The Tao Te Ching is my all time favorite philosophical work. It was written around the 6th century BC by a Chinese sage named Lao Tzu, who was a record keeper for the Zhou Dynasty court. The text forms the backbone of Taoist philosophy. It’s an easy read, not too long, yet it is crammed full of philosophical goodness.

The reason why I love this work so much is that it complements the lessons taught by the Austrian school of economics. Where Austrian economics provides us the logical rigor to assess the best way of increasing human prosperity, the Tao Te Ching takes a spiritual path to arrive at the same conclusions.

2600 years ago this brilliant philosopher recognized that peace and voluntarism are the way of great nations, and by letting go of our desire for control, human prosperity will flourish. Understanding and abiding by the lessons taught in the Tao Te Ching not only leads to individual happiness, but also universal prosperity.

“Tao” essentially translates into “way,” so when reading the Tao, substitute “way” or “the virtuous path” or “the nameless divine” for the word Tao and it will begin to make more sense to you.

A few quotes on governance from the Tao Te Ching:

“When taxes are too high, people go hungry. When the government is too intrusive, people lose their spirit. Act for the people’s benefit. Trust them; leave them alone.” “Stop trying to control. Let go of fixed plans and concepts, and the world will govern itself. The more prohibitions you have, the less virtuous people will be. The more weapons you have, the less secure people will be. The more subsidies you have, the less self-reliant people will be. Therefore the Master says: I let go of the law, and people become honest. I let go of economics, and people become prosperous. I let go of religion, and people become serene. I let go of all desire for the common good, and the good becomes common as grass.” “When the Master governs, the people are hardly aware that he exists. Next best is a leader who is loved. Next, one who is feared. The worst is one who is despised. If you don’t trust the people, you make them untrustworthy. The Master doesn’t talk, he acts. When his work is done, the people say, ‘Amazing: we did it, all by ourselves!'” “Can you love people and lead them without imposing your will? Can you deal with the most vital matters by letting events take their course? Can you step back from you own mind and thus understand all things?” “When a country obtains great power, it becomes like the sea: all streams run downward into it. The more powerful it grows, the greater the need for humility. Humility means trusting the Tao, thus never needing to be defensive. A great nation is like a great man: When he makes a mistake, he realizes it. Having realized it, he admits it. Having admitted it, he corrects it. He considers those who point out his faults as his most benevolent teachers. He thinks of his enemy as the shadow that he himself casts. If a nation is centered in the Tao, if it nourishes its own people and doesn’t meddle in the affairs of others, it will be a light to all nations in the world.” “If you want to learn how to govern, avoid being clever or rich.” “All streams flow to the sea because it is lower than they are. Humility gives it its power. If you want to govern the people, you must place yourself below them. If you want to lead the people, you must learn how to follow them.” “Governing a large country is like frying a small fish. You spoil it with too much poking. Center your country in the Tao and evil will have no power. Not that it isn’t there, but you’ll be able to step out of its way. Give evil nothing to oppose and it will disappear by itself.”

Listen to economist Murray Rothbard comment on Lao Tzu here, or read his comments here.

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