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Source link: http://archive.mises.org/6765/economic-lessons-from-the-amish/

Economic Lessons from the Amish

June 21, 2007 by

By being fairly self reliant, rather than maximizing the benefits of national and international divisions of labor, they choose to be less efficient and to perform activities that subtract from the time they can devote to what they do best. By shunning modern labor-saving devices and technologies — such as electricity, hay bailers, power equipment, and modern milking facilities — they choose to live with less of everything. Many fall within the modern definition of poverty. Nearly all use child labor. They would starve without it. Yes, they are fully employed but to what end? FULL ARTICLE

{ 25 comments }

Brad June 21, 2007 at 9:23 am

If the Amish way of life is acetic and non-maximal it seems to make them happy. For some people tradition is affirming. More power to ‘em. It is a positive that they, as far as I have ever seen, don’t seek to push their views on others by force.

There are whole quadrants of people who think they have a master plan and are very willing to use force and aggression against others to make sure that they follow “liberating” acetic behaviors. What’s worse, these champions of mass “simplicity” always exempt themselves.

So I may find the Amish odd, and find that they have an odd combination of traditional ways and compromises with moderninity, but they basically keep to themselves, don’t condemn others (at least to their face) and don’t seek the corridors of power to have everyone follow their particular philosophic outlook.

TLWP Sam June 21, 2007 at 9:48 am

I don’t know but maybe there’s a hint of Luddite talk underlying this article. If one person operating a tractor puts a lot of people into work then removing tractors from society would create lotsa jobs for unemployed folk, QED. Whilst certainly this article makes for a good point as why it’s better to be decent to other and not go around bashing and robbing people and stuff, there is a but . . .

I’d say the real reason for the well roundness of Amish society is their low-techness. Jobs there are probably kinda mostly low skilled. Not to mention the products of their labour is probably rather homogenous.

Therefore, because of this combination of homogenous products with low technology and low skills (and low population density?), I propose, creates low entry costs, low exit costs, straightforward competition and all the other stuff that makes one bad player or cartel to be uprooted quickly.

Compare this to modern society where you can have both job shortages in one area and unemployment in another. Rather than automatically blame the guvmint, what of the fact that many jobs and technology cannnot just be done by anyone off the street? What if CPU manufacturers form a cartel? How does the average schmoe with a roll of copper, lumps of silicon, a soldering iron and superglue supposed to compete? To get new whizbang skills for another job takes some time (more so than others) can mean moving between different industries amounts to high transaction costs, no? Similarly what of someone with hi-tech invention (even without patents) invariably creates a temporary monopoly on an object as other inventors try to figure how the darn thing works.

I’d still reckon that happy A.C. Libertarianism would invariably work best in Amish-ish setting which just happens to similar to the time period when the (U.S.) ‘Founding Fathers’ lived in.

DF June 21, 2007 at 10:18 am

Are the Amish subject to taxation? If yes, how do they earn money?

Hascat June 21, 2007 at 10:42 am

They’re mostly subject to taxation. The only real break they get is on social security. You can read more here:

http://www.amishnews.com/amisharticles/amishss.htm

It’s also worth noting that the Amish barter as much (if not more) than they use money. That frees them from a substantial amount of taxation by itself.

Yancey Ward June 21, 2007 at 11:15 am

TLWP Sam,

I really wish you would carefully examine and/or edit what you write. It is extremely difficult to follow the arguments you make. For example, what does the following mean?

Compare this to modern society where you can have both job shortages in one area and unemployment in another

Job shortages and unemployment seem like the same thing to me.

And there is this:

If one person operating a tractor puts a lot of people into work then removing tractors from society would create lotsa jobs for unemployed folk, QED

I can only guess that you meant to write that tractors puts a lot of people out of work.

I would suggest a rewrite, and actually make an argument. What is the “Luddite talk” you wrote of? Are you implying that the solution for today’s umemployment is the living of an Amish lifestyle, or are you implying that this is blog entry’s author’s point, a point that you are supporting or criticizing?

I thought it was clear that the author was showing a primitive economic system that has achieved an equilibrium on a near subsistence level. At the same time, I thought it clear that trying to achieve full employment is a fool’s game since change itself is the cause of some unemployment.

jdavidb June 21, 2007 at 1:01 pm

If you think the Amish are something, check out the Freegans. They pretty much think they have all of life figured out, but all I see is abysmal ignorance of economics. :)

Rolf Norfolk June 21, 2007 at 1:37 pm

The tenor of this post seems almost to contradict Ludwig von Mises himself, quoted directly opposite your piece: “Nobody is called upon to determine what could make another man happier or less unhappy.” I understand that the Amish give their adolescents the opportunity to taste the outside world for themselves, and to decide whether they wish to return. Perhaps they feel they have the right mix of material and other forms of wealth.

mikey June 21, 2007 at 3:43 pm

In contrast to the Amish are the Hutterite colonies which are numerous where I live.They embrace modern technology as it applies to farming.They reject the modern worlds consumer goods.They are prosperous enough to be continually
branching off to form new colonies,recognizing that farms can only get so large before becoming inefficient.I believe the key here is extremely
low consumption vs extremely high investment in
more and better capital goods.

