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October 7 - November 2, 2019
The intermediate advantage is in both the tools and their assembly—their “purchase” (another meaning for shi)—the configuration of assets into the means of an ultimate objective. (An asset need not be physical or material; it can be a
emerges intertemporally through roundabout means amidst fluid and shifting factors—the enemy’s strategic position, the rise and fall of the terrain, light and dark, cold and heat, sun and fog. With awareness of all these elements, the commander must move only when they are in optimal alignment—and actively seek a position of their optimal alignment.
“if there is no advantage, do not move into action.”
Just as in tuishou (“push hands”), the objective is to wait for the attainment of a position from which one can exploit an imbalance within one’s opponent, which will make the ultimate rout all the more effective.
War is a clash between major interests, which is resolved by bloodshed—that is the only way in which it differs from other conflicts. Rather than comparing it to art we could more accurately compare it to commerce, which is also a conflict of human interests and activities; and it is still closer to politics, which in turn may be considered as a kind of commerce on a larger scale.”16
Asked to demonstrate his skill as a military leader, Sun Wu agreed to train the ruler’s harem of concubine as soldiers, and divided the 180 women into two battalions, appointing the two favorites as commanders. But when his orders produced giggles instead of strict compliance, Sun Wu ordered the execution of the concubine-commanders. Although the warlord protested and suddenly lost interest in this war game, the rest of the harem began to follow Sun Wu’s orders without question.18 (Daoists are certainly not all pacifists.)
defined shi as a “strategic configuration of power” and as roughly equivalent to an “alignment of forces,” as well as potential and propensity, which “only a skilled strategist can exploit.”27
a shi strategy boils down to acquiring positional advantage and superiority for an easier, if not assured, victorious fight to follow. Shi is always focused more on the future than the current moment, an emphasis on “upstream,” intermediate aims, or intermediate foci within the field, becoming means, and by which the ultimate ends can be more readily achieved. The path to victory, therefore, is reduced to the essential element of adhering to shi, an intertemporal advantage, instead of the headlong rush into conflict, an approach known as li.
Simply stated, li goes for the immediate hit, while shi seeks first the positional advantage of the setup. The former is the aggressor racing against time and who in his directness risks becoming overextended, stretched too thin, and thus vulnerable to the counterattack. The latter, the nonaggressor, with no need to rush, puts time on his side, even to the point of ceding an unimportant clash now in order to come back all the stronger later on.
Shi versus Li Shi Li Roundabout, intertemporal Direct, atemporal Emphasis on means Emphasis on ends Patient, nonaggressive Impatient, aggressive Seeks to secure future advantage through immediate objectives Focuses on immediate results rather than accumulating means Counterforce Force Subtle, intangible Dramatic, tangible Outcome of most battles immaterial Outcome or every battle decisive Progress is continuous Progress is sequential Focused more on cause Focused more on effect Ziel, Mittel Zweck Wuwei wei How the game of weiqi unfolds is illustrative of shi versus li thinking, which can even
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li, as a general term, “can mean a direct profit-oriented yang strategy,” one that “gets things done,” while shi “is a yin strategy that prefers to go for influence at the expense of immediate profit or advantage.”31 Shi is intertemporal; li is myopic.
Black has essentially husbanded his resources, withdrawn them in order to assert them more decisively later—when black’s subsequent moves in the center will have much support. It is an intertemporal tradeoff of aiming at a means to a greater end, rather than directly at the end—it is the roundabout
Napoleon’s basic strategy was one of upsetting the enemy’s balance so that once the equilibrium was broken, the opponent became an easy defeat.
One cannot learn from history, a posteriori, because causal relationships are deceptively veiled from our perception (what is unfortunately termed the “teleological fallacy”). Rather, in many cases the foreseen emerges through the logical rigor of deduction, based on what one knows (and, to some degree, what one observes and experiences) as a sentient human being.
The more disparate these means and ends, the more roundabout and circuitous the route as opposed to direct, often the more efficient and efficacious
Say brought the entrepreneur into the spotlight of economic thought (he is said to have invented the term, which literally means undertaker—which the Austrians call Unternehmer—with the connotation of one who undertakes an adventure1), whereas the entrepreneur had been absent in Smith.
Entrepreneur meamms.one who undertakes.an adventure
(praxeology being the study of human action),
societies in which people “assist each other, work for one another, render reciprocal services, and place our faculties, or the results of their exercise, at the disposal of others, in consideration of a return.” Individuals, like countries, are not solitary; indeed, their very survival depends upon interaction.
Bastiat chafed at arguments that power in the hands of the state was meant for the good of all, and mocked such thinking by wryly envisioning a beneficent state to dispense “bread for all mouths, work for all hands, capital for all enterprises, credit for all projects, salve for all wounds, balm for all sufferings, advice for all perplexities, solutions for all doubts, truths for all intellects, diversions for all who want them, milk for infancy, and wine for old age—which can provide for all our wants, satisfy all our curiosity, correct all our errors, repair all our faults, and exempt us
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So iism
It was followed by his true opus, Economic Harmonies, in which he argues that the interests of all members of society are harmonious if private property rights are respected. In his view, the primary role of government was to uphold rights to life, liberty, and property, and to prevent injustice.
“Now this difference is enormous, for it almost always happens that when the immediate consequence is favorable, the ultimate consequences are fatal, and the converse. Hence it follows that the bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, at the risk of a present small evil.”
The key is to free oneself from a tyranny of first consequences, overvaluing what comes first at the expense of what inevitably comes later.
