HAVING DEVELOPED IN THE PREVIOUS chapters our basic analysis of the market economy, we now proceed to discuss more dynamic and specific applications, as well as the consequences of intervention in the market.
Having considered the ERE and its relation to specific entrepreneurial profit and loss, let us now turn to the problem: When will there be aggregate profits or losses in the economy? This is connected with the question: What is the effect of a change in the level of aggregate saving or investment in the economy?
As is customary with biographies, Professor R. F. Harrod's The Life of John Maynard Keynes (Harcourt, Brace, 195 1) provides an abundance of information about insignificant happenings and uninteresting people who crossed the path of his subject. The whole of page 171, for instance, is devoted to the description of a lady who happened to be the niece of an authentic duke. We are told how she dressed, how and where she lived, what her eccentricities were and many other things.
Names are unimportant; what matters is substance. The term “social liberalism” sounds strange indeed as socialism and liberalism are mutually exclusive. But we are accustomed to such terminology. Also, socialism and democracy are irreconcilable in the final analysis, and yet there is the old concept of “Social Democracy,” which is a contradictio in adjecto.
To prescientific thinkers, a human society built on private property in the means of production seemed to be naturally chaotic. It received its order, so they thought, only from imposed precepts of morality and law. Society can exist only if buyer and seller observe justice and fairness. Government must intervene in order to avoid the evil that flows from an arbitrary deviation from the “just price.” This opinion prevailed in all remarks on social life until the eighteenth century.
The epistemologist who starts his lucubrations from the analysis of the methods of the natural sciences and whom blinders prevent from perceiving anything beyond this field tells us merely that the natural sciences are the natural sciences and that what is not natural science is not natural science. About the sciences of human action he does not know anything, and therefore all that he utters about them is of no consequence.
No sensible proposition concerning human action can be asserted without reference to what the acting individuals are aiming at and what they consider as success or failure, as profit or loss. If we study the actions of the individuals, we learn everything that can be learned about acting, as there are, as far as we can see, in the universe no other entities or beings that, dissatisfied with the state of affairs that would prevail in the absence of their interference, are intent upon improving conditions by action.
The losses that the national economy suffers from war, apart from the disadvantages that exclusion from world trade entails, consist of the destruction of goods by military actions, of the consumption of war material of all kinds, and of the loss of productive labor that the persons drawn into military service would have rendered in their civilian activities.
One of the manifestations of the present-day “revolt against reason” is the tendency to find fault with the social sciences for being purely rational. Life and reality, say the critics, are irrational; it is quite wrong to deal with them as if they were rational and open to interpretation by reasoning.
Save the Date! October 1, 2016 | Mises Circle in Boston, Massachusetts The Mises Bookstore will be on site, and speakers are happy to autograph books. Student Scholarship Applications Students wishing to apply for a scholarship for...
Join Lew Rockwell, Tom Woods, Bob Murphy, and Jeff Deist at Town Hall Seattle for the Seattle Mises Circle! Students see scholarship application process at bottom of page. Special thanks to the Harvey Allison Family for making this event...
May 9, 2015Jonathan NewmanWhat if the government ran hair salons and the private sector provided auto registrations? Needless to say, getting a haircut would be a harrowing and soul-crushing experience. Meanwhile, registering your automobile would be another matter entirely.