Diax’s Rake is a phrase coined in Neal Stephenson’s novel, Anathem:

“Diax’s Rake: A pithy phrase. Uttered by Diax on the steps of the Temple of Orithena when he was driving out the fortune-tellers with a gardener’s rake. Its general import is that one should never believe a thing because one wishes that it were true.”- (Anathem p. 895)

While this idea already exists in our world, to my knowledge there is no other succinct phrase to express it.

It is important to realize that the human mind will readily accept inputs that support its preconceived notions. This is a natural phenomenon and not necessarily the act of an intellectually dishonest person; it is merely human nature. Because of this nature it is important that people apply Diax’s Rake, and consciously examine claims to insure that they are accurate, in order to have the most consistent world view both internally and with reality.

I became an anarchist not because of Austrian economic thought, but because of ethics; anarchy is the natural conclusion to the Non-Aggression Principle (NAP), and the least coercive system is one where the initiation of coercion is never legitimate. In the words of Roderick T. Long, “a consistent peace activist must be an anarchist.” An individual who holds the NAP as the pillar of their ethics must be an anarchist for the exact same reason.

As a result of this conversion I’ve found myself diving into the Austrian school, which is a classic situation where I need to apply Diax’s Rake. I want to believe the Austrians because their ethics and mine are very similar.

The tendency to confirm biases and engage in motivated reasoning is not unique to any one philosophy, so all of us must take care that we diligently examine arguments presented to us. If there is a temptation for libertarians to uncritically accept Austrian economics due to its political implications, so too is there a strong motivation for Statists to follow Keynesian or Marxist economic thought. However, the fact that this tendency exists does not mean that all Statists fall victim to it. Advocates of Keynesian and Marxist economics may simply be reaching a different conclusion without motivated reasoning, whether they are reasoning based on flawed premises or their perspectives are distinct from ours. This is another opportunity to apply the Rake, since it is easiest for libertarians to assume that the Statists are guilty of intellectual fallacies, giving us a way to easily dismiss their arguments.

Keynesian Economics

If we look at the dominance of the Keynesian school in the government, the accusation can arise that government officials are not applying Diax’s Rake because they desire a “scientific” backing for their power. Let us examine the claims of the Keynesians to ensure that we are remaining intellectually honest. In other words, let us take the Rake to our own reasoning.

An essential factor of the Keynesian view of the economy is that the private sector can sometimes lead to inefficient outcomes, and that in order to correct this behavior the State needs to intervene with monetary and trade policy. This intervention is necessarily directed by some officials, and it’s supposed that these officials will have the best interests of the nation at heart. While it may not be the case that supporters of the government are supporting a theory that conveniently grants them (or their democratically elected proxies) power, the possibility should not be overlooked or dismissed out of hand.

The problem with this basic tenet of Keynesian economics is a simple step of logic. Even though the Keynesians are right, and the private sector (with the most immediate information) is capable of causing inefficiency in a macro setting (an inevitability because humans are imperfect), how is a government agency (operating with less information) going to make better economic calculations? If private actors are fallible even when they are experts in their field, comparable to commanders on the ground, how are the “armchair generals” of central planning immune to the same fallibility?

Keynesians are right. Business people are imperfect, and it leads to economic inefficiencies. And business people feel the consequences of their poor decisions. However, Keynesians are wrong to conclude that central planning can remedy these consequences, because bureaucrats are imperfect, and it leads to economic inefficiencies on a grander scale. Their logic is demonstrably flawed.

Here’s the Rake. Because I prefer Austrian economics, I am predisposed to reject Keynesian claims. That’s why it’s important for me to double check their premises, their logic, and their evidence to ensure I am not confirming my own bias. I apply the Rake to check myself, and when the Rake snags on their logical errors my suspicion of Keynesian error is confirmed.

I wonder if the Keynesians are as diligent when debunking Austrian claims?

Marxist Economics

Marxism, and by extension all other strains of communism, rely on the Labor Theory (LTV) of Value to give them something objective and measurable for central planners to calculate. This puts them in direct conflict with the Austrian school, which claims that value is subjective.

