Was Mises a Postmodernist?: The Subjective Theory of Value

I have always had a strong belief that objective truth exists compared to  the subjectivity of postmodernism; but at the same time I have a total belief in the truth of the subjective theory of value. Recently it dawned on me that I might be having a bout of cognitive dissonance: believing in opposing views at the same time. This situation arose from the viewing of an interview of Roy Sebag by Jordan Peterson. Sebag has written a nice little book (less than 100 pages including the appendix and notes) called The Natural Order of Money.

The book is most easily summarized by reading the table of contents that consists of descriptions of each chapter.


What makes cooperation possible and sustainable between people and the natural world?–We must turn to the natural order–Modern economic theory deals with analysis in a mathematical vacuum, removed from its wider ecological environment–This work is an exercise in natural philosophy that is occupied with the synthesis of the living, breathing economy.


Time is the fundamental, superseding law of nature–Time moves forward and is irreversible–Human action is beholden to the requirements of the present–Contemporary economics tends to ignore the condition of our temporality–The essential features of nature emerge within the omnipresent theatre of time.


Nature is a thermodynamic system governed by the forces of energy and entropy–Metabolization is the process of conserving and expending energy–Energy sources which propel this thermodynamic system are foods, fuels, and elemental substances.


The human cooperative system is also thermodynamic–There is a chain of temporal energy dependency, in which the first cause of an economy is those who work with nature to source foods, fuels, and elemental substances–The real economy generates energy embodiments, the service economy only consumes them–The perfect cycle of the farmer’s activity–The real economy is beholden to a natural standard of measure and reward.


Ecological accountability is a fact of nature and of all human cooperative systems–Only the service economy is able to artificially and temporarily ignore ecological accountability–When ecological accountability is manipulated or forgotten, the relationship between the real and service economies become parasitic–The natural standard must be reified and extended to all members ensuring that ecological accountability remains at the heart of cooperation.


Ecological accountability is not an ideal of promise but a lived reality–Money extends the natural standard, promoting cooperation while reflecting ecological accountability–Money itself must be an energy embodiment–Money is more than its incidental features–This understanding of money differs from standard accounts in modern economic and anthropological theory.


A superior money will be resistant to entropy and are of difficult to extract from nature–True money will neither be food nor fuel, but rather an elemental substance–Elements are naturally scarce, meaning that each element exhibits certain unchanging qualities–Gold is the apex element with the natural order of money.


When money is gold, cooperation between people and nature is sustainable–Gold money remains a stable measure and reward in both generative and degenerative cycles–We live in an age of contrived moneys and parasitic economies–A solution must be given by nature and not the service economy–Gold is the perfect mirror of ecological accountability.

To get to the point of this essay, Sebag defines money to be “an energy embodiment which serves as a common measure and a reward for economic activity.” Later, in relation to the subjective theory of value, he states that, “Our understanding departs from Jevons [a leader of the marginal revolution in economics in the late 19th century] and the thinkers who follow in his tradition insofar as we recognize that ecological accountability places a concrete limit on human desires.” On the other hand, Sebag follows the Austrian tradition in taking a qualitative approach, explicitly avoiding quantitative analysis (except for a point I will make later).

Economics deals precisely with the intersection of nature and human intention, and so it must account for something of the fundamental irreducibility of the natural order and the society which inhabits it. Cooperation between persons cannot be analyzed or abstractly promoted in a mathematical vacuum, removed from the wider ecological environment, and denuded of its tangible qualitative features.

Here I will add a rant by James Kunstler after the bank bailouts on the current state of money that echoes the theoretical discourse of Sebag.

Money dies when it loses its direct connection to the generation of wealth from the real things of this earth: fuels, crops, metals, materials, labor, and the value-added products made from them. Since that divorce has already happened, the need arises for something else that can function as money (a store of wealth, an index of value, and a medium of exchange). The government will pretend that a Central Bank Digital Currency is that something else. Since banking is now nationalized by the Federal Reserve backstopping everything and everybody, then theoretically all the wealth of the nation is under its command. That would be another illusion.

Sebag comes to the same conclusion about gold as the Austrians and history, that he calls the natural order money.

