This article is unashamedly in Friedrich von Hayek’s category of “second-hand dealers of ideas”. In fact, it is lower than that being third-hand. More specifically, I, as the third-hand dealer, intend to summarize the axioms of Austrian economics by a second-hand dealer, by the name of Percy Greaves, who first laid these out (in parts throughout) his 302 page book from 1973 entitled Understanding the Dollar Crisis.
In doing so, he was “standing on the shoulders of giants” such as Ludwig von Mises who, in fact, wrote the foreword to this book. I first read this book by Greaves in 2013. Despite the title, it is really more of an intermediate introduction to Austrian economics, and an excellent one at that. Greaves lays out many of the important Austrian axioms (which he called “postulates”), but in a remarkably simple and clear manner.
This article serves as a “public service announcement” of sorts. This is because I have been wondering for many years why somebody had not already identified an listed these axioms in a simple format. And why hasn’t that somebody been one of the “big hitters” of Austrian economics? Apparently it is up to me, despite my third-hand status as an Austrian economist, to list them here as Austrian Axioms 101.
Note that I first did this listing in a 2017 presentation to the Liberal Democrats Party of Australia entitled “Austrian School Libertarianism.” I then wrote this up for a 2018 article for the Aussie think tank LibertyWorks entitled “Austrian Economics: Please Explain?”, which is sadly no longer available online. Also note that at this stage I am not offering my interpretation, criticism or suggestions. Perhaps this will come in time: even though I am mainly an Austrian economist, I also draw upon other schools of thought to a lesser extent including English and French Classical, Neoclassical, Public Choice, Transaction Costs and especially Christian.
A Priori Axioms
The following were explicitly referred to as “a priori postulates” or axioms by Greaves in his book:
Human Action – All men seek to improve their situation from their viewpoint. [From page 10 as a priori postulate #1.]
Action Scarcity – The factors available for improving men’s situations are scarce. [From page 11 as a priori postulate #2.]
Human Fallibility – Men make mistakes. [From page 12 as a priori postulate #3.]
The following were explicitly referred to as “deduced postulates” or axioms by Greaves in his book:
Human Rationality – All men are rational beings. [From pages 13-14 as deduced postulate #1.]
Action Time – All human actions take time. [From page 14 as deduced postulate #2.]
Action Consequences – All human actions have consequences. [From page 15 as deduced postulate #3.]
Action Choices – Men choose those actions they believe will best improve their situation. [From page 16 as deduced postulate #4.]
Action Ideas – The ideas men hold determine their actions. [From pages 16-17 as deduced postulate #5.]
Value and Exchange Axioms
The following were explicitly referred to as “some more deduced” or “value and exchange postulates” or axioms by Greaves in his book:
Ordinal Value – Men have value scales. [From page 42 as some more deduced or value and exchange postulate #1.]
Marginal Value – Each additional unit of any economic good is of diminishing importance, or use value. [From page 44 as value and exchange postulate #2.]
Subjective Value – Different men have different value scales and the same men have different value scales at different times. [From page 48 as value and exchange postulate #3.]
Exchange Value – Only men with different value scales can and do exchange for mutual advantage. [From page 49 as value and exchange postulate #4.]
Market Place Axioms
The following were explicitly referred to as “market place postulates” or axioms by Greaves in his book:
Exchange Exists – Man will exchange only if he can exchange for an advantage. [From page 70 as market place postulate #1.]
Exchange Preferences – Man will exchange for a greater advantage, in preference to an exchange for a lesser advantage. [From page 70 as market place postulate #2.]
Exchange Occurs – Man will exchange for a small advantage in preference to not exchanging at all. [From page 71 as market place postulate #3.]
Greaves also wrote in his 1973 book:
All science aims at tracing back every phenomenon to its cause. There will always be some irreducible and unanalyzable phenomena, some ultimate given, some a priori postulate beyond which you cannot go back any further. In all science, if it is “D” that you want and “C” produces “D,” then you strive for “C.” If you learn that “B” produces “C,” you seek “B,” and if “A” produces “B,” you seek “A.” You go back to “A.” So that “A” gives you “B,” which gives you “C,” which gives you “D,” which is what you want. In science we go back regressus in infinitum. We go back to a point beyond which we cannot go back any further. This is true in economics as it is in every other science.
In addition, as I said in my 2017 presentation:
All of life’s fundamental political problems, about which there are so many disagreements, are basically economic problems. The best answers can be found only by resorting to the study of sound economics. Economics is not a study of opinions. Economics is a science, and as a science it deals with eternal laws —laws that people are not able to change —laws that remain constant.
How the Austrian School is the best can be seen from, amongst other things, its axioms. An axiom is a universal principle or rule.
Finally, I will conclude this Austrian Axioms 101, as I did in my 2018 article, by quoting the great 20th century Christian thinker and literary genius, C.S. Lewis from Mere Christianity, in support of the axioms of human action:
There is one thing, and only one, in the whole universe which we know more about than we could learn from external observation. That one thing is Man. We do not merely observe men, we are men. In this case we have, so to speak, inside information; we are in the know.1
- 1. And Lewis added immediately after that: And because of that, we know that men find themselves under a moral law, which they did not make, and cannot quite forget even when they try, and which they know they ought to obey.