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David Hume

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David Hume (1711-1776) was the Scottish philosopher whose essays on money, property and moral reasoning set problems the Austrian School still works on. He wrote no treatise on economics, but the short essays of the Political Discourses of 1752 contain the arguments that broke mercantilism and the objection that natural law theories of liberty have had to answer ever since.

Money and the balance of trade

Hume's most durable economic argument is the specie-flow account in "Of the Balance of Trade". If money flows into a country, prices there rise; its exports become dearer and its imports cheaper; the flow reverses. The mercantilist aim of hoarding bullion is therefore self-defeating, because the hoard raises domestic prices until it drains away again.[1]

In "Of Money" he made an observation Austrians value more than the specie-flow mechanism itself. An increase in the quantity of money does not raise all prices at once. There is an interval during which the new money has reached some hands and not others, and in that interval industry is stimulated, because those who receive it early buy at prices set before it arrived.[2] This is the germ of what Richard Cantillon had already worked out more fully and of the Austrian insistence that inflation is a redistribution before it is a rise in an index.

Murray N. Rothbard is accordingly two-sided about him. Hume is credited with seeing the transition period; he is faulted for the aggregative framing that surrounds it, which treats the price level as the thing to be explained and so buries the individual price changes that do the actual work.[3]

Public credit

"Of Public Credit" is the least hedged thing Hume wrote. He held that a state which can borrow against future taxes will borrow without limit, because the cost falls on people who are not yet voting, and concluded that either the nation must destroy public credit or public credit will destroy the nation.[4] The mechanism he described, in which the borrower and the payer are different parties, is the one Austrians still give as the reason public debt differs in kind from private debt.

Property, justice and convention

Hume denied that property is a natural quality of objects and denied equally that a legislator invents it. Property is a convention, arising because people discover that stable possession serves each of them better than seizure does, and hardening into rules nobody designed. He gave three fundamental laws: stability of possession, transference by consent, and the performance of promises.[5]

That is an early statement of spontaneous order, and Friedrich Hayek took it as such, treating Hume rather than John Locke as the founder of the tradition he was working in. The cost is that a convention has no standing against a different convention, which is why the Humean route to property is congenial to Hayek and unacceptable to Rothbard.

The is/ought objection

The passage with the widest reach is three sentences in the Treatise: in every system of morality Hume had met, the author proceeds in propositions joined by "is" and then, imperceptibly, the copula becomes "ought", and no reason is given for the change.[6]

Every derivation of natural rights from human nature has to get past this, and the Austrian tradition is split on how. Rothbard held that the objection presupposes the fact-value separation it is meant to establish, since an account of what a kind of being is already contains what is good for it. Ludwig von Mises accepted the objection and built the case for liberty so that it never needs the step: economics establishes means to ends and pronounces on no end at all.[7] Hans-Hermann Hoppe's argument from the presuppositions of argument is a third route, designed to sidestep the problem rather than answer it.

See also

References

  1. ↑ David Hume. "Of the Balance of Trade", Political Discourses, 1752.
  2. ↑ David Hume. "Of Money", Political Discourses, 1752.
  3. ↑ Murray N. Rothbard. "David Hume and the Theory of Money", from Economic Thought Before Adam Smith, vol. 1.
  4. ↑ David Hume. "Of Public Credit", Political Discourses, 1752.
  5. ↑ David Hume. A Treatise of Human Nature, 1739, Book III, Part II, Sec. II-VI.
  6. ↑ David Hume. A Treatise of Human Nature, 1739, Book III, Part I, Sec. I.
  7. ↑ Ludwig von Mises. Theory and History, 1957, ch. 3.
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