by Thorsten Polleit

 Part 1

Ignorance, lack of knowledge, and especially errors, deceptions, and manipulations in economic education cause many problems in the economy and in society — in fact, they are what make these problems possible in the first place.

Consider the problem of domination: Some individuals wish to push around, enslave, exploit, plunder, impoverish their fellow human beings, or even reduce the world population, by means of coercion and violence.

However, the coercive and violent rule of someone over another person cannot be justified without logical contradiction (we can prove this), and it is therefore wrong in the truest sense of the word. Man “is created free, is free,” as Friedrich von Schiller (1759–1805) already said.

Unfortunately, however, the problem of domination is not an issue of the past. It is highly acute in the modern world we live in today. Here, domination is achieved, maintained, and practiced in various ways.

For example, through open violence: with batons or swords some suppress others.

Or domination occurs without open violence, by the rulers deliberately instilling fear in the ruled, thereby inducing their submission.

Or — most insidiously — by deceiving the ruled into not recognizing that they are being dominated, oppressed, plundered — that their lives and limbs are being targeted.

The latter is achieved by misleading the ruled, feeding them false doctrines — and, to be on the safe side, the rulers make the majority of the ruled their accomplices by promising them a small share of the loot that the rulers plunder from the minority.

A false economic doctrine is particularly well suited for this purpose. With it, the victims’ view can be obscured so that they do not see that they are being dominated, exploited, enslaved, plundered; their intellectual resistance to the oppressors never even arises. To illustrate how this works, here are some examples.

Part 2

Example number one

Ms. Smith buys a loaf of bread at the bakery for 4 euros. Question: What is the bread worth to Ms. Smith? Answer: She voluntarily gives 4 US$ for the bread because the bread is worth more to her than the 4 US$. Otherwise, she would not make the exchange. And the baker? He values the bred less than the 4 US$ he receives in exchange. One sees: Through the exchange, both Ms. Smith and the baker are better off — compared to a situation where no exchange takes place. Generally speaking: The voluntary exchange with fellow human beings is beneficial to all involved!

And yet this simple insight (as I have found in my teaching experience) is not taught to most people in school or university — it is overlooked, silenced. No wonder many people distrust the free market, and thus the ground is prepared for agitators who discredit the free market system and want to destroy it. (I will come back to this destruction later.)

Example number two

The word “costs” is regularly misrepresented. For instance, we read in the newspaper: The government’s military spending costs 500 billion euro per year. Or: the costs of statutory health insurance amount to 400 billion euro annually.

However, these numbers do not reflect costs in the economic sense. For the costs of an action are the foregone benefit of the best unrealized alternative action.

If the state spends 500 billion euro of taxes extorted from net taxpayers on war equipment, then the costs are, for example, the foregone benefit that building a new road would have brought to people, but which now cannot be built; or the foregone benefit that people do not now receive from a missing improvement in medical care.

More precisely: If Mr. Jackson has to pay 10,000 euros per year to the state, he cannot go on vacation, preserve his health, prolong his lifespan. These are the true costs hidden behind tax-financed government spending, which regularly remain unrecognized — and thus also reduce people’s resistance to state oppression.

Example number three

At the heart of it, costs, returns, happiness, value, profit and loss — these are subjective, not objective concepts. They lie, proverbially, in the eye of the beholder.

For you, the apple is valuable; for me, it is not. Money makes me happy; for you money has hardly any value.

So we know that there are no just taxes, if only because they affect different people differently: You get only a little angry about every euro taken from you; I am furious about it, and others are so frustrated that their health deteriorates.

A state coercive measure (such as taxes) benefits some at the expense of others — it never benefits all! Those who do not know this are unlikely to resist taxation.

Example number four

Rankings of the world’s largest companies are created in financial magazines. The ordering criterion often is the company’s market capitalization. It is calculated as share price multiplied by outstanding shares. The largest company currently is Nvidia with 4.5 trillion US dollars, followed by Apple with 4.1 trillion US dollars, and Alphabet in third place with 3.8 trillion US dollars.

But this market capitalization is a fiction. It does not exist, and it never will. Why? A share price arises from a very specific number of shares being bought and sold. Not all shares are bought and sold at that price. If, say, all Apple shares were offered at once, the price would not remain where it currently is but would settle much lower. The market capitalization circulated in the financial scene is pure fiction.

