The Importance of Hülsmann's Groundbreaking book Abundance, Generosity, and the State

Guido Hülsmann’s Abundance, Generosity, and the State provides readers with an explanation of the nature and causes of gratuitous goods. Hülsmann demonstrates how free markets are infused with both intentional and unintentional gratuity, and how the repressive and permissive interventions of the modern state lead to their destruction.

This work is desperately needed and represents a remarkable achievement by one of the Austrian School’s leading lights of our time. It is the first successful and systematic treatment of this underappreciated category of human action. Therefore, it is no exaggeration to say that it belongs alongside the great advancements in economic science, and I can say, without hesitation, that it will stand alongside works such as Ludwig von Mises’s Socialism and Murray N. Rothbard’s Power and Market. The knowledge and understanding it provides
economists and noneconomists alike is indeed a gift.

Hülsmann breaks new ground in the political economy of gratuitous goods, which fits squarely within the field of praxeology—the theory of all human action. This subcategory of praxeology has been largely ignored, even by those in the Austrian tradition. Meanwhile, the true nature, causes, and consequences of gifts and gratuity have been badly misconstrued by social scientists outside the field of economics. Furthermore, the best and latest attempts to address the topic have all failed to properly evaluate the impact of interventionism upon the economy of gifts. Hülsmann holds up the work of Kenneth Boulding, Catherine Gbedolo, and John Mueller as providing recent and helpful contributions. But despite the best efforts of these scholars, Hülsmann acknowledges that “generosity, gifts, and unearned abundance still stand at the margins of economics.” Thankfully, Abundance, Generosity, and the State sheds new and penetrating light on the subject, and convincingly delivers a Misesian-Rothbardian vision of the nature of generosity and the predations of the state upon it in a robust work of political economy.

As a master teacher is prone to do, Hülsmann supplies the reader with clear and concise definitions of his terms. Most importantly, he illuminates the essential nature of genuine gifts and donations, which are defined by four key conditions; namely, “the donor intends to benefit some cause or person other than himself, he does not seek any compensation, he freely consents to the transfer, and his donation consists of personal savings.” Violations of each of these conditions produce a different kind of nongift. Donors make grants rather than gifts if they seek their own private benefit, and their transfers have hidden prices if they expect reciprocity. Donors are “fleeced” if they do not actually consent to the donation, and they are merely dispensing “loot” if they do not legitimately own what they are transferring.

These definitions are systematically carried throughout the book, providing the reader with great clarity. With these distinctions being made, the readers of this periodical may already “smell a rat”—interventionism—that is responsible for driving a great number of individuals to shift their actions from genuine generosity toward these dubious “pseudo-gifts.” This is the explicit purpose of a work in political economy—to provide a demonstration of what human action looks like under conditions of private property protection versus the conditions of life when that principle is violated by the state. The latter situation is rightly described by Hülsmann as a grim picture of a world bereft of genuine gifts and proliferating in genuine miserliness and societal atomization.

What follows is a summary of Hülsmann’s key findings along with various attempts to illuminate their importance in furthering economic science as well as some of their implications.

The author identifies his motive early on as an attempt to respond to Pope Benedict XVI’s encyclical Caritas in veritate (2009), which exhorted people of good will to “demonstrate, in thinking and behaviour, . . . that in commercial relationships the principle of gratuitousness and the logic of gift as an expression of fraternity can and must find their place within normal economic activity.” What Hülsmann demonstrates is that in a truly free economy, every market exchange is unintentionally infused with gratuitous goods.

Moreover, the relationship between growing economies and generosity isn’t just a run-of-the-mill positive correlation between wealth and charity. Rather, he explains, “gratuitous goods and markets are not merely complementary but symbiotic. They feed into each other. In order to understand markets, it is necessary to grasp why and how certain economic goods are transferred without payment.”

To further this finding, Hülsmann extends F.A. Hayek’s observations regarding the nature of market competition. Hülsmann reminds us that competition is best understood as “a process of piecemeal improvements . . . that improves the terms on which customers are served.” What emerges from this process is an unintentional, or spontaneous, gratuity. Indeed, the process of competition in an unhampered market is the mechanism through which society is freely provided with higher-quality goods at lower prices. The author further observes that “competitive behavior in Hayek’s sense entails additional benefits for other market participants. These benefits are gratuitous because in the cases Hayek envisioned, there is no obligation for individuals or firms to improve anything whatsoever and their customers do not have any right to claim such benefits. Moreover, these benefits are provided spontaneously.”

