The Ultimate Foundation of Economic Science

The natural conditions of their existence enjoined upon the nonhuman ancestors of man the necessity of mercilessly fighting one another unto death. Inwrought in the animal character of man is the impulse of aggression, the urge to annihilate all those who compete with him in the endeavors to snatch a sufficient share of the scarce means of subsistence that do not suffice for the survival of all those born. Only for the strong animal was there a chance to remain alive.

What distinguishes man from the brutes is the substitution of social cooperation for mortal enmity. The inborn instinct of aggression is suppressed lest it disintegrate the concerted effort to preserve life and to make it more satisfactory by catering to specifically human wants. To calm down the repressed but not fully extinguished urges toward violent action, war dances and games were resorted to. What was once bitterly serious was now sportingly duplicated as a pastime. The tournament looks like fighting, but it is only a pageant. All the moves of the players are strictly regulated by the rules of the game. Victory does not consist in the annihilation of the other party, but in the attainment of a situation that the rules declare to be success. Games are not reality, but merely play. They are civilized man’s outlet for deeply ingrained instincts of enmity. When the game comes to an end, the victors and the defeated shake hands and return to the reality of their social life, which is cooperation and not fighting.

One could hardly misinterpret more fundamentally the essence of social cooperation and the economic effort of civilized mankind than by looking upon it as if it were a fight or the playful duplication of fighting, a game. In social cooperation everyone in serving his own interests serves the interests of his fellow men. Driven by the urge to improve his own conditions, he improves the conditions of other people. The baker does not hurt those for whom he bakes bread; he serves them. All people would be hurt if the baker stopped producing bread and the physician no longer attended to the sick. The shoemaker does not resort to “strategy” in order to defeat his customers by supplying them with shoes. Competition on the market must not be confused with the pitiless biological competition prevailing between animals and plants or with the wars still waged between —unfortunately not yet completely—civilized nations. Catallactic competition on the market aims at assigning to every individual that function in the social system in which he can render to all his fellow men the most valuable of the services he is able to perform.

There have always been people who were emotionally unfit to conceive the fundamental principle of cooperation under the system of the division of tasks. We may try to understand their frailty thymologically. The purchase of any commodity curtails the buyer’s power to acquire some other commodity that he also wishes to get, although, of course, he considers its procurement as less important than that of the good he actually buys. From this point of view he looks upon any purchase he makes as an obstacle preventing him from satisfying some other wants. If he did not buy A or if he had to spend less for A, he would have been able to acquire B. There is, for narrow-minded people, but one step to the inference that it is the seller of A who forces him to forgo B. He sees in the seller not the man who makes it possible for him to satisfy one of his wants, but the man who prevents him from satisfying some other wants. The cold weather induces him to buy fuel for his stove and curtails the funds he can spend for other things. But he blames neither the weather nor his longing for warmth; he lays the blame on the dealer in coal. This bad man, he thinks, profits from his embarrassment.

Such was the reasoning that led people to the conclusion that the source from which the businessman’s profits stem is their fellow men’s need and suffering. According to this reasoning, the doctor makes his living from the patient’s sickness, not from curing it. Bakeries thrive on hunger, not because they provide the means to appease the hunger. No man can profit but at the expense of some other men; one man’s gain is necessarily another man’s loss. In an act of exchange only the seller gains, while the buyer comes off badly. Commerce benefits the sellers by harming the buyers. The advantage of foreign trade, says the Mercantilist doctrine, old and new, consists in exporting, not in the imports purchased by the exports.4

In the light of this fallacy the businessman’s concern is to hurt the public. His skill is strategy, as it were, the art of inflicting as much evil as possible on the enemy. The adversaries whose ruin he plots are his prospective customers as well as his competitors, those who like himself embark upon raids against the people. The most appropriate method to investigate scientifically business activities and the market process is to analyze the behavior and strategy of people engaged in games.5

In a game there is a definite prize that falls to the victor. If the prize has been provided by a third party, the defeated party goes away empty-handed. If the prize is formed by contributions of the players, the defeated forfeit their stake for the benefit of the victorious party. In a game there are winners and losers. But a business deal is always advantageous for both parties. If both the buyer and the seller were not to consider the transaction as the most advantageous action they could choose under the prevailing conditions, they would not enter into the deal.6

It is true that business as well as playing a game is rational behavior. But so are all other actions of man. The scientist in his investigations, the murderer in plotting his crime, the office seeker in canvassing for votes, the judge in search of a just decision, the missionary in his attempts to convert a nonbeliever, the teacher instructing his pupils, all proceed rationally.

A game is a pastime, is a means to employ one’s leisure time and to banish boredom. It involves costs and belongs to the sphere of consumption. But business is a means—the only means—to increase the quantity of goods available for preserving life and rendering it more agreeable. No game can, apart from the pleasure it gives to the players and to the spectators, contribute anything to the improvement of human conditions.7  It is a mistake to equate games with the achievements of business activity.

Man’s striving after an improvement of the conditions of his existence impels him to action. Action requires planning and the decision which of various plans is the most advantageous. But the characteristic feature of business is not that it enjoins upon man decision-making as such, but that it aims at improving the conditions of life. Games are merriment, sport, and fun; business is life and reality.

• 4Mises, Human Action, pp. 660 ff.
• 5J. v. Neumann and 0. Morgenstern, Theory of Games and Economic Behavior (Princeton University Press, 1944); R. Duncan Luce and H. Raiffa, Games and Decisions (New York, 1957); and many other books and articles.
• 6Mises, Human Action, pp. 661 ff.
• 7Games arranged for the entertainment of spectators are not games proper, but show business.