RogerM June 21, 2007 at 4:00 pm

Whatever one thinks of the Amish, you have to admire their self-reliance and very strong work ethic. I’ll take a million Amish over a dozen socialists any day.

Jonathan Bostwick June 21, 2007 at 4:30 pm

“Work Ethic” is not an ideal to strive for.
That was the motto of communism.

Progress only happens when people look for ways to work less.

billwald June 21, 2007 at 7:26 pm

Socialism/communism can work when it is an unintended consequense of a more important principle or goal.

MasterF June 21, 2007 at 10:10 pm

Good site! Good resources here, All the best!
foto
image

P.M.Lawrence June 21, 2007 at 11:19 pm

The Amish aren’t doing this in order to achieve full employment – that’s a side-effect. Also, they don’t much value what they are foregoing (remember, they let their young people choose freely which lifestyle to follow as adults, exposing them to both on purpose). The discussion only makes a sound case against people who are into that lifestyle to get the best out of secular values – but that’s the empty set.

Oh, and saying that the Amish get a “break” on Social Security sounds like they are actually getting something, the way governments claim that cutting taxes is “giving” taxpayers something. It’s just that the Amish aren’t being made to roll over under the logic of clawbacks and drawbacks, just this one time. Nobody should be forced under by this system – the Amish are simply getting what we all deserve in this area (see my post in the recent Social Security thread).

TLWP Sam June 22, 2007 at 1:10 am

Yeah yeah you’re right, I crashed and burned there Yancy Ward. Nonetheless I was trying to make a point that pure competition is considerably more likely in an Amish-ish environment. Or alternatively pure competition is less likely in a high-tech environment. Nevertheless if someone is one or two paychecks from living on the street then I’d regard that person as being close to subsistence. Whereas how do we know for sure that Amish people are close to subsistence just because what they produce is ho-hum basic and generic?

Som June 22, 2007 at 1:32 am

While this is an insightful article of Amish economics, I don’t agree with one point of the article, that is, that the Amish-type lifestyle is necessary to reach full employment within an economy.

Mises himself has argued repeatedly that any free market has all the incentives to move to full employment, and this was due to Say’s law of markets. It was not the issue of how dynamic, closed, or technology driven the society and the economy was, but only the issue of the free movement of prices and wages. Even the classical economists agreed.

So if the entire US was stripped of the entire welfare state and other economic regulations, taxes, etc, and everyone over the age of ten sought employment to work full time, you would not see a surge of unemployment. Granted, you may see a drop in nominal wages, but followed a larger drop in the general price of goods (because society’s production possibilities rapidly expanded). It wouldn’t matter how much technology, cultural attitudes toward child labor, or modern convenience is in the economy, full employment can and would be reached. It’s the hallmark of Say’s law.

I think it might be more accurate to speculate that, because of their traditional old order culture, the Amish economy has a demand for labor that consistently far outstrips their supply of labor.

P.M.Lawrence June 22, 2007 at 4:49 am

Som, there are at least three catches with that:-

(1.) The labour market isn’t free enough, because of taxes, minimum wage laws, and other artificially created on costs of labour.

(2.) Even without those, there would be no guarantee that the levels of competition and productivity would give a real market clearing wage enough for everybody to live on – merely enough for people at the margins of productivity to live on. So, for instance, people in the USA might end up being offered real wages matching those of people in tropical countries with lower heating costs and some private sources of food. Or real wages matching the real costs of machines, come to that (see Nassau Senior’s 19th century work on Wages, particularly his special case when machine fuel is drawn from the same resources as food – we are getting into that with renewable energy).

I have heard that the 19th century railway builders compared the productivity and food consumption of Irish and Italian workers, only to find that while two (larger) Irishmen could do the work of three (smaller) Italians, they also ate the same. If either sort had been more useful in that respect, they would have been hired preferentially so as to reduce the logistics problems of moving food along a railway while it was still incomplete – and, we would see a Darwinian selection if they ever had to compete for subsistence.

Colonial and European history shows that at first, outsiders have to offer high real wages to subsistence locals, to give them an incentive. That’s because they want enough for luxuries. Later on, whether through Malthusian problems or artificial resource shortages like hut or poll taxes or land seizure, they have to work for a top up cash wage – but a low one, since they don’t need much but they really do need it, so the Iron Law of Wages brings it down. Later on still, real wages rise since everybody needs more – but not everybody gets more because of the market clearing problem described above. That means high involuntary unemployment, with “Vagrancy Costs” – an externality. Technically speaking, the vagrants have found work – scavenging, scrounging, stealing, emigrating, serving prison time, or whatever.

