“The economy is struggling.”

“Capitalism exploits workers.”

“The market has decided.”

We use phrases like these all the time, and they sound perfectly reasonable. But there’s a linguistic problem hiding in plain sight. We’re talking about abstract concepts as if they were people capable of making decisions and taking action.

In our last post in this series exploring what capitalism actually is, we touched on why systems can’t be racist. Only individuals can hold racist beliefs and make racist choices. Today, let’s dig deeper into the economic principle behind that insight, one that fundamentally changes how we understand everything from market failures to policy solutions.

The Austrian economist Ludwig von Mises explained in his masterwork Human Action that only individual human beings can act. Groups, systems, institutions, and abstractions like “the economy” or “capitalism” cannot act because they don’t possess the essential ingredients for action: human consciousness and choice.

This might sound like pure abstraction, but it’s actually one of the most practical insights in all of economics. When we understand that only individuals act, we start asking better questions and finding better solutions.

Think about it this way. When someone says “the company polluted the river,” what really happened? Did a building with a corporate logo somehow dump chemicals? Of course not. Specific individuals—a CEO, a plant manager, a shift supervisor—made specific decisions that led to pollution. They weighed costs and benefits, considered alternatives, and chose to prioritize short-term savings over environmental responsibility.

This distinction isn’t just semantic. It’s the difference between effective problem-solving and spinning our wheels.

If we blame “the company” for pollution, our solutions tend to be vague: more corporate responsibility, better corporate culture, stricter corporate regulations. But if we recognize that specific individuals made specific choices, we can design policies that change the incentives those individuals face. We can make sure the people making decisions bear the costs of their choices, not just enjoy the benefits.

The same logic applies across the board. When we say “the government wastes money,” we’re obscuring the fact that specific bureaucrats and politicians made specific spending decisions. Some chose to fund their pet projects rather than essential services. Others approved contracts with companies they had personal relationships with. Still others simply didn’t bother to shop around because they weren’t spending their own money.

Mises called this understanding “methodological individualism,” and it reveals why capitalism works the way it does. Markets aren’t mysterious forces that somehow “decide” prices or allocate resources. They’re simply the collective result of millions of individuals making choices about what to buy, sell, produce, and consume. 

“The market” doesn’t decide anything because the market as a singular entity in possession of consciousness and will doesn’t exist. It’s simply a term we use as a convenient shorthand to describe the totality of economic actions made by individuals.

When we understand this, market outcomes start making sense. Prices aren’t set by “greedy corporations” but by individual consumers deciding what they’re willing to pay and individual business owners deciding what they’re willing to accept. If a specific price seems too high, it’s because not enough individuals are willing (or able) to supply that good or service at a lower price.

Which brings us back to our earlier discussion about racism and discrimination. When someone says “capitalism is racist,” they’re making the same error as when they say “the company polluted the river.” Systems can’t hold beliefs or make moral choices. Only individuals can.

What capitalism actually does is create incentives for individuals to serve others effectively, regardless of their personal prejudices. A racist store owner who refuses to serve certain customers is literally choosing to lose money. Their competitors, who serve everyone, capture that abandoned business and become more successful.

Understanding individual action also explains why some policy approaches fail while others succeed. Trying to make “corporations” behave more ethically through corporate social responsibility campaigns often doesn’t work because corporations don’t make decisions—individuals within them do. But changing the incentives those individuals face? That’s how you get real change.

When executives know they’ll personally benefit from long-term value creation and personally suffer from short-term thinking, they make different choices. When bureaucrats face real consequences for wasteful spending, they become more careful with taxpayer money. When entrepreneurs can freely enter markets to compete with established players, consumer welfare improves.

This insight applies far beyond economics. When we talk about “society” being racist or sexist, we’re again treating an abstraction as if it were a person. Society doesn’t hold beliefs or make choices—individuals do. Some individuals hold prejudiced views and act on them. Others don’t. So, the question becomes: what incentives and institutions encourage individuals to overcome their prejudices and work together productively?

This is where capitalism’s strength becomes clear. By rewarding individuals who serve others effectively and punishing those who don’t, market systems create powerful incentives for cooperation across all kinds of social divisions. When someone can improve their life by solving others’ problems, their personal prejudices become expensive luxuries they can’t afford.

None of this means that individual choices don’t sometimes aggregate into troubling patterns. But it does mean that if we want to address these issues effectively, we need to understand the individual actions and incentives that contribute to them.

The next time you hear someone blame an abstract system for a concrete problem, ask yourself which specific individuals made which specific choices? What incentives were they responding to? How might we change those incentives to encourage better choices?

When we start thinking this way, solutions become clearer. Instead of trying to make “capitalism” less racist or “corporations” less greedy, we can focus on creating institutions and incentives that encourage individuals to make more choices that benefit others—or at least don’t harm them—regardless of their personal biases.

Because at the end of the day, all any system really is is a collection of individual choices, shaped by individual incentives, made by individual human beings.Learn more about capitalism here.