Gold is the longest-lasting, the most energy efficient, and the rarest of the possible energy embodiments which nature bequeaths to us. For this reason, it rests at the apex, at the highest summit of difficulty within the natural standard, and so it is able to measure and reward the energy embodiments which are arrayed beneath it, without competing with them.

It is now about 35 years since I read Mises’ Human Action which was my first exposure to the subjective theory of value. I cannot say I have an especially great knowledge of Mises’ explanation of the Austrian subjective value theory. But using the Mises Institute PDF version I did find the statement that, “It is ultimately always the subjective value judgments of individuals that determine the formation of prices.” Seemingly, Mises and Sebag are in total disagreement. But Mises’ argument is much more nuanced than is apparent in the sentence quoted here. At another point in his treatise he expands on all of the influences that affect human action in coming to a value judgment.

The subject matter of catallactics is all market phenomena with all their roots, ramifications, and consequences. It is a fact that people in dealing on the market are motivated not only by the desire to get food, shelter, and sexual enjoyment, but also by manifold “ideal” urges. Acting man is always concerned both with “material” and “ideal” things. He chooses between various alternatives, no matter whether they are to be classified as material or ideal. In the actual scales of value material and ideal things are jumbled together. Even if it were feasible to draw a sharp line between material and ideal concerns, one must realize that every concrete action either aims at the realization both of material and ideal ends or is the outcome of a choice between something material and something ideal.

Whether it is possible to separate neatly those actions which aim at the satisfaction of needs exclusively conditioned by man’s physiological constitution from other “higher” needs can be left undecided. But we must not overlook the fact that in reality no food is valued solely for its nutritive power [here we could substitute Sebag’s use of the word “energy” to make the comparison more precise] and no garment or house solely for the protection it affords against cold weather and rain. It cannot be denied that the demand for goods is widely influenced by metaphysical, religious, and ethical considerations, by aesthetic value judgments, by customs, habits, prejudices, tradition, changing fashions, and many other things. To an economist who would try to restrict his investigations to “material” aspects only, the subject matter of inquiry vanishes as soon he wants to catch it.

Mises was especially arguing against the socialists and statists of all stripes and to ground his economic analysis on the firm ground of human action.

All that can be contended is this: Economics is mainly concerned with the analysis of the determination of money prices of goods and services exchanged on the market. In order to accomplish this task it must start from a comprehensive theory of human action. Moreover, it must study not only the market phenomena, but no less the hypothetical conduct of an isolated man and of a socialist community. Finally, it must not restrict its investigations to those modes of action which in mundane speech are called “economic” actions, but must deal also with actions which are in a loose manner of speech called “uneconomic.”

I think the views of Mises and Sebag can be reconciled by adding to Mises statement quoted previously as follows. It is ultimately always the subjective value judgments of individuals that determine the formation of prices within the limits of the natural order including human physiology and psychology. For example, Mises states early in his book that  “There is, of course, a margin within which purposeful behavior has the power to neutraIize the working of bodily factors. It is feasible within certain limits to get the body under control.” For Sebag we find this explicit passage on the limits of time.

When thinking about the economic system in the unavoidable context of time, we look more to temporal dependency, to antecedents and consequents, rather than to abstracted simultaneities. Before looking to what motivates an action within the cooperative system, we have to first look at what allows that action within the cooperative system, we have to first look at what allows that action to occur in the first place. In other words, both the natural world and human action are subordinate to this reality of time. This understanding of our temporal condition will lead us to a greater comprehension of both natural requirements and the generated products of human cooperation.

So, in answer to the question that is the title of this essay: no Mises was not a postmodernist. And I might add that I do not suffer from cognitive dissonance. Subjective value theory does explain the real world, but perhaps on occasion it should be added, within the natural order of limits.

Regarding Sebag’s book, there is no index and only limited references. Sebag is not an economist, nor an academic of any kind. He is an intelligent person reflecting on the reality in the world that he has observed and experienced primarily as an entrepreneur and investor. I applaud this effort from a layman.

Within the book he provides data on crustal abundance of precious metals. Silver is 18.75 times more abundant than gold by his data. He implies in the book and I believe states explicitly in the interview that this imposition of the natural order would fix the gold-Silver price ratio at about 16-20. This quantitative observation is mistaken. Here is historical data on the Gold-Silver price ratio.