(3.) Even when things can be sorted out – and there are a lot of ways to do that, at least technically – there are transitional issues. People can die and actually have died during transitions like the Highland Clearances, and what’s more transitional situations can be sustained indefinitely for so long as outside sources of change continue. Whether they eventually end or not, they can easily outlast individuals caught in them.

Yancey Ward June 22, 2007 at 8:31 am

Som,

To my way of thinking, there is a difference between moving towards full employment and reaching full employment. The Amish more or less reach full employment because they must raise their own food. While there is some small amount of division of labor and, thus, trade, it appears that the Amish have stopped advancing and changing. Equilibrium has been established and full employment has been reached. Contrast this with a society that is constantly advancing and/or changing. Jobs are lost continually while others are created. As long as change happens, there will never be full employment even though Mises and Say were completely correct.

Alex Kasak June 22, 2007 at 10:13 am

I have to say that you painted an admirable picture of the Amish in the beginning of your article. They are closer to sustainable, each person adds value and they’re not in hock. Your arguement for progress and capitalism is pretty weak. It sounds like capitalism is people that do not add value making the big bucks. The problem in other countries with their agrarian ways is not the lack of capitalism, but from their capitalistic countrymen who want to gain without adding value.
The Amish won’t go hungry if deliveries to their local supermarket don’t come…..

TokyoTom June 22, 2007 at 12:28 pm

Dan, I’m sorry, but your conclusion that as for the Amish, “rejection of modern capitalism is full employment in poverty and hardship, not the rich fruits of progress” is essentially an empty tautology that really tells us nothing about either the Amish or modern society.

The Amish hold themselves apart from modern capitalism and society, so don’t share fully the material benefits that modern capitalism offers? And their lives are full of shared hard work?Earthshaking news. But is Amish society nevertheless immensely wealthy in meeting human needs for satisfying human relationships and intimate contact with the good earth?

And I don’t find your premises either insightful or supported. Is full employment really the primary goal of Amish society, or merely a side effect? And why do you discount Amish success by claiming that they really rely on modern society? Of course they are happy to have markets and some material benefits that trade brings, but trade is voluntary on both sides, and the Amish are relatively quite independent. Yes, they ask that others and the state leave them alone and do not steal their land or property, but are you arguing that this is a subsidy by modern society?

Readers can find a more interesting analysis by well-known free market enviro/Austrian John Baden with respect to a similar religious group, the Hutterites, here:

http://www.free-eco.org/articleDisplay.php?id=510

TT

TLWP Sam June 22, 2007 at 10:06 pm

So does that mean you both kinda agree with me Alex Kasak and TokyoTom? My main point was that the type of living the Amish have is the type of lifestyle that is empowering of the individual and Capitalism. Their lifestyle has low entry costs, low exit costs, relatively easy to create, homogenous products with near-perfect substitutes mean they are closer to pure Capitalism than modern society.

Or to put it another way, the path where pure Capitalism would equal a quaint happy society is one where if someone tries to use force or fraud to stifle competition then there are immediate painful kickbacks. Hence for the Amish if someone tries to do the wrong thing and tries to be a mini-monopolist people could quite easily go elsewhere whereas the complexity that is modern society that is not necessarily possible.

Reactionary June 25, 2007 at 10:58 am

This is an odd article for this website. Why would it never occur to an Austrian economist that some people might exercise a subjective preference for things other than “the rich fruits of progress?”

TokyoTom June 25, 2007 at 11:45 am

TLWP Sam, sorry, but I don’t know enough to tell how well your analysis works with the Amish. Rather than having alot of individual freedom and competition, it seems they have sublimated competitive drives in favor of cooperation and rules dividing tasks.

TLWP Ssam June 25, 2007 at 9:09 pm

I beg to differ T.T. I hear there are four criteria to denote perfect competition (hence idyllic Capitalism):

1. Perfect substitutes – each business product has an close or identical substitute that if one business try to manipulate the price then buyers will take the competitors’ products.

2. Zero exit or entry costs – if a player is manipulating the market yet it costs way too much to compete then the rogue will a temporary monopoly until someone can justify the cost of a start-up.

3. Perfect information – everyone knows what the product is and how much it should cost because they know what competitors are charging.

4. Small market share – there are enough operators within a local area such that cost of going elsewhere doesn’t negate the extra charge on a product lest the operater enjoys a localised monopoly.

And, oops, it been long said that farming goes closest to perfect competition. Therefore the Amish, I’d speculate, come far closer to meeting the four points than modern society. I’ll even say this will still be true even if the government could be all but taken out of the picture.

Peter June 25, 2007 at 10:13 pm

It’s also worth noting that the Amish barter as much (if not more) than they use money. That frees them from a substantial amount of taxation by itself.

Oh no it doesn’t. You’re supposed to pay taxes on the “market value” of barter transactions.

Rooster Shamblin January 29, 2010 at 5:09 pm

http://roostershamblin.wordpress.com/ would you please spend a few minutes and read my blog. I have been raising 50 breeds of chickens for 40 years.

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