The idea that “if it can fail, it should” probably seems oxymoronic to most people when applied to the economic realm. Isn’t the whole point of economic systems to succeed, to thrive, and to bring prosperity to all? So it would seem. But not according to the Austrian school of economics. Indeed, we believe that the possibility of failure is a prerequisite for genuine economic advancement.As Ludwig von Mises so eloquently put it, “Human action is purposeful behavior.” We, as humans, try to attain our goals and values by means we think are suitable. This is vital to our individual autonomy. Yet it’s vital to recognize that our cognition isn’t necessarily perfect. One can never comprehend the subtleties of human action, nor, for that matter, exactly what consequences
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The idea that “if it can fail, it should” probably seems oxymoronic to most people when applied to the economic realm. Isn’t the whole point of economic systems to succeed, to thrive, and to bring prosperity to all? So it would seem. But not according to the Austrian school of economics. Indeed, we believe that the possibility of failure is a prerequisite for genuine economic advancement.
As Ludwig von Mises so eloquently put it, “Human action is purposeful behavior.” We, as humans, try to attain our goals and values by means we think are suitable. This is vital to our individual autonomy. Yet it’s vital to recognize that our cognition isn’t necessarily perfect. One can never comprehend the subtleties of human action, nor, for that matter, exactly what consequences our actions may bring. This is not a bug, but a feature. It permits failure, and thus promotes innovation, adaptation, and learning. Failure forces us to revisit and revise, to change direction, and improve course.
On the other hand, central planning and interventionist policy presuppose an element of omniscience incompatible with the human constitution of things. They aim at mastering the course of human action, all the while denying that the world is complex and uncertain. That mindset, and the interventions that follow it, display nothing more than sheer arrogance, sometimes leading to disastrous consequences, as history has time and again so painfully illustrated.
The concepts of Austrian economics, in contrast, are cognitively aware of the limitations of our own knowledge and the pre-eminent importance of decentralized decision-making. We want a system that lets individuals and businesses pursue their goals and values without the straitjacket of government coercion. That freedom means experimentation, innovation, and adaptation. That means true economic improvement. When governments step in to bail out failing projects, businesses, or programs, they don’t resolve the problems but prolong them. As I tell my own children, “It’s better to rip off the Band-aid, than slowly peel it off.”
Therefore, when we say “if it can fail, it should,” this means that the potential to fail is itself the very prerequisite of finding out new knowledge, forming new solutions, and striving for better human conditions. Further, if markets allow for failure, innovation and creativity will reign supreme. It is only by recognizing and embracing failure that we are able to learn something and actually move forward.
According to Mises, “The market process is a process of trial and error, of experimentation and selection.” A process where failure itself is valued more as a step toward success, rather than attempting to avoid it altogether. This process is all too human, and to artificially impede it is yet another example of government overreach and coercion, demanding we submit to their false paradigms.
The Austrian school of economics does not celebrate failure for its own sake though. Rather, what we understand is that failure is a signal accompanying the possibility of taking action under human uncertainty. Failure allows for the opportunity to reassess, redesign, and improve. It is from within this signal that we derive true economic progress. By acknowledging our own ignorance and, at times, lack of knowledge, and by allowing for failure, we open up the possibility for a truly dynamic and innovative economics, that which will be prosperous.
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