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Mises, Luxury Goods, and DiLorenzo

August 23, 2004

The famous yet not sufficiently rewarded economist—leader of the Austrian School to which Nobel Laureate F. A. Hayek belonged—Ludwig von Mises once noted that “Every advance first comes into being as the luxury of a few rich people, only to become, after a time, the indispensable necessity taken for granted by everyone. Luxury consumption provides industry with the stimulus to discover and introduce new things.”

I noticed, when I recently watched the original Sabrina—with Humphrey Bogart, William Holden and, of course, the incomparable Audrey Hepburn—that the rich and nice guy played by Bogart had a car phone in his chauffeur driven limo. That was back in the mid-60s. Today what Mises noted is nearly absolutely true: Car phones have become an indispensable necessity for everyone. The same with warm water, the automobile itself, nice vacations, computers, television sets—you name it and at first the rich alone would have it but in time nearly all of us do, at least in the relatively free market economy such as that of the USA.

Ah, but I will be told with righteous indignation, that this is just what is wrong with free market capitalism—it requires that there be some kind of incentive for people to create neat stuff. How sad, even degrading that is: “What should in fact happen, and would in a really good society, is that all these ambitions would come from everyone’s love for everyone else. Shame on anyone who is willing to settle for the idea that obtaining what one wants is a strong motivation for doing something others want.”

The critic is a silly and dangerous dreamer, actually. Adam Smith had the answer to this good and hard: In civilized society [a human being] stands at all times in need of the cooperation and assistance of great multitudes, while his whole life is scarce sufficient to gain the friendship of a few persons....Man has almost constant occasion for the help of his brethren, and it is in vain for him to expect it from their benevolence only. He will be more likely to prevail if he can interest their self-love in his favour, and show them that it is for their own advantage to do for him what he requires of them.... The so called ideal—for me a nightmare, actually—of us all loving everyone equally assumes that we could in fact have everyone in the world as our friend and relative.

Can you imagine? Everyone who dies would deserve our deepest sorrow and extended mourning, while everyone who is born would deserve our most sublime delight and celebration, all at once. Given the multitudes in each group, how on earth could this happen? Intimacy for human beings must of necessity remain selective and small in numbers. Otherwise shallowness sets in.

With a communist society one aims for the impossible and that is why such societies must degenerate into something perverse, unnatural, anti-human. Yet, we hear endless complaints from intellectuals and their followers about how evil it its to love oneself and those close to one—it’s selfish, greedy, mean. Unlike some economists, I do not deny that people can try to be and even succeed at being selfless, in certain regions of their lives, although even here generosity, different from altruism, is better, even more helpful. But acting so as to further one’s well being, to thrive in life, is a good thing and capitalism rests largely on that idea.

But what about all that damage that capitalism has caused all over the world, including in the history of the USA, damage from which countries recovered with the aid of extensive government intervention, especially Franklin Delaware Roosevelt’s New Deal in America? That is exactly what erudite University of Chicago legal scholar Cass R. Sunstein maintains in this The Second Bill of Rights, FDR’s Unfinished Revolution and why We Need it More than Ever (New York: Basic Books, 2004).

Well, I am not going to attempt to refute such works—my only reply here is that freedom is generally much better for people than regimentation. For the details, though, one should consult a very fine book by Professor Thomas J. DiLorenzo, How Capitalism Saved America: The Untold History of Our Country, from the Pilgrims to the Present (New York: Crown Forum, 2004).

So, then, please heed the notion that the “perfect” is the enemy of the good—the pursuit of the dream of a society wherein everyone loves everyone else defeats the real possibility for a just, free, and prosperous community.

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