Free speech May 13, 2021


The first draft.

An excerpt from The Rationalist Liberty Manifesto


Everybody knows about the law of supply and demand that determines the price. But what if the law could be divided into two and applied to non-market situations such as the Robinson Crusoe economics and exploitative relationships such as robbery and institutionalizes exploitation, i.e. statism?



4.2. The law of supply and the law of demand

In order to survive Robinson must use his time to find means to satisfy his goals. For example, Robinson must somehow feed himself, build shelter and try to stay healthy. All these practical activities can be studied by applying the laws of logic and action such as the laws of increasing and diminishing marginal utility. However, to investigate his actions in even more detail it is necessary to introduce two subsidiary postulates. First, there is diversity in nature and humans. Second, leisure is a consumer good.

Actually, despite the “extreme a priori” label, praxeology contains one Fundamental Axiom–the axiom of action–which may be called a priori, and a few subsidiary postulates which are actually empirical. Incredible as it may seem to those versed in the positivist tradition, from this tiny handful of premises the whole of economics is deduced–and deduced as absolutely true. Setting aside the Fundamental Axiom for a moment, the empirical postulates are: (a) small in number, and (b) so broadly based as to be hardly “empirical” in the empiricist sense of the term.

To put it differently, they are so generally true as to be self-evident, as to be seen by all to be obviously true once they are stated, and hence they are not in practice empirically falsifiable and therefore not “operationally meaningful.” What are these propositions? We may consider them in decreasing order of their generality: (1) the most fundamental–variety of resources, both natural and human. From this follows directly the division of labor, the market, etc.; (2) less important, that leisure is a consumer good. These are actually the only postulates needed. (Murray Rothbard. In Defence of Extreme Aprioriorism. p. 3)


By integrating these most realistic postulates into the chain of praxeological deduction it is possible to utilize the laws of increasing and diminishing marginal utility in more practical way by calling the former the law of supply and the latter the law of demand. In practice the law of increasing marginal utility especially relates to the creation of commodities and the law of diminishing marginal utility to their consumption. We can emphasize this practical point by calling the law of increasing marginal utility the law of supply and the law of diminishing marginal utility the law of demand. For example, when Robinson has to give up units of labor to build a ladder to get more apples he would then be under the law of supply because the more labor he has to give up the more valuable each unit of labor. The more he works the less likely that he will continue to work. There is therefore a tendency to increase labor only sparingly. Similarly, when he is consuming the apples he is under the law of demand. The more apples he consumes the less utility he gets from each additional apple. This diminishes his demand. There is an inherent “break” in both the law of supply and the law of demand though it is much more stronger in the law of supply.