The Last Knight of Liberalism

Chapter 21. The Epistemological Case for Capitalism

1 He had said this in a July 1956 meeting with Lachmann. See Lachmann to Mises, letter dated September 17, 1956; Grove City Archive: Lachmann file.

2 Mises, Human Action, 3rd ed. (Chicago: Regnery, 1966), p. 4.

3 Ibid., p. 6.

4 Ibid.

5 Mises, Theory and History: An Interpretation of Social and Economic Evolution (New Haven, Conn.: Yale University Press, 1957).

6 Mises, Human Action, p. 145. See also ibid., pp. 145–47.

7 Mises, Theory and History, pp. 73–74. He emphasizes that from the point of view of a perfect being such as God, things might look completely different. This position can best be characterized as a Leibnizian rationalism. On the importance of Leibnizian rationalism for Austrian intellectual life, see William M. Johnston, The Austrian Mind (Los Angeles: University of California Press, 1972), chap. 19. Johnston is however not convinced that the Austrian School of economics was influenced by the Leibnizian tradition. See ibid, pp. 86f.

8 Thirteen years before, he had written:

We may reasonably assume as hypothesis that man’s mental abilities are the outcome of his bodily features. Of course, we cannot demonstrate the correctness of this hypothesis, but neither is it possible to demonstrate the correctness of the opposite view as expressed in the theological hypothesis. We are forced to recognize that we do not know how out of physiological processes thoughts result. We have some vague notions of the detrimental effects produced by traumatic or other damage inflicted on certain bodily organs; we know that such damage may restrict or completely destroy the mental abilities and functions of men. But that is all. (Omnipotent Government [Spring Mills, Penn.: Libertarian Press, 1985], p. 156)

9 This point also applied to F.A. Hayek’s The Sensory Order (Chicago: University of Chicago Press, 1952), a book that Mises did not cite. Hayek had attempted to analyze the mechanism through which physiological impulses come to be translated into mental perception. Apparently, Mises was not convinced that Hayek delivered more than metaphysical speculation.

10 Individual value judgments and actions

are ultimately given as they cannot be traced back to something of which they would appear to be the necessary consequence. If this were not the case, it would not be permissible to call them an ultimate given. But they are not, like the ultimate given in the natural sciences, a stopping point for human reflection. They are the starting point of a specific mode of reflection, of the specific understanding of the historical sciences of human action. (Mises, Theory and History, p. 310; emphasis added)

11 Mises, Theory and History, p. 183.

12 Ibid., p. 1.

13 Mises, Theory and History:

Thymology has no special relation to praxeology and economics. The popular belief that modern subjective economics, the marginal utility school, is founded on or closely connected with “psychology” is mistaken.... [P]raxeology is not concerned with the events which within a man’s soul or mind or brain produce a definite decision between an A and a B. It takes it for granted that the nature of the universe enjoins upon man choosing between incompatible ends. Its subject is not the content of these acts of choosing but what results from them: action. It does not care about what a man chooses but about the fact that he chooses and acts in compliance with a choice made. (p. 271; emphasis added)

     The thymological analysis of man is essential in the study of history. It conveys all we can know about ultimate ends and judgments of value. But as has been pointed out above, it is of no avail for praxeology and of little use in dealing with the means applied to attain ends sought. (p. 280)

14 Ibid., p. 9.

15 Mises, The Ultimate Foundation of Economic Science (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, [1962] 2002), p. 117.

16 Mises, Theory and History, p. 9.

17 Ibid., p. 12. Notice that Mises admitted the existence of errors in regard to one’s value judgments (ibid., p. 174). He also took it for granted that one could enjoy art (ibid., p. 63). The point was, again, that each individual is his own judge.

18 Ibid., p. 54.

19 Ibid., pp. 59f.

20 Ibid., pp. 60–61.

21 Ibid., p. 61.

22 Mises, The Ultimate Foundation of Economic Science, p. 123.

23 Ibid., p. 3.

24 Mises, The Anti-Capitalistic Mentality (Princeton, N.J.: Van Nostrand, 1956), chap. 2, sect. 1.

25 Mises, Theory and History, pp. 65–66.

26 Mises, ibid., pp. 224–25. He continued: “The essence of civilization is ideas. If we try to distinguish different civilizations, the differentia specifica can be found only in the different meanings of the ideas that determined them” (ibid.) See also ibid., pp. 261f. and Mises, The Ultimate Foundation of Economic Science, pp. 92f.

27 Mises, Theory and History, pp. 186–88.

28 Mises’s stress on the particularities of the genius is a pervasive feature of his thought, running from Gemeinwirtschaft (Jena: Gustav Fischer, 1922) via Human Action (1949) to Theory and History (1957) and Ultimate Foundation of Economic Science (1962). It is not known where his inspiration came from, but it cannot be excluded that he took it for granted that educated people would know the theoretician who had insisted on the categorical difference between “mere” talent (be it ever so great) and true genius. Weininger wrote at the beginning of the century:

Someone may have a talent, for example, the mathematical talent, by birth and to an extraordinary degree; he will then be able to digest the most difficult chapters of this science with but small effort; but it does not follow that, for this reason, he has any genius, which is the same thing as originality, individuality, and condition of his own productivity. Conversely, there are great geniuses who have not developed any special talent to a high degree. Just think of Novalis or Jean Paul.... Talent is hereditary, it may be the common good of a family (the Bachs); genius is not transferable, it is never general, but always individual (Johann Sebastian). (Otto Weininger, Geschlecht und Charakter, 19th ed. , part 2, chap. 4, p. 126)

29 Mises, Theory and History, p. 270. He added:

The second shortcoming of rationalism was its neglect of the problem of erroneous thinking. Most of the rationalist philosophers failed to see that even honest men, sincerely devoted to the search for truth, could err. This prepossession prevented them from doing justice to the ideologies and the metaphysical doctrines of the past. A doctrine of which they disapproved could in their opinion have been prompted only by purposeful deceit. Many of them dismissed all religions as the product of the intentional fraud of wicked impostors.

