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Tu Ne Cede Malis

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The Ultimate Foundation of Economic Science
Ludwig von Mises

6
Further Implications of the Neglect
of Economic Thinking

5. The Sovereignty of the Consumers

One of the characteristics of the market economy is the specific way in which it deals with the problems offered by the biological, moral, and intellectual inequality of men.

In the precapitalistic ages the superior, i.e., the smarter and more efficient individuals, subdued and enthralled the masses of their less efficient fellows. In the status society there are castes; there are lords and there are servants. All affairs are managed for the sole benefit of the former, while the latter have to drudge for their masters.

In the market economy the better people are forced by the instrumentality of the profit-and-loss system to serve the concerns of everybody, including the hosts of inferior people. In its frame the most desirable situations can be attained only by actions that benefit all the people. The masses, in their capacity as consumers, ultimately determine everybody's revenues and wealth. They entrust control of the capital goods to those who know how to employ them for their own, i.e., the masses', best satisfaction.

It is, of course, true that in the market economy not those fare best who, from the point of view of an enlightened judgment, ought to be considered as the most eminent individuals of the human species. The uncouth hordes of common men are not fit to recognize duly the merits of those who eclipse their own wretchedness. They judge everybody from the point of view of the satisfaction of their desires. Thus, boxing champions and authors of detective stories enjoy a higher prestige and earn more money than philosophers and poets. Those who bemoan this fact are certainly right. But no social system could be devised that would fairly reward the contributions of the innovator whose genius leads mankind to ideas unknown before and therefore first rejected by all those who lack the same inspiration.

What the so-called democracy of the market brings about is a state of affairs in which production activities are operated by those of whose conduct of affairs the masses approve by buying their products. By rendering their enterprises profitable, the consumers shift control of the factors of production into the hands of those businessmen who serve them best. By rendering the enterprises of the bungling entrepreneurs unprofitable, they withdraw control from those entrepreneurs with whose services they disagree. It is antisocial in the strict meaning of the term if governments thwart these decisions of the people by taxing profits. From a genuinely social point of view, it would be more "social" to tax losses than to tax profits.

The inferiority of the multitude manifests itself most convincingly in the fact that they loathe the capitalistic system and stigmatize the profits that their own behavior creates as unfair. The demand to expropriate all private property and to redistribute it equally among all members of society made sense in a thoroughly agricultural society. There the fact that some people owned large estates was the corollary of the fact that others owned nothing or not enough to support them and their families. But it is different in a society in which the standard of living depends on the supply of capital goods. Capital is accumulated by thrift and saving and is maintained by abstention from decumulating and dissipating it. The wealth of the well-to-do of an industrial society is both the cause and the effect of the masses well-being. Also those who do not own it are enriched, not impoverished, by it.

The spectacle offered by the policies of contemporary governments is paradoxical indeed. The much defamed acquisitiveness of promoters and speculators succeeds daily in providing the masses with commodities and services unknown before. A horn of plenty is poured upon people for whom the methods by means of which all these marvelous gadgets are produced are incomprehensible. These dull beneficiaries of the capitalistic system indulge in the delusion that it is their own performance of routine jobs that creates all these marvels. They cast their votes for rulers who are committed to a policy of sabotage and destruction. They look upon "big business," necessarily committed to catering to mass consumption, as upon the foremost public enemy and approve of every measure that, as they think, improves their own conditions by "punishing" those whom they envy.

To analyze the problems involved is, of course, not the task of epistemology.

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