Bastiat explained and defended his style by saying “we always want to give complicated explanations to the most simple facts, and we think we are clever only by looking for difficulties where there are none”; he believed simplicity to be the “touchstone of truth.”
as Menger wrote, “All things are subject to the law of cause and effect.”28 It would not be too far a stretch to imagine (as some notably have) that this commonality was, in part, because of the German language itself, which articulated clear distinctions between the proximate objective of Ziel and the ultimate end of Zweck (which Baer adamantly distinguished in Kant, no doubt having read Clausewitz from a few decades earlier), a distinction perhaps absent amid the “poverty” of other Western languages.29
“in short, the future is at work shaping the present.”34
our universal stratagem of ascending stages—of acquiring later stage advantage through an earlier stage disadvantage—that transcends any one subject or school of thought. Its treatment by many disciplines underscores its importance to each one, including economics.)
during which time he discovered the importance of subjective demand in price determination.
(One example given is a bottle of wine that is not valuable because of the land and labor invested in it. Rather, it is because consumers value the wine that the land and the labor invested in winemaking are valuable.
and even teaching them elocution
“Historical experience as an experience of complex phenomena does not provide us with facts in the sense in which the natural sciences employ this term to signify isolated events tested in experiments. The information conveyed by historical experience cannot be used as building material for the construction of theories and the prediction of future events. Every historical experience is open to various interpretations, and is interpreted in different ways.”
“There is no means to establish an a posteriori theory of human conduct and social events. History can neither prove nor disprove any general statement in the manner in which the natural sciences accept or reject a hypothesis on the ground of laboratory experiments. Neither experimental verification nor experimental falsification of a general proposition are possible in this field.”60
“Those whom the world called ‘Austrian economists’ were, in the Austrian universities, somewhat reluctantly tolerated outsiders.”
Mises stated, “Historical facts need to be interpreted on the ground of previously available theorems.”
Such thinking must have been completely unpalatable to the German Historicists, who rejected cause and effect (and, therefore, means and ends).
“clash of two orthodoxies; the Bismarck orthodoxy versus the Jefferson orthodoxy.”72
the laws of human needs, themselves, were sufficient to explain the “complex phenomena of the modern exchange economy.”74
putting human interaction at the pinnacle, has led to rejection and criticism, even outright attack on the Austrian School, not only among its economic peers but also politically as it denied the legitimacy and efficacy of many economic policies.
the importance of subjective human choice and action—all set within a teleological framework of the entrepreneur who must gather the means to achieve the ends of meeting the consumer’s wants and needs.
Focusing on the actions of the individual is one of the core concepts of Austrian economics, as explained by Menger: “There is no economic phenomenon that does not ultimately find its origin and measure in the economically acting human and his economic deliberations.”
a good example of the distinctively Austrian flavor of empiricism, whereby experience can yield an understanding of general principles (for example, the advantage of using tools), but not ironclad economic laws.
Principles not laws from experience
In Produktionsumweg, one amasses the tools of one’s trade, the intermediate goods that will add proficiency and efficiency to the pursuit, the result of which is realized in the future. As Böhm-Bawerk observed, “That roundabout methods lead to greater results than direct methods is one of the most important and fundamental propositions in the whole theory of production.” (The same can be said of roundabout methods in investing.)
to illustrate with simplicity the evolution of a one-person economy, as Crusoe’s very survival depends on him moving beyond the hand-to-mouth direct satisfaction of his needs to become ever-more roundabout.
Crusoe spends so much time trying to catch five fish for the day that the only way he can invest in better tools (improved intermediate goods) is to cut back on current production. In other words, he has to “save” some of his effort instead of expending it all catching fish. This requires him to decrease his fishing time and catch perhaps only three fish a day (which means he’s going to be hungry), so he can spend the remainder of his day making a simple boat out of a hollowed log and a fishing net woven from vines. The process takes weeks, all the while Crusoe foregoes full satisfaction of
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This is Umweg: Crusoe ultimately catches more fish by first catching fewer fish, by focusing his efforts in the immediate toward indirect means, not ends.
Crusoe demonstrates that savings is not mere renunciation, nor is it simply deprivation. Rather, it is highly strategic, yielding or “losing” now to realize an advantage in the future that—the saver hopes—more than justifies the setback and waiting to be paid for the fruits of one’s labor and investment (if, indeed, there is ever a payoff; entrepreneurial ventures naturally do not come with any guarantees of feasibility or profitability). Here again we find the exchange across time: loss now for greater gain later. Thus, as Böhm-Bawerk recognized, savings is not negative, but rather deferred
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Capital must be thought of as a temporal structure that is always dwindling away. Moreover, the advantages and gains that are realized today are due to capital that was invested previously.
by using what Böhm-Bawerk called “wise circuitous methods,” “the superiority of the indirect way manifests itself in being the only way in which certain goods can be obtained; if I might say so, it is so much the better that it is often the only way!”7
Production thus becomes autocatalytic and self-reproductive, as the production of higher-order capital goods furthers the production of lower-order consumer goods, with capital continuously improved through innovation to create better lower-order goods. Looking at the process in these terms, we can think of technology, innovation, and production as adaptive learning, incremental steps generated by previous steps and that lead to other steps—each of which becomes, teleonomically, like von Baer’s caterpillar’s means to the yet undiscovered ends of the butterfly.
The process will take care of itself as long as there is integrity within the feedback loop and accurate (nonmanipulated) information is allowed to flow, resulting in a suitable mix and magnitude of growth, given the available resources—whether savings for investment, or sunlight and soil for trees.
attempts to intervene and manage such systems typically end in a paradox whereby the very opposite of an intended result is achieved; instead of order and balance there is distortion that leads, ultimately, to destruction.