The same applies to statistics on citizens’ wealth. An individual may be able to, say, sell his house at the current market price, but not all can do so simultaneously. If all sell, they achieve a much lower price.

If you encounter it: the “household wealth of Germans” would be a fictional number with no real counterpart. But state-sponsored statisticians are interested in such numbers. Why? Perhaps to conjure up wealth where there is none. Possibly, politicians and bureaucrats want to stir up envy and resentment by referring to “fake” wealth; to enter it into a wealth register to control them even better, to tax people even higher.

Example number five

“Central banks are guardians of the currency,” we read and hear. This is completely false. The opposite is true: Central banks (the people working in them) reduce the purchasing power of money by ensuring that the money supply is continually expanded. The councils in central banks are thus not guardians of the currency but destroyers of the currency’s purchasing power.

If they are called guardians of the currency and this deception is believed by the population, then all actions taken by central bank councillors (interest rate cuts, money supply expansion, purchases of government bonds, etc.) are seen as good and right — and resistance to the machinations of central bank councillors is silenced, the door is wide open to abuse such as inflation, market manipulation, corruption.

Example number six

Or consider that central bank councils have been given the mandate to keep the price level of goods stable. From this, they (with the help of mainstream economists) have fabricated the erroneous idea that price stability is ensured if goods prices rise by no more than 2 per cent per year.

But this amounts to a debasement of money. If the purchasing power of money decreases by 2 per cent each year, it is like a 2 per cent tax on your income. The whole thing is a prime example of George Orwell’s “doublethink”: wanting, or having to accept, two contradictory statements simultaneously.

Example number seven

We often hear and read about “stable money” or the “stability of money”. But that is an impossibility. In the realm of human action, there is no “fix” or “stable” point. We humans are acting and valuing beings. We have desires, goals, employ means to achieve ends. And since we act (something we cannot deny without causing a logical contradiction), it undeniably shows that the value we assign to different goods does not remain stable over time. Sometimes we prefer bananas over bread, sometimes the reverse. This also applies to the good money. Today money is more valuable to us than stocks; tomorrow we value the same money lower than stocks.

The idea of stable money is contradictory and thus false. The promise to provide stable money (that’s about as if you assure your customer to deliver flying elephants) is a lie with which the state commits great evils: such as, say, seizing control of money production, replacing precious metal money with fiat money, manipulating the money supply and interest rates.

Example number eight

An equally consequential error, a falsehood, is found in the claim that the money supply must grow for the economy to expand. This is economically false. Any given money supply is as good and right as any other; a high money supply fulfills the necessary monetary services just as well as a small one. The economy functions smoothly under the condition that the money supply is constant or decreases.

Whether the money supply should increase, shrink, or remain constant, however, is a question best left to those who demand money, their desires, their choices.

The false idea that the money supply must grow, preferably at plannable rates, is essential for those trying to legitimize a state monopoly on money production and the replacement of commodity money with fiat money — a chronically inflationary money through which the many are plundered by a few.

Example number nine

If you earn 100 euros and do not spend 30 euros but set them aside, you save, provide for later. When politicians say they will not take on 200 billion in new debt but only 180 billion euros, and call that saving, it is false. This is not saving but only increasing debt less than planned.

It is also often said: If more of your income is saved and thus not consumed, demand declines, growth and employment suffer. Therefore, one should consume, consume, consume. But this thought, popularized by Keynesianism, is thoroughly false.

Those who do not spend all their income but save by buying gold, silver, acquiring stocks, etc., ensure that their money reaches those who want to spend it for their purposes.

Discouraging, preventing, discrediting saving is an act of sabotage against the process that generates national prosperity. Without saving, no investment is possible, no technological progress, no increase in people’s material prosperity.

Example number ten

A particularly consequential (I think: deliberate) lie and deceit prevails with the word “state.” Many immediately think of “father state,” a “benevolent dictator,” the community, “we” or “all of us.” But the state is not all of us. This can be seen quite easily.

The state divides people into two classes: net taxpayers and net tax recipients. The state is a net tax recipient — and thus it is precisely not we or all of us. Quod erat demonstrandum.

The word state is also a hypostasis, a reification of something that does not exist as such. What exists are some people who have joined together to form the state and, under the heading of state, do things forbidden to others among us: take something from people against their will (i.e., levy taxes), forbid them things (buying gas from Russia), counterfeit money, arbitrarily increase the money supply, force people to attend school, subject young men to military conscription, send them to the trenches to perish — and all who do not want this, who evade it, are punished.

