he would have chosen without the interventionism.
Where there is interventionism it is important to note the justification given for this exercise of force against the entrepreneur. Please note, every modern act of bureaucratic interventionism is justified as follows: This act of bureaucratic interventionism is executed on the grounds that it will directly or indirectly attain the greatest good for the greatest number.
The claimed goal of the interventionist is to attain the greatest good for the greatest number. The means of this goal is interventionism. In optimization theory, we test the means, in this case interventionism, to determine if it can or cannot attain the end sought.
Does the means employ a true means or a false means? The law of human action says every chosen action is aimed at the attainment of greater satisfaction. All social systems are built to attain greater satisfaction for the builders or they wouldn’t be building them in the first place, does that follow?
The idea of building social systems to attain the greatest good for the greatest number has been around for several centuries. The interventionists claim interventionism will achieve the greatest good for the greatest number. And in a like manner, the non-interventionists claim that non-interventionism will achieve the greatest good for the greatest number.
Who is right? Every concerned person has got an opinion on this question, don’t they? Of course, but as I have said, we must transcend opinion, we must go beyond authority, beyond dogma, tradition, superstition, and even conventional wisdom.
To make this transcendence we will apply science. If our science is any good, it can even test conventional wisdom to measure the quality of the wisdom. If this wisdom, whether it be conventional or unconventional, if it’s built upon true doctrines or false doctrines, that is pretty important to try to find out, isn’t it? No matter how venerated and revered the wisdom, if it is built upon false doctrines, the best it can be is pseudo wisdom and, at worst, a disaster.
During the first session I quoted Einstein, he said the formulation of a problem is often more essential than its solution which may be merely a matter of mathematical or experimental skill. Well, here’s another statement of the problem, can the human action sciences resolve the social conflict of the 20th century which is the true means to the achievement of the greatest good for the greatest number? Is it interventionism or non-interventionism?
Now since we know from the law of human action that all of us are acting to gain greater satisfaction, then which social system will achieve the greatest satisfaction for the greatest number, interventionism or non-interventionism? And so we started with the dominant social issue of the 21st century, the win-win society or the free society versus the win-lose society, the unfree society.
Will it be the win-win society or the win-lose society? If, dear friends, if we can reach a scientific answer to this question in just four meetings, I claim you will have gotten your time’s worth to say the least. I claim you will have gotten the best bargain in education of your entire life.