A Crusoe Social Philosophy
One of the most commonly derided constructions of classical economic theory is “Crusoe Economics,” the analysis of an isolated man face-to-face with nature. And yet, this seemingly “unrealistic” model, as I have tried to demonstrate elsewhere, has highly important and even indispensable uses.1 It serves to isolate man as against nature, thus gaining clarity by abstracting at the beginning from interpersonal relations. Later on, this man/nature analysis can be extended and applied to the “real world.” The bringing in of “Friday” or of one or more other persons, after analysis of strictly Robinsonian isolation, then serves to show how the addition of other persons affects the discussion. These conclusions can then also be applied to the contemporary world. Thus, the abstraction of analyzing a few persons interacting on an island enables a clear perception of the basic truths of interpersonal relations, truths which remain obscure if we insist on looking first at the contemporary world only whole and of a piece.
If Crusoe economics can and does supply the indispensable groundwork for the entire structure of economics and praxeology—the broad, formal analysis of human action—a similar procedure should be able to do the same thing for social philosophy, for the analysis of the fundamental truths of the nature of man vis-à-vis the nature of the world into which he is born, as well as the world of other men. Specifically, it can aid greatly in solving such problems of political philosophy as the nature and role of liberty, property, and violence.2
Let us consider Crusoe, who has landed on his island, and, to simplify matters, has contracted amnesia. What inescapable facts does Crusoe confront? He finds, for one thing, himself, with the primordial fact of his own consciousness and his own body. He finds, second, the natural world around him, the nature-given habitat and resources which economists sum up in the term “land.”3 He finds also that, in seeming contrast with animals, he does not possess any innate instinctual knowledge impelling him into the proper paths for the satisfaction of his needs and desires. In fact, he begins his life in this world by knowing literally nothing; all knowledge must be learned by him. He comes to learn that he has numerous ends, purposes which he desires to achieve, many of which he must achieve to sustain his life: food, shelter, clothing, etc. After the basic needs are satisfied, he finds more “advanced” wants for which to aim. To satisfy any or all of these wants which he evaluates in accordance with their respective importance to him, Crusoe must also learn how to achieve them; he must, in short, acquire “technological knowledge,” or “recipes.”
Crusoe, then, has manifold wants which he tries to satisfy, ends that he strives to attain. Some of these ends may be attained with minimal effort on his part; if the island is so structured, he may be able to pick edible berries off nearby bushes. In such cases, his “consumption” of a good or service may be obtained quickly and almost instantaneously. But for almost all of his wants, Crusoe finds that the natural world about him does not satisfy them immediately and instantaneously; he is not, in short, in a Garden of Eden. To achieve his ends, he must, as quickly and productively as he can, take the nature-given resources and transform them into useful objects, shapes, and places most useful to him—so that he can satisfy his wants.
In short, he must (a) choose his goals; (b) learn how to achieve them by using nature-given resources; and then (c) exert his labor energy to transform these resources into more useful shapes and places: i.e., into “capital goods,” and finally into “consumer goods” that he can directly consume. Thus, Crusoe may build himself, out of the given natural raw materials, an axe (capital good) with which to chop down trees, in order to construct a cabin (consumer good). Or he may build a net (capital good) with which to catch fish (consumer good). In each case, he employs his learned technological knowledge to exert his labor effort in transforming land into capital goods and eventually into consumer goods. This process of transformation of land resources constitutes his “production.” In short, Crusoe must produce before he can consume, and so that he may consume. And by this process of production, of transformation, man shapes and alters his nature-given environment to his own ends, instead of, animal-like, being simply determined by that environment.
And so man, not having innate, instinctive, automatically acquired knowledge of his proper ends, or of the means by which they can be achieved, must learn them, and to learn them he must exercise his powers of observation, abstraction, thought: in short, his reason. Reason is man’s instrument of knowledge and of his very survival; the use and of his mind, the acquisition of knowledge about what is best for him and how he can achieve it, is the uniquely human method of existence and of achievement. And this is uniquely man’s nature; man, as Aristotle pointed out, is the rational animal, or to be more precise, the rational being. Through his reason, the individual man observes both the facts and ways of the external world, and the facts of his own consciousness, including his emotions: in short, he employs both extraspection and introspection.