Fateful (not only for Germans) has been Georg Friedrich Hegel’s explanation of the state: According to Hegel, the state is the highest realization of reason and freedom, the synthesis of family and civil society, the true ethical order and “God’s march on earth,” in which individuals find their true freedom through participation in the general.

But all this is mental confusion, deception. For what do we call people who band together to rob, regiment, coerce others, counterfeit money, lie to and deceive and plunder their fellow human beings? Correct: a gang of robbers.

Example number eleven

A particularly perfidious confusion hides behind capitalism criticism. It loudly denounces ills such as financial and economic crises, rising prices for food, energy, and housing, the widening gap between rich and poor, old-age poverty, crime, wars.

Although these and other ills are unmistakable in the world, they have nothing whatsoever to do with capitalism.

For nowhere in the world is there capitalism. The prevailing economic and social order is interventionism. In interventionism, the state intervenes in economy and society to (allegedly) achieve politically desirable outcomes.

But from economics, we know: Interventionism fails. It either does not achieve its goals, or only by creating problems that did not exist before, or it worsens existing ills. Interventionism is a precursor to socialism, a pre-socialism that, if not stopped, leads to full socialism. False capitalism criticism is an insidious distortion of true conditions, alienates unsuspecting people from the concept of freedom, drives them into unfreedom.

Example number twelve

The exaltation of the so-called “social market economy”, which it is not. Friedrich August von Hayek (1899–1992) pointed out that the adjective “social” is a weasel word. A weasel can supposedly enter the chicken coop and suck out an egg without breaking the shell. What remains is an egg that looks intact from the outside but is emptied inside. Something similar happens with the weasel word “social.”

When one says “social market economy,” something happens in your head: You tell yourself, if there is a social market economy, there must also be something like an unsocial market economy. Ergo: A market economy is not social per se but must be made social. And thus the door is open wide for the state, for demagogues and ideologues: They all set about making the market economy — allegedly unsocial if left to itself — social through interventions (taxes, regulation, commands and prohibitions, etc.). This leads to interventionism, which, if not stopped, leads to a planned and command economy, and in the end stands socialism.

Part 3

The problem ultimately hidden behind all these examples (others could be added) is the following: Experiential knowledge is overly praised as the “relevant,” the “ultimate” form of knowledge, while rational knowledge is pushed back, discredited.

Experiential knowledge is: I touch the hotplate and thus experience that it is hot. Or: If I am friendly toward you, I have experienced that you are also friendly toward me. But experiential knowledge (however helpful it may seem) can never establish a law. It can only say that things happened one way or another but can never logically justify (i) that what was had to be that way and no other, and (ii) that it will be so in the future.

Yet referring to experiential knowledge (and therefore it is so popular with those who want to deceive, defraud, and plunder their fellow human beings) allows to cloak false promises with a claim to truth.

This was known and practiced by the economists of the German Historical School (associated with names like Gustav von Schmoller (1838–1917) and Adolph Wagner (1835–1917)). An economics conceived as an empirical science is a huge problem — and there is a huge problem, for today’s economics is now understood and practiced as an empirical science!

Economists want to gain insights by setting up hypotheses (if-then statements) and testing their truth claim with historical data (or laboratory experiments). But this leads not only to a scientific dead end; it especially opens the door wide to political corruption of economics.

For example, by ideologues and demagogues making sweet-sounding promises (such as: “Introduce fiat money, it increases prosperity”; or: “We need a strong state, it ensures justice and peace” and more), and mainstream media eagerly spreading them.

And those who doubt or criticize it as nonsense are countered: You enemy of progress! Do you want to withhold the good from people? If you have doubts, let’s try it out — after all, only experience can prove whether the promises made are right! Experience is the touchstone!

Under this epistemological dogma, economy and society become a guinea pig laboratory where ideologues and fanatics can experiment to their heart’s content, trying the most absurd things — under the heading “This is supported by science.”

But there is light in the darkness. For besides experiential knowledge, there is also experience-independent knowledge, pure rational knowledge.

It is a priori knowledge, meaning knowledge that underlies our cognitive faculty prior to all experience; it is knowledge of the highest kind, making our structured experience possible in the first place — and everyone already carries it within themselves.

The idea that we experience things as we can experience them comes from the Italian philosopher Giambattista Vico (1688–1744); he said: Verum esse ipsum factum (“The true is what has been made”), a central thought later found in the epistemology of the Königsberg Enlightenment philosopher Immanuel Kant (1724–1804).

