Natural Rights, Positivism & Austrian Economics

Judge Andrew Napolitano presents the case for natural rights (as opposed to positivism) as the foundation of the United States Declaration of Independence and Constitution. He makes his case at the Mises Institute, named after Ludwig Von Mises a past professor from NYU and one of the founders of the Austrian School of economics.

The libertarian Austrian School also claims Frederich von Hayek, Murray Rothbard and Carl Menger as founders along with Mises. The Austrian School rejects much of the mathematicization of contemporary economics, preferring instead a teleological approach to the study of human action. Human actors are rational beings and so in the Austrian School the purpose of human action must be studied with respect to desired ends.

This emphasis on means and ends stands in rather stark contrast to the more positivistic approach of modern economics which tends to be expressed with respect to causes and effects. The difference between the schools of thought is subtle. Modern economics infers causes and effects using advanced statistical models–but the underlying mathematics is based on the experimental methods of the physical sciences. For instance the Black-Scholes options pricing model shares characteristics of the heat equation first developed by Joseph Fourier in 1882.

The Austrian model posits voluntary and purposeful human action taken with ends in mind as the proper focus of study. Knowledge and reason drive individual behavior and without planning to do so, through market mechanism they create spontaneous order, to use Hayek’s famous terminology. It is a spontaneous order that no one human being could ever plan or produce because no one person or organization could ever acquire sufficient information and knowledge to do so. But freely transmitted price signals from voluntary transactions in the market provide the necessary knowledge and information for spontaneous order.

The 1 hour lecture by Judge Napolitano, shown below, connects the Natural Law School and the Austrian School and is well worth watching.

Judge Napolitano at the Mises Institute