It is widely held that what causes recessions is a decline in the demand for goods and services. If the private sector fails to strengthen its demand, then the government should step in by raising its demand for goods and services. However, any individual’s ability to demand is constrained by their ability to produce goods valued by others. The more valued goods individuals produce, the more goods they can demand. According to James Mill,

Every major economic illusion begins with the corruption of a word. Inflation once meant popularly what it still means in truth—the artificial expansion of money and credit. But, over time, it has been redefined to describe its consequence rather than its cause. This deliberate inversion of language serves a political purpose: it shifts blame from those who create money to those who merely spend it, transforming an act of monetary fraud into a mere statistical “phenomenon.” The result is profound.

A group of Separatists, whom we call the Pilgrims, originally abandoned England for Holland but they found life there too routine, too easy. Life should be a challenge, and they weren’t being tested enough. According to William Bradford, their leader, a few preferred the prisons of England to the liberties of Holland, which they considered an affliction.

Ludwig von Mises argued that the “nineteenth century philosophy of liberalism,” or the classical tradition of liberalism, is not founded on equality but on liberty. He rejected the notion that all men are factually or substantively equal. He saw the notion of substantive equality—what is sometimes called real equality or true equality—as incompatible with individual liberty, and as a Trojan horse for coercive interventionist schemes designed to equalize all members of society. He saw liberty as essential to peaceful coexistence and to Western civilization itself.

Adam Smith’s Wealth of Nations (1776) is considered the beginning of modern economics, a discipline of philosophical and political thought. From Smith to Marx, economics was primarily an explanation of human behavior until Western nations—advancing through technology and the Industrial Revolution—made an effort to shift economics into a quantitative science.

Editor’s note: The following is an article originally published on October 20th, 2025, at Ludwig von Mises Institut Deutschland. Its publication sparked a public debate on the topic between Dr. Bagus and Dr. Jörg Guido Hülsmann. 

This debate can be followed here: 

Hülsmann: Closing a Central Bank: Comment on Bagus