30 Schumpeter had discussed the shortcomings of the classical doctrine of democracy along very similar lines. See Joseph A. Schumpeter, Capitalism, Socialism, and Democracy (New York: Harper & Sons, 1942), chap. 21. Both Schumpeter and Mises would highlight the crucial role of leadership in the operation of the market and in politics. In distinct contrast to Schumpeter, however, Mises stressed intellectual leadership. He also insisted that leadership could be good or bad; it could promote the preservation and flourishing of society, but it could also hurt and destroy it.

31 Mises, Theory and History, p. 66.

32 Mises, The Ultimate Foundation of Economic Science, p. 95.

33 Mises, Theory and History, pp. 66f.

34 Mises, Anti-Capitalistic Mentality, chap. 4, sect. 2.

35 Mises, The Ultimate Foundation of Economic Science, p. 113.

36 Ibid., p. 114.

37 Mises, Theory and History, p. 288.

38 Mises to Nymeyer, letter dated June 19, 1953; Grove City Archive: Nymeyer files.

39 Mises, Human Action, p. 50:

The scope of understanding is the mental grasp of phenomena which cannot be totally elucidated by logic, mathematics, praxeology, and the natural sciences to the extent that they cannot be cleared up by all these other sciences. It must never contradict the teachings of these other branches of knowledge.

40 Ibid., pp. 57–58. In Theory and History, speaking of the same problem:

The precariousness of forecasting is mainly due to the intricacy of this... problem. It is not only a rather puzzling question in forecasting future events. It is no less puzzling in retrospect for the historian. (p. 314)

See also The Ultimate Foundation of Economic Science, pp. 67, 103.

41 Mises, Theory and History, pp. 287–88.

42 Ibid., p. 289.

43 Ibid., p. 290.

44 Ibid., p. 290.

45 Ibid., pp. 264–65.

46 Ibid., p. 266.

47 Ibid., p. 320.

48 Ibid., p. 311.

49 Ibid., p. 272. On thymology being an empirical rather than an a priori discipline, see also ibid., p. 311. He later gave a more operational description of the intellectual process involved:

Out of what we know about a man’s past behavior, we construct a scheme about what we call his character. We assume that this character will not change if no special reasons interfere, and, going a step farther, we even try to foretell how definite changes in conditions will affect his reactions. (Mises, The Ultimate Foundation of Economic Science, pp. 50f.)

50 Claude Lévi-Strauss, Race et Histoire (Paris: UNESCO, 1952).

51 Mises, Theory and History, pp. 335–37. He remarked:

A prediction about the future behavior of those races which today are considered culturally backward could only be made by biological science. If biology were to discover some anatomical characteristics of the members of the non-Caucasian races which necessarily curb their mental faculties, one could venture such a prediction. But so far biology has not discovered any such characteristics.

52 Mises, Anti-Capitalistic Mentality, chap. 2, sect. 2. He had alluded to the fundamental role of envy in Socialism (Indianapolis: Liberty Fund, 1981, p. 384) quoting Mandeville, Hume, and Schatz. In October 1952, he had recommended Helmut Schoeck’s proposed study on envy to the Volker Fund. Schoeck’s application was successful, and he reported to Mises on the progress of his studies; see Grove City Archive: Schoeck file.

53 Nymeyer to Johnson, letters dated October 31, 1956 and January 10, 1957; Grove City Archive: Nymeyer files.

54 Mises to M.E. Constantacatos, letter dated May 16, 1957; Grove City Archive: Constantacatos files.

55 Mises to Trygve Hoff, letter dated June 11, 1957; Grove City Archive: Hoff files. Mises had told Hoff that he never replied to criticism.

56 Mises, Gemeinwirtschaft, p. 421; my translation.

57 Mises, Human Action, p. 156.

58 Mises, Theory and History, p. 343.

59 Ibid., p. 45. This was probably under the impact of reading Raymond de Roover and Schumpeter, possibly also Marjorie Grice-Hutchinson, on the sixteenth- and seventeenth-century School of Salamanca.

60 Ibid., p. 343.

61 Mises, The Ultimate Foundation of Economic Science, pp. 106f. In Theory and History, he had not yet been convinced that the antagonism between reason and faith could be overcome within Christian theology.

We may leave aside the genuine dogmas such as Creation, Incarnation, the Trinity, as they have no direct bearing on the problems of interhuman relations. But many issues remain with regard to which most, if not all, Christian churches and denominations are not prepared to yield to secular reasoning and an evaluation from the point of view of social utility. Thus the recognition of natural law on the part of Christian theology was only conditional. It referred to a definite type of natural law, not opposed to the teachings of Christ as each of these churches and denominations interpreted them. It did not acknowledge the supremacy of reason. It was incompatible with the principles of utilitarian philosophy. (Ibid., pp. 46f.)

62 Barth is mentioned in Anti-Capitalistic Mentality, chap. 2, sect. 2.; but not in Human Action, p. 671, n. 8.

63 Karl Barth, Der Römerbrief (Munich: Kaiser, 1922).

64 Mises, The Ultimate Foundation of Economic Science, p. 38.

65 Mises, Theory and History, pp. 344–45.