The Individual is Everything

We took a two-week trip through five Eastern European countries at the start of this month.

We began our trip in Budapest, Hungary, and spent much of that week sharing the investment insights of legendary investor George Soros. Regardless of the controversy over his political activism, he still has some incredible wisdom for investors.

We finished our trip in Vienna, Austria, which got us thinking about a hugely influential group of economic thinkers that many readers may not know. They represent a group of economic philosophies that are referred to as the Austrian school of economics.

Look them up on Wikipedia, and you will read the following…

The Austrian school is a heterodox school of economic thought that advocates strict adherence to methodological individualism, the concept that social phenomena result primarily from the motivations and actions of individuals along with their self-interest. Austrian-school theorists hold that economic theory should be exclusively derived from the basic principles of human action.

Wow – that is a mouthful! What does it mean?

This group of economists believes that everything we see in society and economics is driven by each of us as an individual trying to get the best result for ourselves and our families. We added the "our families" part here because we think that most of us think not just of ourselves but also of our immediate group.

What we do NOT think when making most decisions about is the larger group of society. We are biologically programmed to get good results for ourselves, our family, and our “tribe.”

Regardless of the advancements in philosophy, economics, and technology, we will ALWAYS be humans driven by this biological programming.

We often emphasize this when discussing TRADING and INVESTING. Our evolution creates biases that we must overcome to be successful.

This approach contrasts with traditional views of economics, which are driven more by model-building and statistical methods. Economic traditionalists often dismiss it.

We think this is a mistake as it has far more applicable insights than any of those academics. Understanding our individual biases is valuable in trading.

This is why it is referred to as a “heterodox” school of economic thought.

(Editor’s Note – Do you know what the “HX” in “HX Research” stands for? Do the math…)

The Austrian school of economics focuses on these biases as the basis for our actions in society and the economy. Understanding them can help us better appreciate how society and the economy can develop and evolve.

We encourage you to learn more about this unique branch of economic study.

Today, we are going to share several quotes from the most famous Austrian school economist, Fredrich Hayek. He won a Nobel Prize in Economics in 1974 with his partner Gunner Myrdal, and he stands out for his insights. Enjoy…

“’Emergencies” have always been the pretext on which the safeguards of individual liberty have been eroded.”

Hayek lived from 1899 to 1992 and witnessed some of the most horrific events in human history during World Wars I and II. He saw firsthand how authorities used a time of concern to take away individuals' rights, often with terrible results.

COVID?

“I do not think it is an exaggeration to say history is largely a history of inflation, usually inflations engineered by governments for the gain of governments.”

Another Hayek quote that predicts the future.

He rightly points out that the history of governments is one where they consistently devalue their currencies to protect the survival of the government.

While government most often begins with the best interest of the people in mind, it always ends up being focused on its own best interest.

“Our faith in freedom does not rest on the foreseeable results in particular circumstances but on the belief that it will, on balance, release more forces for the good than for the bad.”

This is a key concept in both libertarianism and capitalism.

The idea is that, if put in the proper system of rules, choices driven by individual (and family) self-interest will ultimately drive the best outcome for everyone. It is not a perfect system by far, but it is the best.

“Liberty not only means that the individual has both the opportunity and the burden of choice; it also means that he must bear the consequences of his actions and will receive praise or blame for them. Liberty and responsibility are inseparable.”

This statement is a key “proviso” to the Austrian school’s emphasis on actions driven by individual self-interest.

There has to be ACCOUNTABILITY to ensure that society and the economy can properly evolve and function.