These initial observations offer the modern reader intellectual ammunition against the age-old equivalence postulate. This Aristotelian idea still occupies the minds of many who view economic exchange as a zero-sum game. Furthermore, the reader is reminded of the fact that “as soon as they engage in an exchange, they cannot prevent the double gratuitousness that it inexorably generates.” Put another way, voluntary exchange only happens because of the improved state of affairs it yields for both participants. The implication is that in the unhampered market, there is a mutually reinforcing relationship where gratuitousness leads to more exchange and more exchange leads to greater gratuity.

Another important takeaway from Hülsmann’s treatise is his systematic and clear distinction between genuine gifts and “pseudo-gifts.” He rightly notes that even in a free society there will be those whose hearts are duplicitous and who will extend what appear to be genuine gifts or donations while they are—as the biblical proverbs state—inwardly calculating. Such individuals are secretly counting on reciprocity while appearing to give genuine gifts that require not even the slightest form of repayment. Hülsmann refrains from making harsh judgment on the practice of reciprocity—even recognizing its importance in various cases. Indeed, he aptly observes that “reciprocation does not contradict the sacrificial nature of donations. Quite to the contrary, the particular sort of reciprocity that is found in friendship and in the loving relationships between family members can only be understood before the background of genuine sacrifice.”

Elsewhere, Hülsmann illustrates the dangers of creating overgeneralizations about the motive of reciprocity by drawing our attention to the excesses of the works of French anthropologist Marcel Mauss and his followers, who largely contended that genuine gifts are, in fact, impossible. Mauss’s works from the early 1920s on primitive societies presented the view that “strictly speaking, there is no such thing as a pure gift at all. . . . In the real world, [Mauss] argued, all social relations are based on reciprocity, but the respective obligations cannot be final and conclusive.” It comes as no great shock, then, that Mauss and his disciples were seeking to “develop a theory of human action in deliberate opposition to economics,” motivated by their unwillingness to accept the “political (pro–free market) implications of economics.” Furthermore, the Maussians “blithely disregarded the benefits springing from property law and contracts.” In his retort, Hülsmann makes the salient observation that “it is only when each person’s obligations are clearly defined, as they tend to be in an economy based on the principle of private property, that it becomes possible to do something beyond and in excess of one’s obligations. Only then do genuine gifts become conceivable. Only then does true gratuitousness become a reality.”

Of course, while humans always have been and will ever remain less than divine in their motives in all things, this problem of the aforementioned “pseudo-gifts” will also always exist. This is not in question. However, the task of the political economist is to demonstrate the contrast between the economics of donations under private property and under interventionism.

Hülsmann does just that by building on some of his earlier works to explain the impacts of repressive and permissive interventionism on generosity. The former include taxation, prohibition, and regulation, which all “curb the citizens’ exercise of their ordinary property rights” and have the effect of ruining individual initiative. The latter create special classes of people who are protected and indeed encouraged to engage in “irresponsibility and outright frivolous behavior.”

As is Hülsmann’s wonderful habit, he points to monetary interventionism as a devastating form of permissive interventionism. By manipulating money and credit, the state creates the conditions for an inflation culture. In it, rationality traps and intervention spirals are to be expected, although they may emerge slowly. Hülsmann rightly observes that as this culture begins to take hold, “the willingness to make donations of time and material goods is compromised. Less time is spent on disinterested activities, whether reading, music, sports, education of one’s children, worship, or spending time with others.”

Monetary interventionism’s antisocial effects cannot be ignored, especially when people are increasingly stingy in sharing time with their children, faith community, or civic organizations— all things enjoyed for their own sake. These aren’t the only things that Hülsmann reminds us that we’ve lost under this statist invention. Indeed, trust, social cohesion, and friendship itself, the normal gifts of life, have eroded.

In stark contrast to the pernicious effects of monetary interventionism upon the gift economy is the reality of the unhampered market for money. Professor Hülsmann reminds his readers that in the unhampered market money hoarding has gratuitous effects. Indeed, when this occurs, the price level falls and bystanders who expected to pay more for goods find themselves in an environment of falling prices. It is easy to see that this state of affairs benefits those who do not hoard their money, and the benefits do not stop there! With this newly increased purchasing power, people are more likely to give genuine gifts. We have more beautiful displays of shared wealth because of the gratuitous effects of money hoarding. Hülsmann also reminds us that in a free market, free of monetary interventionism, there will tend to be a higher tendency to save and invest, leading to lower returns on capital investment, and the wealthiest members of society will be more likely to make genuine sacrifices. This form of sacrifice is “a chosen abundance of economic goods that could very well be used for self-gratification. The donor deliberately limits the personal use of his resources.” For all the talk of how capitalism and free markets lead to consumerism, frivolity, waste, avarice, and insatiable greed, Hülsmann provides us with a clear-headed and coherent argument for why just the opposite is true. Indeed, it’s the unhampered market—bolstered by virtuous people who shun the promise of power that comes with interventionism—that enables people to live free and to live generously.