Finally, I was alerted to the Sebag-Peterson interview by Karen Wong, a friend in the little corner of the internet spawned by the Peterson phenomenon. She has an extremely interesting Youtube channel devoted to many fundamental questions called The Meaning Code. I discussed this book (here) with her and the engineer Brad Bilski who is an expert on measurement, as money is the economic measure of things.


I add below a passage from my novella Our Person in Paris, where James the libertarian protagonist responds to a question from Marion, a French graduate student.

Marion stated the common view of her people. “In France we believe that it is the state that protects the ordinary people from the rich.”

James spoke slowly and softly even though he was excited to explain many things at the same time because where one should begin to address this fallacy is not obvious. Because he did not want to be divisive and argumentative, he looked for some place of agreement. “In theory, I think what you say about governments could be true. Perhaps smaller governments are more representative of the people’s needs. But in the vast majority of instances, the government serves the rich or is in fact the rich themselves. Today, big corporations capture government regulators. This is a huge problem for which we have not figured out a good solution. In the modern sense I believe the most important aspect of the utilization of government by the rich against the people is through the money supply.”

“The French think money is the root of all evil.”

He now could not maintain his slow, low tone; so with more energy he said, “In the Bible the verse actually reads, The LOVE of money is the root of all evil. Some people think money is simply a tool, like a hammer and that tools like money have no moral value – they are neither good nor evil. I disagree; real money is more than good. It is a foundation of civilization itself through the distribution of labor and a storage of wealth for the future. That is, real money can decrease time preference, defer consumption to the future. However, fiat money issued by government central banks is at least the root of many evils, including war, wealth inequality, systemic theft and a live for today attitude that degrades civilization. The production of money has an enormous impact on the relationships between human persons and groups such as families and private associations.”

Marion asked, “What do you mean by real money?”

James answered, “Money came into being as the most tradable item in a barter system. For example, in a society where everybody eats fish, fish could become money. A teacher could take ten sardines for giving a lesson and then buy a screwdriver using five sardines. Everybody would have a stash of sardines to be able to buy items or services for their needs.”

Marion noted the key issue with money by saying, “Sardines are not very practical to carry around and to store.”

James, excited at an intellectual connection, exclaimed, “Exactly! What is needed for money to work well? It needs to be durable. Sardines will fall apart and rot. It helps if money is easily divisible. We could envisage paying half of a sardine for a piece of candy, but it would be messy. In the society we imagined everybody wanted sardines, but it was a fungible commodity. But we realize that this could be a special case. It is also important that money has good value density. What I mean is that it is valuable compared to other items. How many sardines would be required to buy a car or a house? Finally, the availability of sardines could vary greatly year-to-year such that their value relative to other products could vary greatly. This would make economic planning difficult.”

Marion understood the argument by completing it, “Thus, a material like gold is the best example of these characteristics so it is the real money. And in French money is called argent, silver.”

Once again James exclaimed, “Exactly! And in today’s world what we use for exchange is far from real money. It can be created at will by various governments so it is called fiat. This general increase in the fiat money supply we call inflation.”

Marion said, “I thought inflation is an increase in prices.”

“Yes, that is now the common definition. In reality, prices are very complex phenomena, but an increase in the money supply will always tend to cause an increase in money prices. Back to your original point, that new fiat money almost always goes to the rich. It is introduced into the economy by banks through the issuance of credit such that they can take a very profitable cut. Then it goes to many preferred industries like the military-industrial complex. Certainly some of it does go to needy people, but always through big bureaucracies. Governments at nearly all times and places have been the main beneficiaries of inflation. Rather than protecting society from it, therefore, all of them have sooner or later given in to the temptation of using inflation for their own purposes. The fundamental fact is that inflation does not bring into existence any additional resources. It merely changes the allocation of the existing resources. They no longer go to companies that are run by entrepreneurs who operate with their own money, but to business executives who run companies financed with credit. And critically, inflation takes wealth out of the pockets of all average people. The eventual rise in prices from monetary inflation causes money and financial questions to play an exaggerated role in life. Inflation makes society materialistic. Great writers such as Thomas Mann and Stefan Zweig have described the moral decay caused by the inflation in Germany and Austria after the First World War.”

The post Was Mises a Postmodernist?: The Subjective Theory of Value appeared first on LewRockwell.

Leave a Comment

%d bloggers like this: