II. On Reading von Mises

II On Reading von Mises

by WILLIAM E. RAPPARO

WHEN I was invited to contribute an essay to a volume in honor of Ludwig von Mises, I was surprised and still more delighted. My astonishment was due to the fact that the contributors were to be chosen from the ranks of some of the most distinguished living economists, among which I have no reason to count myself. It was, on the other hand, a happy prospect to be allowed publicly to state my esteem and my affection for a very dear friend, and to be urged to spend at least some weeks in his intellectual intimacy.

That, I confess, was the main motive of my acceptance. During the all too brief years, from 1934 to 1940, during which Dr. von Mises had consented to be associated with the Institute at Geneva which I was directing with my friend Paul Mantoux, I very often and, I am afraid, very indiscreetly, enjoyed his company. All those who have ever had a like privilege realize that he is not only one of the keenest analytical minds among contemporary economists, but that he also has at his disposal a store of historical culture, the treasures of which are animated and illuminated by a form of humanity and Austrian wit rarely to be found today on the surface of this globe. In fact, I sometimes wonder, not without fear, whether our generation is not the last to be blessed with what seems to have been a monopoly of pre-war Vienna.

In reflecting upon our numerous and, to me, always very enlightening conversations, two points on which the fundamental opinion of L. von Mises never varied are most prominent.

On the one hand, he was ever insistent on the purely scientific character and functions of economics. As with all other sciences, the role of economics was solely to analyze and to explain reality, not to assess nor to improve it. It was completely wertfrei. Values could be assumed, posited, believed in or disbelieved, claimed or denied. They could not be known nor demonstrated. Therefore, economists who invoked the authority of their intellectual discipline to urge upon society measures calculated to reform it were imposters. Reforms could only be means to an end. Economics dealt, and could legitimately deal, only with means. The means adopted or rejected, of course, depended essentially on the ends chosen. But the choice of ends was quite beyond the discretion of our own, or of any other, science. Therefore, while economists might well advise statesmen as to the probable results of the means suggested to achieve their ends, they could not, as men of science, express any valid judgment as to the excellence of these ends. This they would leave to seers, to prophets, to metaphysicians, or to the man in the street. The visions of the latter might be admirable, but their assertions could but be the expression of their faith and never be postulates of their sole reason.

On the other hand, von Mises missed no opportunity, in private as well as in public, to proclaim his abhorrence of all forms of state intervention in the processes of economic life. Our age knows no more consistent and but very few as passionate advocates of policies of complete laissez-faire in an unhampered market economy.

A single personal recollection—it could be readily multiplied—may serve to illustrate my point. This recollection is drawn from a meeting of the Mont-Pèlerin Society. As is well known, this very loose association of liberal intellectuals was formed some years ago by economists, historians, and philosophers of a score of countries. What brought them together were a common love of liberty and a common apprehension that statist policies, ever more generally preached and practised the world over, would bring about an eclipse of freedom, and consequently also of prosperity. Von Mises was naturally a charter member of this organization which, from the start, was presided over by our colleague, von Hayek. It might well have been expected that the periodical gatherings of this Society could not fail to generate an atmosphere exceptionally congenial to the revered dean of twentieth-century liberals.

Well, what I am about to narrate shows that even the Mont-Pèlerin Society seemed to him dangerously infected by the virus of statism. This episode took place at a meeting held in Seelisberg, a Swiss mountain resort situated just above the Grütli, the traditional birthplace of Helvetic freedom. The topic discussed was the social policies of liberalism. What interventions of public authorities to combat unemployment and industrial destitution were to be favored, or at least tolerated? Social insurance, minimum wages guaranteed by the state, such and similar devices were rather timidly urged by some of the liberals present. None of their proposals found the slightest mercy at the hands of von Mises. “But what would you do,” it was asked of him, “if you were in the position of our French colleague, Jacques Rueff,” who was present at the meeting and who happened at that time to be shouldering the responsibilities of the administration of the Principality of Monaco. “Suppose that for some reason which could easily be imagined, there was in that Principality widespread unemployment and therefore famine and revolutionary discontent. Would you, could you advise the government to limit its activities to police action for the maintenance of order and the protection of private property?”

Our friend von Mises was entirely unmoved. He replied: “If the policies of non-intervention which I advocate prevailed—universal free trade, freely fluctuating nominal wages, no form of social insurance, etc.—there would be no acute unemployment. Private charity would suffice to prevent the absolute destitution of the very restricted hard core of unemployables.”

It might be tempting to recall many other instances in which, in the course of private conversation or collective debate, von Mises absolutely rejected as ill-considered any form of state meddling in the operations of the free market. Tempting, but quite superfluous. No one who is apt to glance over these pages can ignore the uncompromising stand which our friend has ever taken in these matters. In fact, in spite of his many original and learned writings, which have long made of him one of the most renowned living economists, I would venture to assert that he is most widely known the world over as the staunchest, most undaunted, and most uncompromising friend of economic and social liberty of mid-twentieth century.

Now, a question has often arisen in my mind: how his stand on this major matter of policy was to be squared with his equally uncompromising banning of absolute values from the orbit of economic science, and therefore also of economic policy. Of course, there is no logically necessary inconsistency between these two mental attitudes. Psychologically, however, they are not often adopted by the same mind. Theoretical agnostics in the matter of ultimate value are apt to be somewhat reserved and cautious as advocates of policy. And enthusiastic crusaders and intolerant critics in the field of action are usually to be found in the ranks of those who feel least hesitation about proclaiming as absolutely good or evil the policies they champion or combat.

In order fully to comprehend the thought of my esteemed friend on these two fundamental issues, the invitation to take part in this intellectual symposium suggested the idea of discovering it by a careful perusal of his most recent important work, Human Action, published in English in 1949. I therefore resolved to forego all other avoidable work until I had given myself the full benefit of the spiritual and mental intimacy with him I anticipated from carefully reading from cover to cover this major exposition of his mature social philosophy.

The experience proved well worth the effort. Besides the profit and delight I derived from the many weeks devoted to this most exhilarating task, a question insistently arose in my mind: how many, before me, had found it tempting to undertake and possible to carry out the long, intellectual journey through the 880-odd pages from which I have just returned?

No one will ever be in a position to answer this question. The numbers of the copies of the book absorbed by the market offer no adequate clue. Every self-respecting periodical has doubtless reviewed the volume and no self-respecting public library has failed to purchase it. But reading a book is a very different matter from purchasing or even from reviewing it.

It is not my purpose to carry this incidental query any further. But it does concern what is to my mind one of the fundamental problems of our contemporary civilization. A learned treatise is not a dictionary one keeps for reference purposes on one’s shelves. Even when it is admirably composed and adequately indexed, as in the present case, it cannot really and fairly be judged by one who is content to dip into its chapters here and there. The author has the right to expect a less cursory treatment on the part of the reader. But how can he hope to receive it in the present day when at least a thousand volumes are published for every one that appeared in the age of Adam Smith? True, among this torrential output one is not likely to find a Wealth of Nations. If contemporary economists find it possible to read carefully only one extensive book a year, they would not be ill-advised to select, if they have not already done so, the Human Action of Ludwig von Mises.

To revert to the main purpose of this disquisition. In his latest great work our author has very clearly confirmed what I thought I knew of his intellectual positions on the two points stated above. He makes it abundantly clear that economics, no more than any other science, can establish the absolute validity of any ultimate aims of human conduct. Furthermore I have never, in all my previous recollections of him, found him more passionately addicted to the defense of the free market economy nor more intolerant of all forms of what he likes to call “statolatry.”

A few quotations will prove these two assertions. After presenting them I shall conclude by showing how they are reconciled in his social philosophy.

In the opening pages of Human Action we find a statement on the first point so clear that it renders any repetition almost superfluous. It is as follows:

. . . economics is a theoretical science and as such abstains from any judgment of value. It is not its task to tell people what ends they should aim at. It is a science of the means to be applied for the attainment of ends chosen, not, to be sure, a science of the choosing of ends. Ultimate decisions, the valuations and the choosing of ends, are beyond the scope of any science. Science never tells a man how he should act; it merely shows how a man must act if he wants to attain definite ends.1

To this opinion the author remains unswervingly faithful throughout his lengthy book. Its constant repetition is as a Leitmotiv which in various forms recurs in almost every chapter.2

The importance he attaches to it is shown by the following statement quoted from one of his very last pages:

While many people blame economics for its neutrality with regard to value judgments, other people blame it for its alleged indulgence in them. Some contend that economics must necessarily express judgments of value and is therefore not really scientific, as the criterion of science is its valuational indifference. Others maintain that good economics should be and could be impartial, and that only bad economists sin against this postulate.3

We shall revert in our conclusion to what is here indicted as “the semantic confusion” responsible for this ambiguity. Before doing so, let us turn from the consistent and insistent apologist of Wertfreiheit in the realm of economics to the equally consistent and insistent advocate of pure liberalism as the proper and, in fact, the only proper economic policy. We shall now see how this intransigent champion of intellectual neutrality in the field of science becomes a most bellicose gladiator when he descends into the arena of economic policy.

It cannot be the purpose of this study to analyze minutely the opinions expressed by von Mises in Human Action on all the controversial issues which oppose his unadulterated liberalism to the various forms of state interventionism, practiced by all contemporary governments and recommended or at least condoned by the vast majority of writers on economic topics in the middle of our century.

A few quotations must suffice to show that he fully deserves his reputation as the most outspoken and least compromising advocate of a complete policy of pure laissez-faire in the world today.

Ludwig von Mises is an individualist but not an anarchist. Thus he writes:

The anarchists overlook the undeniable fact that some people are either too narrow-minded or too weak to adjust themselves spontaneously to the conditions of social life. . . . We may agree that he who acts antisocially should be considered mentally sick and in need of care. But as long as not all are cured, and as long as there are infants and the senile, some provision must be taken lest they jeopardize society. An anarchistic society would be exposed to the mercy of every individual. Society cannot exist if the majority is not ready to hinder, by the application or threat of violent action, minorities from destroying the social order. This power is vested in the state or government.

State or government is the social apparatus of compulsion and coercion. It has the monopoly of violent action. No individual is free to use violence or the threat of violence if the government has not accorded this right to him. The state is essentially an institution for the preservation of peaceful interhuman relations. However, for the preservation of peace it must be prepared to crush the onslaughts of peace-breakers.4

But, he adds, “the principle of majority rule or government by the people as recommended by liberalism”5 has nothing in common with the statolatry as widely advocated today. This can be defined as the conception which “assumes that there exists above and beyond the individual’s actions an imperishable entity aiming at its own ends, different from those of mortal men, . . . the concept of a superhuman being.”6

Under this assumption,

. . . one cannot evade the question whose ends take precedence whenever an antagonism arises, those of the state or society or those of the individual. The answer to this question is already implied in the very concept of state or society as conceived by collectivism and universalism. If one postulates the existence of an entity which ex definitione is higher, nobler, and better than the individuals, then there cannot be any doubt that the aims of this eminent being must tower above those of the wretched individuals.7

It is the prevalence of statolatry which is responsible for international tension and war.

The alternatives to the liberal and democratic principle of majority rule are the militarist principles of armed conflict and dictatorial oppression.8

Writing at the close of two world wars, he, of course, could not avoid considering the impact of international conflicts, present and future, on the responsibilities and functions of the state. This topic, as well it might be, is clearly distasteful to him. War, which is mainly the product of antiliberal ideas and institutions, is as brutal in its operations as it is futile in its consequences. He writes:

. . . in the long run war and the preservation of the market economy are incompatible. Capitalism is essentially a scheme for peaceful nations.9

Modern civilization is a product of the philosophy of laissez faire. It cannot be preserved under the ideology of government omnipotence. Statolatry owes much to the doctrines of Hegel. However, one may pass over many of Hegel’s inexcusable faults, for Hegel also coined the phrase “the futility of victory” (die Ohnmacht des Sieges). To defeat the aggressors is not enough to make peace durable. The main thing is to discard the ideology that generates war.10

However, in spite of the obvious logical and historical links between economic liberalism and international peace on the one hand, and statolatry and war on the other, the necessities of national defense are no valid excuse for the extent and forms of state intervention practiced by all belligerent nations in the most recent armed conflicts. This is how our author deals with this topic, obviously one of the most embarrassing for all advocates of economic liberalism:

The market economy, say the socialists and the interventionists, is at best a system that may be tolerated in peacetime. But when war comes, such indulgence is impermissible. It would jeopardize the vital interests of the nation for the sole benefit of the selfish concerns of capitalists and entrepreneurs. War, and in any case modern total war, peremptorily requires government control of business.

Hardly anybody has been bold enough to challenge this dogma. It served in both World Wars as a convenient pretext for innumerable measures of government interference with business which in many countries step by step led to full “war socialism.” When the hostilities ceased, a new slogan was launched. The period of transition from war to peace and of “reconversion,” people contended, requires even more government control than the period of war. Besides, why should one ever turn to a social system which can work, if at all, only in the interval between two wars? The most appropriate thing would be to cling permanently to government control in order to be duly prepared for any possible emergency.

An examination of the problems which the United States had to face in the second World War will clearly show how fallacious this reasoning is.

What America needed in order to win the war was a radical conversion of all its production activities. All not absolutely indispensable civilian consumption was to be eliminated. The plants and farms were henceforth to turn out only a minimum of goods for nonmilitary use. For the rest, they were to devote themselves completely to the task of supplying the armed forces.

The realization of this program did not require the establishment of controls and priorities. If the government had raised all the funds needed for the conduct of war by taxing the citizens and by borrowing from them, everybody would have been forced to cut down his consumption drastically. The entrepreneurs and farmers would have turned toward production for the government because the sale of goods to private citizens would have dropped. The government, now by virtue of the inflow of taxes and borrowed money the biggest buyer on the market, would have been in a position to obtain all it wanted. Even the fact that the government chose to finance a considerable part of the war expenditure by increasing the quantity of money in circulation and by borrowing from the commercial banks would not have altered this state of affairs. The inflation must, of course, bring about a marked tendency toward a rise in the prices of all goods and services. The government would have had to pay higher nominal prices. But it would still have been the most solvent buyer on the market. It would have been possible for it to outbid the citizens who on the one hand had not the right of manufacturing the money they needed and on the other hand would have been squeezed by enormous taxes.

But the government deliberately adopted a policy which was bound to make it impossible for it to rely upon the operation of the unhampered market. It resorted to price control and made it illegal to raise commodity prices. Furthermore it was very slow in taxing the incomes swollen by the inflation. It surrendered to the claim of the unions that the workers’ real take-home wages should be kept at a height which would enable them to preserve in the war their prewar standard of living. In fact, the most numerous class of the nation, the class which in peacetime consumed the greatest part of the total amount of goods consumed, had so much more money in their pockets that their power to buy and to consume was greater than in peacetime. The wage earners—and to some extent also the farmers and the owners of plants producing for the government—would have frustrated the government’s endeavors to direct industries toward the production of war materials. They would have induced business to produce more, not less, of those goods which in wartime are considered superfluous luxuries. It was this circumstance that forced the Administration to resort to the systems of priorities and of rationing. The shortcomings of the methods adopted for financing war expenditure made government control of business necessary. If no inflation had been made and if taxation had cut down the income (after taxes) of all citizens, not only of those enjoying higher incomes, to a fraction of their peacetime revenues, these controls would have been supererogatory. The endorsement of the doctrine that the wage earners’ real income must in wartime be even higher than in peacetime made them unavoidable.11

As this most remarkable passage clearly shows, even the exceptional exigencies of total war, that is, of war in which all private interests are necessarily subordinated to, and even engulfed in the interests of the belligerent state, were not sufficient to divorce von Mises from his all-beloved economic liberalism. What is more significant, however, is his defense of laissez-faire in times and under conditions of peace. In spite of the present state of international relations, septuagenarians such as he and I may be excused from looking upon such times and such conditions as more normal and more durable than those referred to in my last quotation.

There is not, in Human Action, any precise delimitation of the state’s legitimate activities. Von Mises expressly rejects the possibility of regulating this matter in accordance with any norms of right or wrong, just or unjust. Two points, however, stand out very clearly in his exposition.12 On the one hand, besides the recognized necessity of national defense, the state must protect the individual against the consequences of social disorder and violence. “The only purpose of the laws and the social apparatus of coercion and compulsion is to safeguard the smooth functioning of social cooperation.”13

However, even this admitted duty of the state is looked upon with more suspicion than favor, as is obvious from the following statement:

. . . government interference always means either violent action or the threat of such action. Government is in the last resort the employment of armed men, of policemen, gendarmes, soldiers, prison guards, and hangmen. The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.14

On the other hand, all government interference, even when it is imposed by circumstances, is restrictive and not productive. Thus we read:

On the unhampered market there prevails an irresistible tendency to employ every factor of production for the best possible satisfaction of the most urgent needs of the consumers. If the government interferes with this process, it can only impair satisfaction; it can never improve it.

. . . While government has no power to make people more prosperous by interference with business, it certainly does have the power to make them less satisfied by restriction of production.15

This general view, expounded throughout Human Action, of course makes its author a determined opponent of tariff protection, labor legislation, high taxation, socialization of the means of production, and of all other forms of state intervention in the market economy such as are universally practiced by contemporary states.

I must resist the temptation of reproducing here many pungent statements on these various matters which I have noted in the preparation of these pages. Just one exception to characterize the severity of his judgment:

The outcome of the municipalization and nationalization policies of the last decades was almost without exception financial failure, poor service, and political corruption. Blinded by their anticapitalistic prejudices people condone poor service and corruption and for a long time did not bother about the financial failure. However, this failure is one of the factors which contributed to the emergence of the present-day crisis of interventionism.16

Some points of his attack on labor legislation may also be quoted. This would seem justified both because these statements display their author in one of his most isolated intellectual attitudes, and by reason of their bearing on one of the most widely discussed issues of the day, that of so-called underdeveloped countries. In his remarks on the industrial revolution of the eighteenth century in Great Britain he writes:

The history of capitalism in Great Britain as well as in all other capitalist countries is a record of an unceasing tendency toward the improvement in the wage earners’ standard of living. This evolution coincided with the development of prolabor legislation and the spread of labor unionism on the one hand and with the increase in the marginal productivity of labor on the other hand. The economists assert that the improvement in the workers’ material conditions is due to the increase in the per capita quota of capital invested and the technological achievements which the employment of this additional capital brought about. As far as labor legislation and union pressure did not exceed the limits of what the workers would have got without them as a necessary consequence of the acceleration of capital accumulation as compared with population, they were superfluous. As far as they exceeded these limits, they were harmful to the interests of the masses. They delayed the accumulation of capital thus slowing down the tendency toward a rise in the marginal productivity of labor and in wage rates.17

This conception of the futility of labor legislation in the country of its birth leads him to the following remarks on the subject of economically backward countries:

Vast areas—Eastern Asia, the East Indies, Southern and Southeastern Europe, Latin America—are only superficially affected by modern capitalism. Conditions in these countries by and large do not differ from those of England on the eve of the “Industrial Revolution.” There are millions and millions of people for whom there is no secure place left in the traditional economic setting. The fate of these wretched masses can be improved only by industrialization. What they need most is entrepreneurs and capitalists. As their own foolish policies have deprived these nations of the further enjoyment of the assistance imported foreign capital hitherto gave them, they must embark upon domestic capital accumulation. They must go through all the stages through which the evolution of Western industrialism had to pass. They must start with comparatively low wage rates and long hours of work. But, deluded by the doctrines prevailing in present-day Western Europe and North America, their statesmen think that they can proceed in a different way. They encourage labor-union pressure and alleged prolabor legislation. Their interventionist radicalism nips in the bud all attempts to create domestic industries. These men do not comprehend that industrialization cannot begin with the adoption of the precepts of the International Labor Office and the principles of the American Congress of Industrial Organizations. Their stubborn dogmatism spells the doom of the Indian and Chinese coolies, the Mexican peons, and millions of other peoples, desperately struggling on the verge of starvation.18

Another phase of von Mises’ advocacy of laissez-faire in economic affairs is displayed in his views on banking and money. I quote some of his relevant statements to show to what extremes of severity he is led by his abhorrence of state intervention in this field. Thus he writes:

The attitudes of the European governments and their satellites with regard to banking were from the beginning insincere and mendacious. The pretended solicitude for the nation’s welfare, for the public in general, and for the poor ignorant masses in particular was a mere blind. The governments wanted inflation and credit expansion, they wanted booms and easy money.

. . . . It is a fable that governments interfered with banking in order to restrict the issue of fiduciary media and to prevent credit expansion. The idea that guided governments was, on the contrary, the lust for inflation and credit expansion.

. . . . Many governments never looked upon the issuance of fiduciary media from a point of view other than that of fiscal concerns. In their eyes the foremost task of the banks was to lend money to the treasury. The money-substitutes were pacemakers for government-issued paper money. The convertible banknote was merely a first step on the way to the nonredeemable banknote. With the progress of statolatry and the policy of interventionism these ideas have become general and are no longer questioned by anybody. No government is willing today to give any thought to the program of free banking because no government wants to renounce what it considers a handy source of revenue. What is called today financial war preparedness is merely the ability to procure by means of privileged and government-controlled banks all the money a warring nation may need- Radical inflationism, although not admitted explicitly, is an essential feature of the economic ideology of our age.

But even at the time liberalism enjoyed its highest prestige and governments were more eager to preserve peace and well-being than to foment war, death, destruction, and misery, people were biased in dealing with the problems of banking.19

Much as I would like to pursue this recital of the anti-state views of L. von Mises, notably in the field of public instruction,20 where his radical individualism leads him into a position of almost complete isolation amongst our contemporaries, it is time to conclude.

In the first part of this study we have shown him as an uncompromising foe of all pseudo-scientific judgments of value in economic affairs. In the second, we have just caught some glimpses of him on the warpath, denouncing often with extreme vigor of thought and language the aberration of all contemporary governments and the folly of almost all contemporary economists who practice and preach interventionist policies.

How are these intellectual attitudes to be reconciled? My purpose in undertaking this study was to discover the solution of this problem, which, I admit, had often perplexed me in the score of years I had the privilege of knowing our friend von Mises. My satisfaction in bringing it to a close is that this problem perplexes me no longer. Any careful and fair-minded reader of Human Action must recognize that it contains a clear and unequivocal answer to the question posed. Not that the reader will necessarily follow our author in his denunciations of all the economic policies he attacks. But the accusation, or at least the suspicion, of logical inconsistency will have been invalidated.

Why and how?

Throughout his work von Mises maintains that there is and can be no justification for the scientific assertion of ends as the only desirable aims of policy. But he claims that most, if not absolutely all, governments, parties, and economists today have chosen and pretend to be pursuing the same aims. Under this assumption, what separates men is much less a variety of ends, about which science is impotent and must therefore remain mute, than means, which it is the right and duty of all economists to examine as to their adequacy.

That the ultimate aims pursued by all in matters economic are substantially the same, is a claim clearly made and constantly repeated in Human Action. The following quotations may suffice to show it:

It is true that the appetite for food and warmth is common to men and other mammals and that as a rule a man who lacks food and shelter concentrates his efforts upon the satisfaction of these urgent needs and does not care much for other things. The impulse to live, to preserve one’s own life, and to take advantage of every opportunity of strengthening one’s vital forces is a primal feature of life, present in every living being.21

Notwithstanding all declarations to the contrary, the immense majority of men aim first of all at an improvement of the material conditions of well-being. They want more and better food, better homes and clothes, and a thousand other amenities. They strive after abundance and health.22

While praxeology, and therefore economics too, uses the terms happiness and removal of uneasiness in a purely formal sense, liberalism attaches to them a concrete meaning. It presupposes that people prefer life to death, health to sickness, nourishment to starvation, abundance to poverty. It teaches man how to act in accordance with these valuations.23

It is a fact that civilization, when judged from this point of view, is to be considered a benefit and not an evil. It has enabled man to hold his own in the struggle against all other living beings, both the big beasts of prey and the even more pernicious microbes; it has multiplied man’s means of sustenance; it has made the average man taller, more agile, and more versatile and it has stretched his average length of life; it has given man the uncontested mastery of the earth; it has multiplied population figures and raised the standard of living to a level never dreamed of by the crude cave dwellers of prehistoric ages.24

Asceticism teaches that the only means open to man for removing pain and for attaining complete quietude, contentment, and happiness is to turn away from earthly concerns and to live without bothering about worldly things. There is no salvation other than to renounce striving after material well-being, to endure submissively the adversities of the earthly pilgrimage and to dedicate oneself exclusively to the preparation for eternal bliss. However, the number of those who consistently and unswervingly comply with the principles of asceticism is so small that it is not easy to instance more than a few names. It seems that the complete passivity advocated by asceticism is contrary to nature. The enticement of life triumphs.25

All present-day political parties strive after the earthly well-being and prosperity of their supporters. They promise that they will render economic conditions more satisfactory to their followers. With regard to this issue there is no difference between the Roman Catholic Church and the various Protestant denominations as far as they intervene in political and social questions, between Christianity and the non-Christian religions, between the advocates of economic freedom and the various brands of Marxian materialism, between nationalists and internationalists, between racists and the friends of interracial peace. . . .

The pompous statements which people make about things unknowable and beyond the power of the human mind, their cosmologies, world views, religions, mysticisms, metaphysics, and conceptual phantasies differ widely from one another. But the practical essence of their ideologies, i.e., their teachings dealing with the ends to be aimed at in earthly life and with the means for the attainment of these ends, show much uniformity.26

In the field of society’s economic organization there are the liberals advocating private ownership of the means of production, the socialists advocating public ownership of the means of production, and the interventionists advocating a third system which, they contend, is as far from socialism as it is from capitalism. In the clash of these parties there is again much talk about basic philosophical issues. People speak of true liberty, equality, social justice, the rights of the individual, community, solidarity, and humanitarianism. But each party is intent upon proving by ratiocination and by referring to historical experience that only the system it recommends will make the citizens prosperous and satisfied. They tell the people that realization of their program will raise the standard of living to a higher level than realization of any other party’s program. They insist upon the expediency of their plans and upon their utility. It is obvious that they do not differ from one another with regard to ends but only as to means. They all pretend to aim at the highest material welfare for the majority of citizens.27

No religion in its exoteric activities ever ventured to tell people frankly: The realization of our plans for social organization will make you poor and impair your earthly well-being. Those consistently committed to a life of poverty withdrew from the political scene and fled into anchoritic seclusion. But churches and religious communities which have aimed at making converts and at influencing political and social activities of their followers have espoused the principles of secular conduct. In dealing with questions of man’s earthly pilgrimage they hardly differ from any other political party. In canvassing, they emphasize the material advantages which they have in store for their brothers in faith more than bliss in the beyond.28

The immense majority strives after a greater and better supply of food, clothes, homes, and other material amenities. In calling a rise in the masses’ standard of living progress and improvement, economists do not espouse a mean materialism. They simply establish the fact that people are motivated by the urge to improve the material conditions of their existence. They judge policies from the point of view of the aims men want to attain. He who disdains the fall in infant mortality and the gradual disappearance of famines and plagues may cast the first stone upon the materialism of the economists.29

We call a progressing economy an economy in which the per capita quota of capita] invested is increasing. In using this term we do not imply value judgments. We adopt neither the “materialistic” view that such a progression is good nor the “idealistic” view that it is bad or at least irrelevant from a “higher point of view.” Of course, it is a well-known fact that the immense majority of people consider the consequences of progress in this sense as the most desirable state of affairs and yearn for conditions which can be realized only in a progressing economy.30

All varieties of the producers’ policy are advocated on the ground of their alleged ability to raise the party members’ standard of living. Protectionism and economic self-sufficiency, labor union pressure and compulsion, labor legislation, minimum wage rates, public spending, credit expansion, subsidies, and other makeshifts are always recommended by their advocates as the most suitable or the only means to increase the real income of the people for whose votes they canvass. Every contemporary statesman or politician invariably tells his voters: My program will make you as affluent as conditions may permit, while my adversaries’ program will bring you want and misery.

It is true that some secluded intellectuals in their esoteric circles talk differently. They proclaim the priority of what they call eternal absolute values and feign in their declamations—not in their personal conduct—a disdain of things secular and transitory. But the public ignores such utterances. The main goal of present-day political action is to secure for the respective pressure group memberships the highest material well-being. The only way for a leader to succeed is to instill in people the conviction that his program best serves the attainment of this goal.

What is wrong with the producers’ policies is their faulty economics.31

These many quotations all go to show that in the mind of von Mises the statement is justified that, in economic matters, men differ much less in the ultimate aims they pursue than in the means they recommend or adopt as best calculated to attain these ends. This view, he holds, is valid not as an abstract truth but as an assumption based on general observation. It is the contrary opinion which, in his estimation, is responsible for the “semantic confusion” above referred to. His final statement on this matter may be taken as a satisfactory conclusion. He writes:

The semantic confusion in the discussion of the problems concerned is due to an inaccurate use of terms on the part of many economists. An economist investigates whether a measure a can bring about the result p for the attainment of which it is recommended, and finds that a does not result in p but in g, an effect which even the supporters of the measure a consider undesirable. If this economist states the outcome of his investigation by saying that a is a bad measure, he does not pronounce a judgment of value. He merely says that from the point of view of those aiming at the goal p, the measure a is inappropriate. In this sense the free trade economists attacked protection. They demonstrated that protection does not, as its champions believe, increase but, on the contrary, decreases the total amount of products, and is therefore bad from the point of view of those who prefer an ampler supply of products to a smaller. It is in this sense that economists criticize policies from the point of view of the ends aimed at. If an economist calls minimum wage rates a bad policy, what he means is that its effects are contrary to the purpose of those who recommend their application.32

This paper has fulfilled its purpose if it has shown the reader, as it has convinced the author, that there is no logical inconsistency between Ludwig von Mises the rational agnostic and Ludwig von Mises the persistent and intolerant advocate of liberalism as a policy based on economic science.

It does not follow, of course, that all economists who share his rational agnosticism must of necessity also favor his laissez-faire policies in their absolute intransigence. The escape from the dilemma is not far afield. It is to be found much less in disagreement with his remarkable scientific dialectics than in doubts as to the universal validity of his fundamental assumption. As he declares himself, in the final pages of Human Action:

Economics does not assume or postulate that men aim only or first of all at what is called material well-being. . . . It is neither more nor less rational to aim at riches like Croesus than to aim at poverty like a Buddhist monk. . . .

It is a question of fact whether or not . . . men in general and our contemporaries especially are driven more by the wish to realize myths and dreams than by the wish to improve their material well-being.33

This question of fact strikes me as being susceptible of various answers, according to one’s conception of myths and dreams. Does the British voter, for instance, favor confiscatory taxation of large incomes primarily in the hope that it will redound to his material advantage, or in the certainty that it tends to reduce unwelcome and irritating social inequalities? In general, is the urge towards equality in our modern democracies not often stronger than the desire to improve one’s material lot?

Let me conclude with a statement for which I truly believe I can vouch and which flatly contradicts that made by the author of Human Action when he declares:

. . . in the predominantly industrial countries of Europe the protectionists were first eager to declare that the tariff on agricultural products hurts exclusively the interests of the farmers of the predominantly agricultural countries and of the grain dealers.34

Now, Switzerland is undoubtedly one of those countries. It is furthermore a completely democratic state in which the voter not only chooses his legislators but in which issues such as that of agrarian portectionism are often settled directly at the polls by means of the popular referendum after prolonged and very outspoken political campaigns. My country, in which farmers represent less than 20 per cent of the population, has in the course of the last generations repeatedly favored this small and dwindling minority by protectionist measures on corn, dairy products, and wine. The urban industrial and commercial majority have done so, neither in what would obviously be an absurd belief that they were thereby increasing their real income, nor out of what would be a no less absurd desire to hurt foreign producers. Quite deliberately and expressly, political parties have sacrificed the immediate material welfare of their members in order to prevent, or at least somewhat to retard, the complete industrialization of the country. A more agricultural Switzerland, though poorer, such is the dominant wish of the Swiss people today. It may be dismissed as a myth or a dream. In fact it is a somewhat costly, but a sincerely professed national ideal of a real democracy.

Such cases are not as exceptional as they may seem in the world of today. What, for instance, of the anti-colonialism professed in Bandoeng today? Does it not show that many, if not most, people in the world today prefer national freedom to individual wealth? To recall all these cases is not to deny the overwhelming validity of the doctrines expounded in Human Action, nor to belittle the truly magnificent intellectual achievement of its highly esteemed and dearly beloved author.

35 Human Action, Yale University Press, New Haven, 1949, p. 10.

36 Ibid., pp. 10, 21, 29, 46, 87, 89, 92, 96, 148, 157, 172, 173, 179, 180, 243, 264, 292, 295-6, 617, 713, 715, 716, 717, 719, 749, 879.

37 Ibid., p. 879.

38 Ibid., p. 149.

39 Ibid., p. 150.

40 Ibid., p. 151.

41 Ibid., p. 151.

42 Ibid., p. 152.

43 Ibid., p. 824.

44 Ibid., p. 828.

45 Ibid., pp. 821-822.

46 Ibid., pp. 715 et seq.

47 Ibid., p. 718.

48 Ibid., p. 715.

49 Ibid., pp. 736-737.

50 Ibid., p. 373.

51 Ibid., p. 617.

52 Ibid., pp. 618-619.

53 Ibid., pp. 438 and 439.

54 Ibid., pp. 872 et seq.

55 Ibid., p. 19.

56 Ibid., p. 96.

57 Ibid., p. 154.

58 Ibid., p. 170.

59 Ibid., pp. 178-179.

60 Ibid., pp. 180-181.

61 Ibid., p. 183.

62 Ibid., p. 184.

63 Ibid., pp. 193-194.

64 Ibid., p. 292.

65 Ibid., p. 315.

66 Ibid., p. 879.

67 Ibid., p. 880.

68 Ibid., p. 313.

1Le refus de Ludwig von Mises.
2Ludwig von Mises, Human Action. Yale University Press, New Haven, 1949, p. 188.
3Stalin, Les problèmes économiques du socialisme en U.S.S.R., Ed. Sociale, p. 4.
4Ludwig von Mises, Ibid., p. 187.
5Leibnitz, Nouveaux Essais, I.II.12.
6Paul Valéry, Monsieur Teste. NR.F., p. 86.
7Ibid., p. 104.
8Ibid., p. 152.
9Ibid., p. 824.
10Ibid., p. 828.
11Ibid., pp. 821-822.
12Ibid., pp. 715 et seq.
13Ibid., p. 718.
14Ibid., p. 715.
15Ibid., pp. 736-737.
16Ibid., p. 373.
17Ibid., p. 617.
18Ibid., pp. 618-619.
19Ibid., pp. 438 and 439.
20Ibid., pp. 872 et seq.
21Ibid., p. 19.
22Ibid., p. 96.
23Ibid., p. 154.
24Ibid., p. 170.
25Ibid., pp. 178-179.
26Ibid., pp. 180-181.
27Ibid., p. 183.
28Ibid., p. 184.
29Ibid., pp. 193-194.
30Ibid., p. 292.
31Ibid., p. 315.
32Ibid., p. 879.
33Ibid., p. 880.
34Ibid., p. 313.
35The Intransigence of Ludwig von Mises
36LUDWIG VON MISES is a rara avis in this twentieth century of ours, for he considers reason a valid and efficacious instrument even in the study of questions that concern economics. According to him, “any given social order was thought out and designed before it could be realized . . . any existing state of social affairs is the product of ideologies previously thought out . . . action is always directed by ideas.”
37The very title of his great book, Human Action, is in and of itself both an affirmation and a denial. It indicates what, for its author, constitutes the real economic problem, which is raised by the behavior of men with respect to the things they desire—the things called wealth. And it shows that the real economic problem is completely encompassed within the study of such behavior; that it does not consist only in an analysis “of objective processes taking place quite independently of human will.”
38This problem constitutes an object of science and is open to only two kinds of solution—those which are effective, and those which are not. Reason—and only reason—enables us to choose between them. “Man has only one tool to fight error: reason.” It is the task of the economist to tell the politician which system he must set up in order to give men what they want, and not the very opposite.
39It would be cruel to insist on learning the reasons for the practically universal renunciation of thinking. Leibnitz already indicated that, “If geometry conflicted with our passions and interests as much as morality does, we would no less question and violate its laws. And this despite all the proofs offered by Euclid and Archimedes, which we would then treat as flights of fancy and believe to be full of fallacies. And in that case Joseph Scaliger, Hobbes, and others who attacked Euclid and Archimedes, would not be so bereft of supporters as they now are.”
40In the following words, one of Mr. Teste’s listeners reports the sensations experienced while listening to him. “He shatters my mind with a word, and I feel like a defective vase that the potter has discarded. He is as hard, sir, as an angel. He is unaware of his own strength; he finds unexpected words that are all too true, that overwhelm people, that awaken them in the midst of great folly confronting them, all ensnared in being what they are, in the meshes of living, in foolishness. We live in comfort, each in his own absurdity, like fish in water, and we never become aware, except by chance, of how much stupidity is contained in the life of a reasonable person.” And the same listener goes on to say, “There is in him some appalling purity, detachment, undeniable strength and light. Never have I observed such complete absence of confusion and of doubt in an intelligence that is so deeply industrious. He is awfully quiet! There can be ascribed to him no uneasiness of soul, no shadow in his heart.”
41In the following words, one of Mr. Teste’s listeners reports the sensations experienced while listening to him. “He shatters my mind with a word, and I feel like a defective vase that the potter has discarded. He is as hard, sir, as an angel. He is unaware of his own strength; he finds unexpected words that are all too true, that overwhelm people, that awaken them in the midst of great folly confronting them, all ensnared in being what they are, in the meshes of living, in foolishness. We live in comfort, each in his own absurdity, like fish in water, and we never become aware, except by chance, of how much stupidity is contained in the life of a reasonable person.” And the same listener goes on to say, “There is in him some appalling purity, detachment, undeniable strength and light. Never have I observed such complete absence of confusion and of doubt in an intelligence that is so deeply industrious. He is awfully quiet! There can be ascribed to him no uneasiness of soul, no shadow in his heart.”
42The alternatives to the liberal and democratic principle of majority rule are the militarist principles of armed conflict and dictatorial oppression.
43. . . in the long run war and the preservation of the market economy are incompatible. Capitalism is essentially a scheme for peaceful nations.
44Modern civilization is a product of the philosophy of laissez faire. It cannot be preserved under the ideology of government omnipotence. Statolatry owes much to the doctrines of Hegel. However, one may pass over many of Hegel’s inexcusable faults, for Hegel also coined the phrase “the futility of victory” (die Ohnmacht des Sieges). To defeat the aggressors is not enough to make peace durable. The main thing is to discard the ideology that generates war.
45But the government deliberately adopted a policy which was bound to make it impossible for it to rely upon the operation of the unhampered market. It resorted to price control and made it illegal to raise commodity prices. Furthermore it was very slow in taxing the incomes swollen by the inflation. It surrendered to the claim of the unions that the workers’ real take-home wages should be kept at a height which would enable them to preserve in the war their prewar standard of living. In fact, the most numerous class of the nation, the class which in peacetime consumed the greatest part of the total amount of goods consumed, had so much more money in their pockets that their power to buy and to consume was greater than in peacetime. The wage earners—and to some extent also the farmers and the owners of plants producing for the government—would have frustrated the government’s endeavors to direct industries toward the production of war materials. They would have induced business to produce more, not less, of those goods which in wartime are considered superfluous luxuries. It was this circumstance that forced the Administration to resort to the systems of priorities and of rationing. The shortcomings of the methods adopted for financing war expenditure made government control of business necessary. If no inflation had been made and if taxation had cut down the income (after taxes) of all citizens, not only of those enjoying higher incomes, to a fraction of their peacetime revenues, these controls would have been supererogatory. The endorsement of the doctrine that the wage earners’ real income must in wartime be even higher than in peacetime made them unavoidable.
46There is not, in Human Action, any precise delimitation of the state’s legitimate activities. Von Mises expressly rejects the possibility of regulating this matter in accordance with any norms of right or wrong, just or unjust. Two points, however, stand out very clearly in his exposition. On the one hand, besides the recognized necessity of national defense, the state must protect the individual against the consequences of social disorder and violence. “The only purpose of the laws and the social apparatus of coercion and compulsion is to safeguard the smooth functioning of social cooperation.”
47There is not, in Human Action, any precise delimitation of the state’s legitimate activities. Von Mises expressly rejects the possibility of regulating this matter in accordance with any norms of right or wrong, just or unjust. Two points, however, stand out very clearly in his exposition. On the one hand, besides the recognized necessity of national defense, the state must protect the individual against the consequences of social disorder and violence. “The only purpose of the laws and the social apparatus of coercion and compulsion is to safeguard the smooth functioning of social cooperation.”
48. . . government interference always means either violent action or the threat of such action. Government is in the last resort the employment of armed men, of policemen, gendarmes, soldiers, prison guards, and hangmen. The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom.
49. . . While government has no power to make people more prosperous by interference with business, it certainly does have the power to make them less satisfied by restriction of production.
50The outcome of the municipalization and nationalization policies of the last decades was almost without exception financial failure, poor service, and political corruption. Blinded by their anticapitalistic prejudices people condone poor service and corruption and for a long time did not bother about the financial failure. However, this failure is one of the factors which contributed to the emergence of the present-day crisis of interventionism.
51The history of capitalism in Great Britain as well as in all other capitalist countries is a record of an unceasing tendency toward the improvement in the wage earners’ standard of living. This evolution coincided with the development of prolabor legislation and the spread of labor unionism on the one hand and with the increase in the marginal productivity of labor on the other hand. The economists assert that the improvement in the workers’ material conditions is due to the increase in the per capita quota of capital invested and the technological achievements which the employment of this additional capital brought about. As far as labor legislation and union pressure did not exceed the limits of what the workers would have got without them as a necessary consequence of the acceleration of capital accumulation as compared with population, they were superfluous. As far as they exceeded these limits, they were harmful to the interests of the masses. They delayed the accumulation of capital thus slowing down the tendency toward a rise in the marginal productivity of labor and in wage rates.
52Vast areas—Eastern Asia, the East Indies, Southern and Southeastern Europe, Latin America—are only superficially affected by modern capitalism. Conditions in these countries by and large do not differ from those of England on the eve of the “Industrial Revolution.” There are millions and millions of people for whom there is no secure place left in the traditional economic setting. The fate of these wretched masses can be improved only by industrialization. What they need most is entrepreneurs and capitalists. As their own foolish policies have deprived these nations of the further enjoyment of the assistance imported foreign capital hitherto gave them, they must embark upon domestic capital accumulation. They must go through all the stages through which the evolution of Western industrialism had to pass. They must start with comparatively low wage rates and long hours of work. But, deluded by the doctrines prevailing in present-day Western Europe and North America, their statesmen think that they can proceed in a different way. They encourage labor-union pressure and alleged prolabor legislation. Their interventionist radicalism nips in the bud all attempts to create domestic industries. These men do not comprehend that industrialization cannot begin with the adoption of the precepts of the International Labor Office and the principles of the American Congress of Industrial Organizations. Their stubborn dogmatism spells the doom of the Indian and Chinese coolies, the Mexican peons, and millions of other peoples, desperately struggling on the verge of starvation.
53But even at the time liberalism enjoyed its highest prestige and governments were more eager to preserve peace and well-being than to foment war, death, destruction, and misery, people were biased in dealing with the problems of banking.
54Much as I would like to pursue this recital of the anti-state views of L. von Mises, notably in the field of public instruction, where his radical individualism leads him into a position of almost complete isolation amongst our contemporaries, it is time to conclude.
55It is true that the appetite for food and warmth is common to men and other mammals and that as a rule a man who lacks food and shelter concentrates his efforts upon the satisfaction of these urgent needs and does not care much for other things. The impulse to live, to preserve one’s own life, and to take advantage of every opportunity of strengthening one’s vital forces is a primal feature of life, present in every living being.
56Notwithstanding all declarations to the contrary, the immense majority of men aim first of all at an improvement of the material conditions of well-being. They want more and better food, better homes and clothes, and a thousand other amenities. They strive after abundance and health.
57While praxeology, and therefore economics too, uses the terms happiness and removal of uneasiness in a purely formal sense, liberalism attaches to them a concrete meaning. It presupposes that people prefer life to death, health to sickness, nourishment to starvation, abundance to poverty. It teaches man how to act in accordance with these valuations.
58It is a fact that civilization, when judged from this point of view, is to be considered a benefit and not an evil. It has enabled man to hold his own in the struggle against all other living beings, both the big beasts of prey and the even more pernicious microbes; it has multiplied man’s means of sustenance; it has made the average man taller, more agile, and more versatile and it has stretched his average length of life; it has given man the uncontested mastery of the earth; it has multiplied population figures and raised the standard of living to a level never dreamed of by the crude cave dwellers of prehistoric ages.
59Asceticism teaches that the only means open to man for removing pain and for attaining complete quietude, contentment, and happiness is to turn away from earthly concerns and to live without bothering about worldly things. There is no salvation other than to renounce striving after material well-being, to endure submissively the adversities of the earthly pilgrimage and to dedicate oneself exclusively to the preparation for eternal bliss. However, the number of those who consistently and unswervingly comply with the principles of asceticism is so small that it is not easy to instance more than a few names. It seems that the complete passivity advocated by asceticism is contrary to nature. The enticement of life triumphs.
60The pompous statements which people make about things unknowable and beyond the power of the human mind, their cosmologies, world views, religions, mysticisms, metaphysics, and conceptual phantasies differ widely from one another. But the practical essence of their ideologies, i.e., their teachings dealing with the ends to be aimed at in earthly life and with the means for the attainment of these ends, show much uniformity.
61In the field of society’s economic organization there are the liberals advocating private ownership of the means of production, the socialists advocating public ownership of the means of production, and the interventionists advocating a third system which, they contend, is as far from socialism as it is from capitalism. In the clash of these parties there is again much talk about basic philosophical issues. People speak of true liberty, equality, social justice, the rights of the individual, community, solidarity, and humanitarianism. But each party is intent upon proving by ratiocination and by referring to historical experience that only the system it recommends will make the citizens prosperous and satisfied. They tell the people that realization of their program will raise the standard of living to a higher level than realization of any other party’s program. They insist upon the expediency of their plans and upon their utility. It is obvious that they do not differ from one another with regard to ends but only as to means. They all pretend to aim at the highest material welfare for the majority of citizens.
62No religion in its exoteric activities ever ventured to tell people frankly: The realization of our plans for social organization will make you poor and impair your earthly well-being. Those consistently committed to a life of poverty withdrew from the political scene and fled into anchoritic seclusion. But churches and religious communities which have aimed at making converts and at influencing political and social activities of their followers have espoused the principles of secular conduct. In dealing with questions of man’s earthly pilgrimage they hardly differ from any other political party. In canvassing, they emphasize the material advantages which they have in store for their brothers in faith more than bliss in the beyond.
63The immense majority strives after a greater and better supply of food, clothes, homes, and other material amenities. In calling a rise in the masses’ standard of living progress and improvement, economists do not espouse a mean materialism. They simply establish the fact that people are motivated by the urge to improve the material conditions of their existence. They judge policies from the point of view of the aims men want to attain. He who disdains the fall in infant mortality and the gradual disappearance of famines and plagues may cast the first stone upon the materialism of the economists.
64We call a progressing economy an economy in which the per capita quota of capita] invested is increasing. In using this term we do not imply value judgments. We adopt neither the “materialistic” view that such a progression is good nor the “idealistic” view that it is bad or at least irrelevant from a “higher point of view.” Of course, it is a well-known fact that the immense majority of people consider the consequences of progress in this sense as the most desirable state of affairs and yearn for conditions which can be realized only in a progressing economy.
65What is wrong with the producers’ policies is their faulty economics.
66The semantic confusion in the discussion of the problems concerned is due to an inaccurate use of terms on the part of many economists. An economist investigates whether a measure a can bring about the result p for the attainment of which it is recommended, and finds that a does not result in p but in g, an effect which even the supporters of the measure a consider undesirable. If this economist states the outcome of his investigation by saying that a is a bad measure, he does not pronounce a judgment of value. He merely says that from the point of view of those aiming at the goal p, the measure a is inappropriate. In this sense the free trade economists attacked protection. They demonstrated that protection does not, as its champions believe, increase but, on the contrary, decreases the total amount of products, and is therefore bad from the point of view of those who prefer an ampler supply of products to a smaller. It is in this sense that economists criticize policies from the point of view of the ends aimed at. If an economist calls minimum wage rates a bad policy, what he means is that its effects are contrary to the purpose of those who recommend their application.
67It is a question of fact whether or not . . . men in general and our contemporaries especially are driven more by the wish to realize myths and dreams than by the wish to improve their material well-being.
68. . . in the predominantly industrial countries of Europe the protectionists were first eager to declare that the tariff on agricultural products hurts exclusively the interests of the farmers of the predominantly agricultural countries and of the grain dealers.

On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises