Economic Equilibrium In The Austrian And Divine Economy Theories.

There is less virtue in science when it is static and it is never the desire of the champions of science that their contributions be seen as the final contribution to its advancement. Just like it was before their contributions, science had reached a certain plateau where most of their contemporaries dwelt until the explorer began the trek towards a new summit.

In contrast to the empiricism-dominated economic 'science' the Austrian school never accepted the interpretation of equilibrium given by their contemporaries. Actually empirical economists have to use equilibrium to provide a framework so they can apply econometrics. In a sense the whole empirical construction depends on the assumption of equilibrium and it will necessarily crumble into a heap of nonsense if the concept of equilibrium is removed. Sensing its total self-destruction the gate-keepers of empiricism cannot allow query into the subjectivist approach. Right there - the fear of inquiry - demonstrates extremely poor scientific method.

In the Austrian school of thought equilibrium is viewed as a mental construct that never really exists and so it is not needed to make economic analysis. The real condition in the economy is disequilibrium tending towards equilibrium. As succinctly stated by Murray Rothbard "The final equilibrium state is one which the economy is always tending to approach." These tendencies reflect the actions of humans as subjective beings with uniquely functional human qualities, the effect of which can be understood further by praxeology.

The divine economy theory advances economics further by broadening the ontological foundation that fits into the natural law as it pertains to human beings. Not only are humans physical and intellectual but also spiritual which then has significance with regards to equilibrium. The equilibrium forces that create the tendencies spoken of by Rothbard are not randomly a part of Mother Nature. The equilibrium forces are part of the economy and the reason is because the economy only exists because humans exist and humans are spiritual in addition to physical and intellectual. By ignoring or being unaware of the spiritual nature of human beings the balancing and harmonizing potency of equilibrium is falsely deprived of the inherent motive force since human action is purposeful. In other words, the equilibrium forces are also purposeful, not dissociated from the special station of human beings in the world of creation.

Equilibrium as a force and the appearance of disequilibrium in the economy are fully within the realm of scientific exploration and the realm of advancing comprehension but it does require a dynamic approach to science. Our ability to test validity should make us willing to welcome claims of new discoveries because we can make reasoned judgments, that is, as long as we do not act as if science is something static.

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Where Is There A Free Market Economy?

It is ubiquitous! Theory only proves its existence!

The testing of the theory has to do with the laws that exist and the compatibility of the free market with those laws. Humans are subjective and they are physical, intellectual, and spiritual. Without going into details this is all perfectly compatible with the divine economy theory. I wouldn't worry too much about being able to see it - in all of its splendor - in these, the Dark Ages of economics.

If you understand how the physical laws operate and you see a jar containing water and sediment the fact that it is constantly being stirred does not mean that when the agitation stops the sediment will remain in suspension. What will happen is the impurities will settle out and the water will be clear for all to see! Likewise when all the agitation of the interventionists stop the glory of the divine economy - the unhampered market economy - will be clear to everyone!

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What Equation Holds True And Anchors Economic Science?

Laissez-faire = unhampered market economy = the divine economy.

Without an understanding of this equation any outcome is necessarily error-based, designed with the foolish assumption that the market process - which is infinite - can be comprehended by finite minds.

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Austrian Economics And The Divine Economy Theory.

As part of your exploration of the divine economy theory you might find it interesting to read comments that I have made over the years to the Mises blog and you may also find it interesting to focus that search even more by reading comments specifically related the divine economy made over the years to the Mises blog.

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The Switch From Latent To Active Entrepreneurship.

There are prominent leaders of thought in entrepreneurship that anchor the literature on the subject of entrepreneurship for those of us who recognize the essential role of human action in the economy. Two names that immediately come to the surface are Israel Kirzner and Joseph Schumpeter.

In  a moment we will examine the difference between the viewpoints of these two individuals but first it is important to put everything into the context of natural law. Human beings share characteristics universally which is what distinguishes them from all other creatures. Alertness in a physical sense is not unique to humans. Most if not all animals are alert or else they will be eaten!

Yet alertness is the quality of an entrepreneur. So what is the alertness that is uniquely human? Alertness by the physical senses does not sufficiently distinguish humans so it must encompass more and even greater perception. Perception beyond the physical senses taps into the powers of the mind and the spirit. From this realization it can be stated that, in general, alertness in the entrepreneurial sense is related to the investigation of the truth.

Humans are social and so they benefit from the flow of knowledge that comes from social cooperation but there can also be barriers that form and so the entrepreneur distinguishes himself or herself by the independent investigation of the truth.

Whether this inherent entrepreneurial spirit manifests itself or not, it is always present - that is - it is either latent or active. For example, if there are certain taboos in society which creates barriers to the discovery of a better way of doing things most people will be latent rather than alert about that opportunity to make an improvement.

In this very interesting interview of Arielle John by Stephen Hicks two basic moments of entrepreneurship are identified. Arielle talks (@2:25) about the discovery moment given emphasis by Kirzner and the exploitive moment given emphasis by Schumpeter. My impression of the overview was that both moments were valued as part of a continuum which is very much in line with the viewpoint in the divine economy theory.

To this 'timeline' can be added the transition from latent to active entrepreneurship. It is a preparatory step which may be spontaneous or gradually developed and may or may not be consciously driven. It is like a seed germinating or a seedling unfolding to receive sunlight. It is a potential that is on the verge. This is when the latent entrepreneurial spirit transforms to an active state.

Will the newly activated "seeker after truth" immediately discover something? Perhaps not but the conditions are right for discovery?

Why the interest in going further back to the origins of entrepreneurship? Imagine the difference this would have on education and imagine the difference this empowering knowledge can have on individuals. Instead of a 'class' of entrepreneurs all humans are recognized as having the gift. Billions of entrepreneurs will move civilization along faster than only a select few!


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Does The Divine Economy Theory Differ From Austrian Economics?

The divine economy theory does not differ with Austrian economics unless, for some reason, Austrian economics is considered as finished. Just like Austrian economics has basically nothing to do with the economy of Austria, Austrian economics encompasses the advancement of economic science and praxeology beyond the remnant links (their students) to Mises and Rothbard. Of course there are criteria that can be used to determine if the advancements are true to the Austrian tradition and the tradition of classical liberalism.

 

If there is a noticeable difference between Austrian economics and the divine economy theory it has to do with the removal of religious prejudice and the creeping of atheism into 'science.' Some who contribute to Austrian economics have an exclusionary attitude that is not complementary with an attitude of comparative religion. Some who contribute to Austrian economics think that atheism is an expression of wertfrei and cannot fathom the harmony of sciene and religion. Let's be fair and measure these contributors with the existent criteria of what is Austrian and what is classical liberalism. I am up to the challenge. Are others?

 

Regardless, as an Austrian economist I continually test what is being developed as part of the divine economy theory and so far it meets the tests. As far as I am concerned the divine economy theory is merely a specialized study within the Austrian economics tradition and the classical liberalism tradition.

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Will Austrian Economics Just Be Called Economics?

Austrian economics is the name that emphasizes the time and place when subjectivism regained focus and classical liberalism regained recognition.

Within subjectivism there is only one kind of economics and within classical liberalism there is only one kind of economics in the sense that there is recognition that all human action is subjective and there is no moral authority for any intervention into the economy.

In this sense I agree wholeheartedly with you and with Peter Schiff. Where I differ is because of the difference between carrying old baggage forward versus discarding the old bags. For instance, are we to assume that these marvelously intelligent and spiritually perceptive creatures (humans) will merely accept carrying forward a obsolete understanding of the concept of equilibrium, as if it exists but no one is allowed to try to understand it further? The answer is no!

Whether the name used in the future is "economics" or "divine economy theory" is not important (because both are ancient concepts and have parallel origins) but the concepts elucidated in the divine economy theory will definitely be a part of this scientific discipline.


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