The LTV claims that the value of a product is based upon the labor that was put into a product. If we examine this Marxist theory, a glaring problem presents itself immediately, one of circular reasoning. If the value of an item is based upon the labor used to create it, what’s the value of the labor? If the value of the labor is determined by the value of the resulting product, than we have reasoned in a circle.

A claim that you’ll hear coming out of the communist camps is that all labor is equal. If we suppose that this is true what is the result? An individual that spends their time idly sanding a block of wood for eight hours creates a product which is equal in value to that of a Macbook, if the time spent building the Macbook is also eight hours. The idea is absurd.

It seems clear that one of two things is happening here. Either Marxists are deliberately ignoring the circular reasoning and absurdity in their theory, or it hasn’t occurred to them, and they are uncritically accepting the theory that supports their desired outcome. In other words they aren’t applying the Rake. Neither is acceptable.

If they are ignoring flaws in their theory then they are being intentionally deceptive and intellectually dishonest. If they are accepting the theory uncritically the reason is simple: because the LTV claims to provide an objective measure of value, which lends itself to idealized modeling, and supports a centrally controlled economic system.

Austrian thought specifically claims that accurate modeling of the economy is not possible, which makes it the antithesis of what someone who believes in the benevolence and necessity of the State, or who believes that the market is coercive, wants to believe. In light of this, it is obvious that whether these individuals are ignoring the flaws in their theory, or unaware of them, they are being intellectually dishonest.

Austrian Economics

Austrian economic thought on the other hand posits that value is subjective which contrasts with the claims analyzed above. Saying that value is subjective removes the issue of circular reasoning present in the Marxist LTV, however it raises issues of its own. If value is subjective it necessarily means that it is impossible to model, which makes the Austrians directly at odds with legislators. Because people are not omniscient it is impossible for one to know the contents of another’s mind, so it is impossible to know what another person values. It is impossible to build rational legislation on uncertainty. Acknowledging this fact completely invalidates the State’s monetary and trade policy.

The subjective nature of value acknowledges that people are individuals and that their experiences and perspectives are all different, an indisputable fact. It explains why some people like Dr. Pepper, while others like Coke, and why still others do not like soda pop at all. The claim that value is subjective is consistent with reality.

A debate that is taking place in the Austrian school is whether or not money has an use value. Ludwig von Mises makes the claim that it is necessary for money to have a utilitarian base; in his own words:

“The price of money, like other prices, is determined in the last resort by the subjective valuations of buyers and sellers. But, as has been said already, the subjective use-value of money, which coincides with its subjective exchange value, is nothing but the anticipated use-value of the things that are to be bought with it. The subjective value of money must be measured by the marginal utility of the goods for which the money can be exchanged. It follows that a valuation of money is possible only on the assumption that the money has a certain objective exchange value. Such a point d’appui (fulcrum) is necessary before the gap between satisfaction and “useless” money can be bridged. Since there is no direct connection between money as such and any human want, individuals can obtain an idea of its utility and consequently of its value only by assuming a definite purchasing power. But it is easy to see that this supposition cannot be anything but an expression of the exchange ratio ruling at the time in the market between the money and commodities.” (The Theory of Money and Credit)

The first paragraph seems to be making the claim that the one factor taken into account when an individual is deciding on the value of money is the utility of the good that money purchases. This claim is completely logical; it makes sense for an individual to take the utility of an item into account.

The first sentence of the second paragraph makes the claim that because it makes sense for the utility of future purchased items to be taken into account, money must be assumed to have an objective exchange value. This reasoning is erroneous. Just because it makes sense for someone to take the utility of purchased items into account when determining what it is worth doesn’t mean that they must. How can we say that money must have an objective value because a subjective use-value coincides with a subjective exchange value? This is the exact same issue that the Marxist LTV contains. The idea that the process of valuation of money must take into account the utility, therefore money must have a utilitarian base, misses the point and adds a useless step. The utility of money is determined by the subjective value scale of the actor in question, and is not a factor unto itself. It is based on the subjective nature of value.

The fact remains that value is purely subjective; the idea of objective value is logically inconsistent and therefore cannot exist. At the end of the day no one is infallible, it is possible even for the giants to make mistakes! This is why one must always apply the Rake, and never appeal to authority!

Tags: Anathem, Austrian Economics, Diax's Rake, Keynesian Economcs, Marxism