The Montaigne Dogma
The Montaigne dogma has misdirected the attention of governments into expensive “wars on poverty” rather than on strategies to promote wealth acquisition
Michel de Montaigne (1533-1592), who devised the essay as a literary genre, was one of the most erudite and sceptic humanist philosophers of the XVI century. He personified the French Renaissance’s spirit of freely embracing doubts. Admired as a statesman, and author of three books of Essays, he coined the sceptic motto: “what do I know?.”
Montaigne has had a direct influence on Western thinkers including Francis Bacon, René Descartes, Blaise Pascal, Jean-Jacques Rousseau and many others.
But perhaps his most widespread and toxic influence has been by what Austrian School economist Ludwig von Mises labeled as the “Montaigne dogma.” In a brief chapter of his Essays, Montaigne claims that “no profit whatever can possibly be made but at the expense of another” Montaigne applied this same belief to trade between nations. This fallacious idea that the gain of some must be at the loss of others has become known as the Montaigne dogma. It is an idea that continues to find its way into political discourse and lawmaking. And yet, it is demonstrably false.
At first consideration, the proposal that the gain of some must be at the loss of others seems in line with our everyday experience. In sports, when one team wins, the adversary loses; the same is true in political campaigns, military conflicts, court cases, and many other instances. These are examples of zero-sum games where, indeed, the gain of one must be the loss of another.
But in these examples we are considering an ex post, or after the fact, evaluations of the events. Before the events (ex ante), all of the participants in these examples expect to win. In voluntary exchanges, both the buyer and the seller must believe the transaction is in their best interest. That is, they must expect to win, or they would not enter into the transaction in the first place. In a free-market gains result, not by creating stress for others, but by alleviating that stress with products and services.
If you bought this newspaper for 1.00 dollar, you and the seller both benefited from a voluntary exchange. This is because you and the seller valued the goods differently; the seller preferred your dollar, and you preferred the newspaper. In modern game-theory language this exchange results in a positive-sum, rather than a zero-sum, or negative-sum.
Economists, rely extensively on the study of human action (praxeology) in their economic theories. Praxeology is based on the concept that we engage in purposeful behavior rather than in reflective behavior such as sneezing. From this idea of purposeful behavior, economist can develop an understanding of human behavior. Our intentional behavior expresses our preferences.
Montaigne dogma fails to recognize that poverty is what results if wealth is not produced. Or as economist Peter Bauer has phrased it: “Poverty has no causes. Wealth has causes.” Poverty is what we get when we do not generate wealth. For much of human history, poverty has been the norm. It has only been a few centuries since we learned to create wealth. It is that knowhow in creating wealth that has allowed us to make progress in reducing worldwide poverty.
A graphical depiction of this phenomenon shows an uninterrupted horizontal line of human poverty for 1,800 years. It is only in the last three centuries that we see a near vertical increase in wealth (see, for instance, the graphical representations of economist Max Roser in “Our World in Data”). Given that poverty is the natural occurring condition, then wealth must be produced to mitigate poverty.
The erroneous Montaigne dogma has misdirected the attention of governments into expensive and ineffectual “wars on poverty”, and wealth redistribution policies, rather than on strategies to promote wealth acquisition. Poverty can be reduced with policies to incentivize productivity and profit. Unfortunately, the entire regulatory and taxation frameworks of most nations demonize profits and are designed to do just the opposite.
If nations are serious about reducing poverty, they must discard the harmful Montaigne dogma and embrace passionately the freedom for citizens to create and keep wealth.