Unfortunately, the permissive forms of interventionism aren’t the only ones lurking in the shadows of statism. The repressive forms of interventionism are no less destructive to generosity and the economy of gifts. Hülsmann powerfully illustrates how the repression of taxation—just one form of repressive intervention—creates conflicts of interest between “tax payers and tax receivers; the government and the citizens; employers and employees; men and women; blacks and whites; old retirees and young professionals.” This observation highlights the importance of recognizing that it is the tax authority itself that must be abolished in order to end what has truly become a war of all against all. This war is not the result of the natural free state of men, but rather is an imposition that destroys friendship, fellowship, and kinship. When the full effects of taxation have taken hold, the author observes, atomized and disintegrated individuals must “organize themselves in order to obtain power sufficient to loot others or to fend off other looters . . . the characteristic friendship of repressive interventionism is the robber gang.” The inexorable descent of many Western cities into politically generated tribal chaos provides a disquieting glimpse of repressive intervention in action.

The author makes yet another contribution to the economics of generosity by referring to the works of Hans-Hermann Hoppe and Gordon Tullock. At various points, Hülsmann also reminds us that interventionism—especially under democratic systems—contributes to the creation of an entire political class that is sustained by the “hidden prices” that are imposed on the public. Some of the clearest examples of this reality can be clearly seen in the welfare-warfare state apparatus that provides the pseudo-gift of subsidies in exchange for political loyalty. Of course, the modern state continues to use its propaganda machine to “fleece” the public by encouraging them to give up their private wealth as a way to pay their “fair share” or exhibit true patriotism. All the while, the political class enriches itself and distributes the “loot” among the favored few. Indeed, these activities are clearly harmful to the public and as such are properly regarded as a gratuitous evil. Hülsmann in his notably moderate tone of writing never claims that excessive, unreasonable harm is impossible in the free market. However, he reminds the reader that “gratuitous evil is as a rule intentional and can be a regular and permanent side effect of human action only in exceptional circumstances (under a corrupted legal and political order).” Gratuitous evil comes about more frequently under permissive intervention, and Hülsmann reminds us that this is “not an accident, but the natural tendency of modern democratic systems. By the very logic of modern electoral politics, the welfare state is not likely to help the poor. It is likely to impoverish them further.”

The findings of Abundance, Generosity, and the State have completely unseated the notion of positive externalities as a market failure and completely dispensed with externality theory as a whole. What have been regarded by mainstream economists as “spillovers,” “positive externalities,” and “network effects,” as so-called market failures, are no failures at all. Indeed, the author clearly demonstrates—as noted earlier—that gratuitous goods have a symbiotic relationship with all market exchanges. Furthermore, gratuitous bads are minimized and gratuitous evils dismissed when permissive and repressive interventions are abolished. It should be abundantly clear to keen observers of the interventionist state that externality theory is one of the most important plausible fallacies that the state uses to entrance the public into acquiescing to its power. By toppling this falsehood and upholding the goodness that emerges from genuinely free exchange, Hülsmann has perhaps made a more generous and benevolent future more possible.

I would be remiss if I failed to mention that the excellence of this treatise is exceeded by the excellence of the man himself. Guido Hülsmann has embodied intentional generosity to his students, and to all those who serve, study, and speak with the goal that liberty, beauty, virtue, and truth may prevail in our time. It is true that the science of economics has been advanced through this work. Indeed, some of the most noxious and long-lasting economic doctrines that uphold the interventionist state—the equivalence postulate, the zero-sum game fallacy, and externality theory—have been cut down to size by Hülsmann’s mighty pen. Furthermore, the importance of this treatise is readily recognizable: it lies primarily in its clear demonstration that the interventionist state is at the root of Western society’s increasingly loathsome, self-destructive, and stingy culture. The author has given a gift of new economic knowledge, and those fortunate enough to know him have the even greater gift of knowing and experiencing his gratuitous kindness and friendship. Bravo, Professor!