Crusoe, we have said, learns about his ends and about how to attain them. But what specifically does his learning faculty, his reason, do in the process of obtaining such knowledge? It learns about the way things work in the world, i.e., the natures of the various specific entities and classes of entities that the man finds in existence; in short, he learns the natural laws of the way things behave in the world. He learns that an arrow shot from a bow can bring down a deer, and that a net can catch an abundance of fish. Further, he learns about his own nature, about the sort of events and actions that will make him happy or unhappy; in short, he learns about the ends he needs to achieve and those he should seek to avoid.
This process, this method necessary to man’s survival and prosperity upon the earth, has often been derided as unduly or exclusively “materialistic.” But it should be clear that what has happened in this activity proper to man’s nature is a fusion of “spirit” and matter; man’s mind, using the ideas it has learned, directs his energy in transforming and reshaping matter into ways to sustain and advance his wants and his life. Behind every “produced” good, behind every man-made transformation of natural resources, is an idea directing the effort, a manifestation of man’s spirit.
The individual man, in introspecting the fact of his own consciousness, also discovers the primordial natural fact of his freedom: his freedom to choose, his freedom to use or not use his reason about any given subject. In short, the natural fact of his “free will.” He also discovers the natural fact of his mind’s command over his body and its actions: that is, of his natural ownership over his self.
Crusoe, then, owns his body; his mind is free to adopt whatever ends it wishes, and to exercise his reason in order to discover what ends he should choose, and to learn the recipes for employing the means at hand to attain them. Indeed, the very fact that the knowledge needed for man’s survival and progress is not innately given to him or determined by external events, the very fact that he must use his mind to learn this knowledge, demonstrates that he is by nature free to employ or not to employ that reason—i.e., that he has free will.4 Surely, there is nothing outré or mystical about the fact that men differ from stones, plants, or even animals, and that the above are crucial differences between them. The critical and unique facts about man and the ways in which he must live to survive—his consciousness, his free will and free choice, his faculty of reason, his necessity for learning the natural laws of the external world and of himself, his self-ownership, his need to “produce” by transforming nature-given matter into consumable forms—all these are wrapped up in what man’s nature is, and how man may survive and flourish. Suppose now that Crusoe is confronted with a choice of either picking berries or picking some mushrooms for food, and he decides upon the pleasantly tasting mushrooms, when suddenly a previously shipwrecked inhabitant, coming upon Crusoe, shouts: “Don’t do that! Those mushrooms are poisonous.” There is no mystery in Crusoe’s subsequent shift to berries. What has happened here? Both men have operated on an assumption so strong that it remained tacit, an assumption that poison is bad, bad for the health and even for the survival of the human organism—in short, bad for the continuation and the quality of a man’s life. In this implicit agreement on the value of life and health for the person, and on the evils of pain and death, the two men have clearly arrived at the basis of an ethic, grounded on reality and on the natural laws of the human organism.
If Crusoe had eaten the mushrooms without learning of their poisonous effects, then his decision would have been incorrect—a possibly tragic error based on the fact that man is scarcely automatically determined to make correct decisions at all times. Hence, his lack of omniscience and his liability to error. If Crusoe, on the other hand, had known of the poison and eaten the mushrooms anyway—perhaps for “kicks” or from a very high time preference—then his decision would have been objectively immoral, an act deliberately set against his life and health. It may well be asked why life should be an objective ultimate value, why man should opt for life (in duration and quality).5 In reply, we may note that a proposition rises to the status of an axiom when he who denies it may be shown to be using it in the very course of the supposed refutation.6 Now, any person participating in any sort of discussion, including one on values, is, by virtue of so participating, alive and affirming life. For if he were really opposed to life, he would have no business in such a discussion, indeed he would have no business continuing to be alive. Hence, the supposed opponent of life is really affirming it in the very process of his discussion, and hence the preservation and furtherance of one’s life takes on the stature of an incontestable axiom.
