Theories of “natural law” and the “law of nations” are another excellent example of discussions destitute of all exactness. Many thinkers have more or less vaguely expressed their sentiments under those terms, and have then exerted themselves to link their sentiments with practical ends that they desired to attain. As usual, they have derived great advantage in such efforts from using indefinite words that correspond not to things, but only to sentiments… “Natural law” is simply that law of which the person using the phrase approves; but the cards cannot be so ingenuously laid on the table in any such terms; it is wiser to put the thing a little less bluntly, supplement it by more or less argument. [§401]
What Pareto says about “natural law” applies, by analogy, to Rand’s “moral argument for capitalism,” which is merely a series of loose assertions expressing Rand’s political preferences. It proves nothing beyond Rand’s emotional attachment to certain political convictions. It is rationalization through and through, with the vagueness of lofty abstractions used to carry forth what fact and logic could never have supplied.
Let us take a look at Rand’s argument:
The action required to sustain human life is primarily intellectual: everything man needs has to be discovered by his mind and produced by his effort. Production is the application of reason to the problem of survival . . . .
Since knowledge, thinking, and rational action are properties of the individual, since the choice to exercise his rational faculty or not depends on the individual, man’s survival requires that those who think be free of the interference of those who don’t. Since men are neither omniscient nor infallible, they must be free to agree or disagree, to cooperate or to pursue their own independent course, each according to his own rational judgment. Freedom is the fundamental requirement of man’s mind.
Rand begins with the usual vague truisms: human life, she insists rather sententiously, "depends" on the mind. Very well. She belabors the obvious, but that's okay. It's preferable to what she does next, when she declares, without clarifying what on earth she is talking about, that “production is the application of reason to the problem of survival.” Uncritical people fall for this kind of rhetoric; they fail to notice the egregious vagueness of the term reason. What, after all, is this “reason” that Rand and her disciples pontificate about ad nauseum? How does one distinguish between an individual allegedly using Rand’s “reason” and an individual using some other cognitive method, such as intuition or the scientific method? Objectivists still haven’t gotten around to providing a detailed, empirically testable description of this obscure faculty. Instead, the most they provide is vague descriptions in which reason is defined in terms of other indistinct words, such as their claim that reason “integrates man’s perceptions by means of forming abstractions or conceptions” and “the method ... reason employs ... is logic.” None of these descriptions tell us how reason integrates perceptions, or what Rand means by “logic”; nor do they allow us how to empirically test Rand’s assertions about “reason.” They are little more than a series of arbitrary claims, their dubiety masked by their inexactness.
Yet the difficulties embedded in Rand’s vague concept of reason pale in comparison to the much worse difficulties that confront us when we examine the next step in her argument, where she argues that “freedom is the fundamental requirement of man’s mind.” Here, again, we run into the problem of vagueness. What does Rand mean by the term “freedom”? Her disciples would probably say: “She means laissez-faire capitalism.” Very well. Why didn’t she just say so right from the start? The answer, again, is fairly simple: she used the more generic (and vague) term freedom because if she claimed that laissez-faire is “a fundamental requirement of man’s mind,” her argument would clearly go against obvious facts known by nearly everyone. As Rand and her followers are the first to admit, pure “laissez-faire” capitalism has never existed; yet this has not prevented all kinds of amazing scientific and technological advances, all of which can be vaguely attributed to the human mind (though not necessarily to “reason,” as we shall see). So it turns out that laissez-faire is not a “fundamental” requirement of man’s mind”: any sort of free enterprise, even one as “heavily” regulated as the American version, will do.
Rand’s argument has yet another glaring weakness. If we identify Rand’s “reason” with some type of formalized thinking (and after all, Rand invites us to make such identification with her claim that “logic” is the “method employed by reason”), then we have to reject Rand’s claim that “production is the application of reason to the problem of survival.” In point of fact, processes of production require a great deal more cognitive skills than can be encompassed by merely formalized thinking. Indeed, it is debatable whether formalized thinking plays much of a role in in most of the decisions involved in directing the processes of production—i.e., decisions involved in allocation of capital, where entrepreneurship comes into play. Business decisions require facing uncertainties that cannot be resolved by formal “reason.” As economist Frank Knight pointed out in Risk, Uncertainty, and Profit: “The powers and attributes of [economic] leadership form the most mysterious as well as the most vital endowment which fits the human species for civilized or organized life, transcending even that power of perceiving and associating qualities and relations which is the true nature of what we call reasoning.” The uncertainties and complexities facing the entrepreneur are so daunting that logic and reason break down: the entrepreneur must rely on his “intuition.” Market processes are therefore not merely “an application of reason to the problem of survival”; they also rely heavily on “intuition” and “trial and error.” As Knight explained:
...when we try to decide what to expect in a certain situation, and how to behave ourselves accordingly, we are likely to do a lot of irrelevant mental rambling, and the first thing we know we find that we have made up our minds, that our course of action is settled. There seems to be very little meaning in what has gone on in our minds, and certainly little kinship with the formal processes of logic which the scientist uses in an investigation. We contrast the two processes by recognizing that the former is not reasoned knowledge, but "judgment," "common sense," or "intuition." There is doubtless some analysis of a crude type involved, but in the main it seems that we "infer" largely from our experience of the past as a whole, somewhat in the same way that we deal with intrinsically simple (unanalyzable) problems like estimating distances, weights, or other physical magnitudes, when measuring instruments are not at hand.
To sum up: Rand’s “moral” argument for capitalism, to the extent that we can decipher any kind of distinct empirical content in at all, oversteps obvious facts. Rand in her argument appears to be guilty of conflating “freedom” with laissez-faire capitalism; in any case, her implication that survival requires freedom from “interference” (i.e., laissez-faire) is obviously contradicted by facts known to everyone (i.e, by the fact that, despite the absence of laissez-faire, we’re still alive). Nor is Rand’s assertions about “reason” empirically sound; for, in practical matters, men rely far more on “intuition”; nor is it clear, given the uncertainties and complexities faced in ordinary business, that it could be otherwise, since formalized systems of thought can’t handle great complexity and uncertainty.