An a priori statement is true and has strict universality; it applies always and everywhere, here and today and tomorrow. An example is the law of contradiction: It cannot be the case that statement X is true and simultaneously that statement X is not true. Or: Things equal to the same thing are equal to each other. Or: Humans act. All this is a priori true; one does not need to test its truth by trying it out.

And now comes the most important message in my lecture: Economics can only be understood and practiced, that is conceptualized, without contradiction as an a priori science of human action. It requires action-logical thinking, the method of praxeology, as Ludwig von Mises (1881–1973) called it.

Economics, the theory of human action, is neither a nomothetic nor an idiographic science, thus does not fit into the (widely accepted) categorization of sciences established by the German philosophers Wilhelm Windelband (1848–1915) and Heinrich Rickert (1863–1936); economics is not a nomothetic natural science with generalizing concept formation, nor an idiographic historical science focusing on the particular and individual.

If one conceives and applies economics as an a priori science of human action, one obtains not conjectural knowledge but indisputably true statements. Let me give you some examples:

We know with absolute certainty that a voluntary exchange in free markets (like the purchase and sale of bread in our example) is advantageous for both parties.

We also know with apodictic certainty that there is no such thing as stable money (one with an unchanged value relation to all other goods).

We know that central banks and their fiat money were not established by natural, voluntary means but through force and violence and are maintained through force and violence.

We also know that interventionism, if not stopped, leads to a command and planned economy, ultimately to socialism.

And we know this: Expanding the money supply lowers the purchasing power of money (compared to a situation where the money supply was not expanded).

Or: Issuing fiat money through credit creation necessarily causes disturbances in the financial and economic system, leads to crises.

Or: There is no just tax, there cannot and will not be one. Taxes always create victims and perpetrators.

Or: Every acting human has time preference, carries an originary interest within himself. Time preference and originary interest are always and everywhere present, cannot disappear, cannot become negative.

Or: Socialism is impossible, ends in chaos, arbitrariness, violence, and impoverishment.

Part 4

What would happen if a priori economic knowledge about economic phenomena were lost? It would be a catastrophe.

People would literally no longer understand the role of specialization, division of labor, trade, free markets, individual freedom, and self-determination for their prosperity and peace. It would be a relapse into the most primitive conditions, the end of civilization, presumably leading to the extinction of large parts of the world’s population. Discrediting, sidelining, and pushing back a priori knowledge in economics thus unleashes rather destructive forces.

However, if people have a priori economic knowledge, it is not a guarantee that they will do the right thing — they can deliberately do what they know is wrong, because they are, say, lazy, malicious, or disinterested.

But a priori knowledge is a bulwark against errors, deceptions, and manipulations that are foisted upon you.

For “knowing” something a priori (which includes knowing that one can know things with certainty) is different from merely opining or guessing.

Knowledge from a priori action logic would let people know:

Fiat money is economically and ethically unacceptable; it leads to terrible economic damage; it is “the devil’s money.”

They would also know: Taxes are never just; they are gang-like extortion.

They would know: “The state is a gang of robbers on a grand scale — the most immoral, greediest, and most unscrupulous individuals in any society,” as Murray Rothbard (1926–1995) put it.

They would know that Friedrich Nietzsche (1844–1900) not only formulated literarily powerfully but spoke the truth when he wrote: “The state is the coldest of all cold monsters. Coldly it lies too; and this lie creeps from its mouth: ‘I, the state, am the people.’” … “The state lies in all tongues of good and evil; and whatever it says, it lies — and whatever it has, it has stolen.”

The disenchantment, the shattering of errors, deceptions, and manipulations in economics is not the sole panacea to halt the civilizational decline unfolding before our eyes.

The decisive key, I am convinced, lies in Christian faith. Without following the path shown to us by Jesus Christ, the fight against the spreading darkness in the world cannot be won by us humans. Let us recall the Gospel of John, chapter 8, verse 12:

“I am the light of the world. Whoever follows me will not walk in darkness but will have the light of life.”

I very much hope that I have pointed you all to what needs to be done, and can be done, by us: to combat errors, deceptions, and manipulations in economics.

What can you personally take away now? It is this one sentence: Economics, the theory of human action, is not an empirical science but an a priori science of human action.

All further good follows from this insight.

Thank you very much for your attention!