We have seen that Crusoe, as in the case of any man, has freedom of will, freedom to choose the course of his life and his actions. Some critics have charged that this freedom is illusory because man is bound by natural laws. This, however, is a misrepresentation—one of the many examples of the persistent modem confusion between freedom and power. Man is free to adopt values and to choose his actions; but this does not at all mean that he may violate natural laws with impunity—that he may, for example, leap oceans at a single bound. In short, when we say that “man is not ‘free’ to leap the ocean,” we are really discussing not his lack of freedom but his lack of power to cross the ocean, given the laws of his nature and of the nature of the world. Crusoe’s freedom to adopt ideas, to choose his ends, is inviolable and inalienable; on the other hand, man, not being omnipotent as well as not being omniscient, always finds his power limited for doing all the things that he would like to do. In short, his power is necessarily limited by natural laws, but not his freedom of will. To put the case another way it is patently absurd to define the “freedom” of an entity as its power to perform an act impossible for its nature!7
If a man’s free will to adopt ideas and values is inalienable, his freedom of action—his freedom to put these ideas into effect in the world, is not in such a fortunate condition. Again, we are not talking about the limitations on man’s power inherent in the laws of his own nature and of the natures of other entities. What we are talking about now is interference with his sphere of action by other people—but here we are getting a bit ahead of Robinson Crusoe and our discussion. Suffice it to say now that, in the sense of social freedom—of freedom as absence of molestation by other persons—Crusoe is absolutely free, but that a world of more than one person requires our further investigation.
Since, in this book, we are interested in social and political philosophy rather than in philosophy proper, we shall be interested in the term “freedom” in this social or interpersonal sense, rather than in the sense of freedom of will.8
Let us now return to our analysis of Crusoe’s purposeful transformation of nature-given data though the understanding of natural laws. Crusoe finds virgin, unused land on the island; land, in short, unused and uncontrolled by anyone, and hence unowned. By finding land resources, by learning how to use them, and, in particular, by actually transforming them into a more useful shape, Crusoe has, in the memorable phrase of John Locke, “mixed his labor with the soil.” In doing so, in stamping the imprint of his personality and his energy on the land, he has naturally converted the land and its fruits into his property. Hence, the isolated man owns what he uses and transforms; therefore, in his case there is no problem of what should be A’s property as against B’s. Any man’s property is ipso facto what he produces, i.e., what he transforms into use by his own effort. His property in land and capital goods continues down the various stages of production, until Crusoe comes to own the consumer goods which he has produced, until they finally disappear through his consumption of them.
As long as an individual remains isolated, then, there is no problem whatever about how far his property—his ownership—extends; as a rational being with free will, it extends over his own body, and it extends further over the material goods which he transforms with his labor. Suppose that Crusoe had landed not on a small island, but on a new and virgin continent, and that, standing on the shore, he had claimed “ownership” of the entire new continent by virtue of his prior discovery. This assertion would be sheer empty vainglory, so long as no one else came upon the continent. For the natural fact is that his true property—his actual control over material goods—would extend only so far as his actual labor brought them into production. His true ownership could not extend beyond the power of his own reach.9 Similarly, it would be empty and meaningless for Crusoe to trumpet that he does not “really” own some or all of what he has produced (perhaps this Crusoe happens to be a romantic opponent of the property concept), for in fact the use and therefore the ownership has already been his. Crusoe, in natural fact, owns his own self and the extension of his self into the material world, neither more nor less.
Interpersonal Relations: Voluntary Exchange
It is now time to bring other men into our Robinsonian idyll—to extend our analysis to interpersonal relations. The problem for our analysis is not simply more people: after all, we could simply postulate a world of a million Crusoes on a million isolated islands, and our analysis would not need to be expanded by one iota. The problem is to analyze the interaction of these people. Friday, for example, might land in another part of the island, and make contact with Crusoe, or he might land on a separate island, and then later construct a boat that could reach the other island.
Economics has revealed a great truth about the natural law of human interaction: that not only is production essential to man’s prosperity and survival, but so also is exchange. In short, Crusoe, on his island or part thereof, might produce fish, while Friday, on his part, might grow wheat, instead of both trying to produce both commodities. By exchanging part of Crusoe’s fish for some of Friday’s wheat, the two men can greatly improve the amount of both fish and bread that both can enjoy.10 This great gain for both men is made possible by two primordial facts of nature—natural laws—on which all of economic theory is based: (a) the great variety of skills and interests among individual persons; and (b) the variety of natural resources in geographic land areas. If all people were equally skilled and equally interested in all matters, and if all areas of land were homogeneous with all others, there would be no room for exchanges. But, in the world as it is, the opportunity for specialization in the best uses for land and people enables exchanges to multiply vastly and immensely to raise the productivity and the standard of living (the satisfaction of wants) of all those participating in exchange.
If anyone wishes to grasp how much we owe to the processes of exchange, let him consider what would happen in the modern world if every man were suddenly prohibited from exchanging anything with anyone else. Each person would be forced to produce all of his own goods and services himself. The utter chaos, the total starvation of the great bulk of the human race, and the reversion to primitive subsistence by the remaining handful of people, can readily be imagined.
Another remarkable fact of human action is that A and B can specialize and exchange for their mutual benefit even if one of them is superior to the other in both lines of production. Thus, suppose that Crusoe is superior to Friday in fish and wheat production. It still benefits Crusoe to concentrate on what he is relatively best at. If, for example, he is a far better fisherman than Friday but only a moderately better farmer, he can gain more of both products by concentrating on fishing, and then exchanging his produce for Friday’s wheat. Or, to use an example from an advanced exchange economy, it will pay a physician to hire a secretary for typing, filing, etc. even if he is better at the latter jobs, in order to free his time for far more productive work. This insight into the advantages of exchange, discovered by David Ricardo in his Law of Comparative Advantage, means that, in the free market of voluntary exchanges, the “strong” do not devour or crush the “weak,” contrary to common assumptions about the nature of the free-market economy. On the contrary, it is precisely on the free market where the “weak” reap the advantages of productivity because it benefits the “strong” to exchange with them.
The process of exchange enables man to ascend from primitive isolation to civilization: it enormously widens his opportunities and the market for his wares; it enables him to invest in machines and other “high-order capital goods”; it forms a pattern of exchanges—the free market—which enables him to calculate economically the benefits and the costs of highly complex methods and aggregates of production.
But economists too often forget, in contemplating the critical importance and the glories of the free market, what precisely is being exchanged. For apples are not simply being exchanged for butter, or gold for horses. What is really being exchanged is not the commodities themselves, but the rights to ownership of them. When Smith exchanges a bag of apples for Jones’s pound of butter, he is actually transferring his ownership rights in the apples in exchange for the ownership rights to the butter, and vice versa. Now that Smith rather than Jones is the absolute controller of the butter, it is Smith who may eat it or not at his will; Jones now has nothing to say in its disposition, and is instead absolute owner of the apples.
Returning now to Crusoe and Friday, suppose that more people, C, D, E … join Crusoe and Friday on the island. Each specializes in different products; gradually one particular product emerges—because of such qualities as high value, steady demand, ready divisibility—as a medium of exchange. For it is discovered that the use of a medium enormously expands the scope of exchanges and the wants that can be satisfied on the market. Thus, a writer or an economics teacher would be hard put to exchange his teaching or writing services for loaves of bread, parts of a radio, a piece of a suit, etc. A generally acceptable medium is indispensable for any extensive network of exchange and hence for any civilized economy.
Such a generally acceptable medium of exchange is defined as a money. It has generally been found, on the free market, that the best commodities for use as a money have been the precious metals, gold and silver. The exchange sequence now appears as follows: A, owning his body and his labor, finds land, transforms it, produces fish which he then owns; B uses his labor similarly to produce wheat, which he then owns; C finds land containing gold, transforms it, produces the gold which he then owns. C then exchanges the gold for other services, say A’s fish. A uses the gold to exchange for B’s wheat, etc. In short, the gold “enters circulation,” i.e., its ownership is transferred from person to person, as it is used as a general medium of exchange. In each case, the exchangers transfer ownership rights, and, in each case, ownership rights are acquired in two ways and two ways only: (a) by finding and transforming resources (“producing”), and (b) by exchanging one’s produce for someone else’s product—including the medium of exchange, or “money” commodity. And it is clear that method b reduces logically to a, for the only way a person can obtain something in exchange is by giving up his own product. In short, there is only one route to ownership of goods: production-and-exchange. If Smith gives up a product in exchange for Jones’s which Jones also acquired in a previous exchange, then someone, whether the person from whom Jones bought the product or someone else down the line, must have been the original finder- and-transformer of the resource.
A man then, can acquire “wealth”—a stock of useful capital or consumer goods—either by “producing” it himself, or by selling to its producer some other product in exchange. The exchange process reduces logically back to original production. Such production is a process by which a man “mixes his labor with the soil”—finding and transforming land resources or, in such cases as a teacher or writer, by producing and selling one’s own labor services directly. Put another way: since all production of capital goods reduces ultimately back to the original factors of land and labor, all production reduces back either to labor services or to finding new and virgin land and putting it into production by means of labor energy.11
A man may also obtain wealth voluntarily in another way: through gifts. Thus Crusoe, upon stumbling on Friday at another end of the island, may give him some sustenance. In such a case, the giver receives, not another alienable good or service from the other party, but the psychic satisfaction of having done something for the receiver. In the case of a gift, also, the process of acquisition reduces back to production and exchange—and again ultimately to production itself, since a gift must be preceded by production, if not directly as in this case, then somewhere back down the line.
We have so far analyzed the exchange process for a multitude of exchanges of consumer goods. We must now complete our picture of the real world by analyzing exchanges along the structure of production. For exchanges in an advanced economy are not only “horizontal” (of consumer goods), but also “vertical”: they proceed downward from the original transformation of land, down through the various types of capital goods, and finally to the ultimate state of consumption.
Let us consider a simple vertical pattern as it occurs in the exchange economy. Smith transforms land resources and constructs an axe; instead of using the axe to make another product, Smith, as a specialist in a vast exchange economy, sells his axe for gold (money). Smith, producer of the axe, transfers his right of ownership to Jones, in exchange for a certain amount of Jones’s gold—the precise amount of gold being agreed upon voluntarily by the two parties. Jones now takes the axe and fells lumber, then sells the lumber to Johnson for gold; Johnson in turn sells the lumber to Robbins, a contractor, for gold, and Robbins in his turn constructs a house in exchange for the gold of his client, Benton. (It should be evident that this vertical network of exchange could not take place without the use of a monetary medium for the exchanges.)
To complete our picture of a market economy, let us suppose that Jones has cut down his lumber, but has to ship it downriver to transfer it to Johnson; Jones, then, sells the lumber to another intermediary, Polk, who hires the labor services of X, Y, and Z to transport the logs to Johnson. What has happened here, and why doesn’t the use of X, Y, and Z’s labor in transforming and transporting the logs to a more useful place give them rights to ownership of the logs?
What has happened is this: Polk transfers some gold to X and to Y, and to Z, in return for their selling to him their labor services of transporting the logs. Polk did not sell the logs to these men for money; instead, he “sold” them money in exchange for employing their labor services on his logs. In short, Polk may have bought the logs from Jones for 40 gold ounces, and then paid X, Y, and Z 20 gold ounces each to transport the logs, and then sold the logs to Johnson for 110 ounces of gold. Hence, Polk netted a gain of 10 gold ounces on the entire transaction. X, Y, and Z, if they had so desired, could have purchased the logs from Jones themselves for the 40 ounces, and then shipped the logs themselves, sold them to Johnson for 110 and pocketed the 10 extra ounces. Why didn’t they? Because (a) they didn’t have the capital; in short, they hadn’t saved up the requisite money by reducing their previous consumption sufficiently below their income to accumulate the 40 ounces; and/or (b) they wanted money payment while they worked, and were not willing to wait for the number of months it took for the logs to be shipped and sold; and/or (c) they were unwilling to be saddled with the risk that the logs might indeed not be saleable for 110 ounces. Thus, the indispensable and enormously important function of Polk, the capitalist in our example of the market economy is to save the laborers from the necessity of restricting their consumption and thus saving up the capital themselves, and from waiting for their pay until the product would (hopefully) be sold at a profit further down the chain of production. Hence, the capitalist, far from somehow depriving the laborer of his rightful ownership of the product, makes possible a payment to the laborer considerably in advance of the sale of the product. Furthermore, the capitalist, in his capacity as forecaster or entrepreneur, saves the laborer from the risk that the product might not be sold at a profit, or that he might even suffer
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