Admirers of Ludwig von Mises will welcome this new collection of forty-six
articles and essays, most from the 1950s and 1960s, many rescued from obscure
publication, and some recently translated into English. The titles of the
book's subsections, "Economic Freedom," "Interventionism," "Mises as Critic,"
and "Economics and Ideas," remind us that Mises dealt with the big issues.
Except in the final section, the individual selections are short and pithy;
but throughout the book and with variation in context and level of abstraction,
Mises makes the strongest and most fundamental case in favor of a market
economy and against socialism and interventionism.
Characteristically, Mises
has no patience with those who seemingly feign ignorance of economics in
order to bolster their case for central control or those who flaunt their
ignorance in some misdirected criticism of the business community. He condemns
these detractors roundly and brands them as hypocrites, idle babblers,
and ignoramuses. But Mises has near-infinite patience with the layperson
who is eager to understand economic principles. He argues both explicitly
(e.g. pp. 157 and 179) and by example that writing for the layperson is
an important task that economists must undertake. Unlike experts in the
natural sciences, who can apply their knowledge without soliciting the
understanding and sympathy of the general citizenry, experts in the field
of economics must educate the public. We can have market solutions to economic
problems only if the participants in our political process can see through
the fallacies of socialism and interventionism and accept the outcome of
the market process.
Economists must also be
able to converse with one another over the full range of economic issues.
Mises emphasizes the interconnectedness of economic phenomenon when he
writes that "Economics does not allow any breaking up into special branches"
(p. 55). Here, the modern reader can take Mises's "does not" for an "ought
not." The actual breaking up of economics into separate fields and subfields
together with the insular nature of these highly specialized areas of concentration
demonstrates, by its mocking contrast, the essential unity of economics.
Several of Mises's essays
are linked substantively by recurring themes: The market does not favor
big business or even business in general; it favors consumers. By their
choices in the marketplace, consumers decide whether a business can get
big, stay big, or stay in business at all. Consumers are sovereign in a
market economy: their spending determines what it produces; their saving
determines how fast it grows. The choices of consumers also determine indirectly
the wage rates of workers. Interventionists who would override the market
process that ties labor income to consumer spending and grant workers a
larger share of business revenues on the basis of their proclaimed productivity
misconceive the relationship between capital and labor. They fail to recognize
that changes in labor productivity are attributable not to labor itself
but to the capital that gives labor its leverage. To divert income away
from capital and towards labor would be to discourage capital accumulation
and hence to halt the increases in labor productivity that supposedly justified
the income diversion. Mises identifies institutions that preserve ownership
rights and maintain a sound monetary system as the essential prerequisites
for encouraging saving, which finances capital accumulation, which makes
labor productive, which maintains high living standards for the Western
nations and distinguishes them from the underdeveloped nations.
The ultimate choice faced
by the social scientist as citizen--and by the general citizenry--is the
choice between a market system and a socialist system. Mises argues in
terms of this either-or choice with great rhetorical effect using both
overstatement and understatement. He argues (p. 55) that there can exist
no middle way in the form of interventionism. The political dynamics of
any such mixed economy result in either (i) interventionist policies pursued
to the extreme of socialism or (ii) the wholesale abandonment of interventionism
in favor of the market system. In discussing a particular interventionist
policy, farm subsidies enacted for the benefit of the independent farmer,
Mises remarks in mid-paragraph (p. 209) that "One cannot subsidize a man
to render him independent."
Though writing decades ago,
Mises incorporates into his arguments many economic theories that have
emerged full-blown only in recent years. He anticipates the kernel of truth
in so-called Rational Expectations Theory by criticizing Keynes for his
implicit belief that inflation can deceive the public persistently and
systematically (p. 72); he anticipates a key aspect of Supply-side Economics
and its Laffer Curve in noting that governments resort to inflation when
tax rates have been pushed beyond the point of maximum returns (p. 103).
The reader will encounter several such passages which establish Mises's
ideas as precursors of now-fashionable insights.
If there is a weakness that
characterizes this collection of essays, it is Mises's tendency to underestimate
the enduring appeal of the ideas he criticizes. For instance, he writes
(p. 140) that "As an economic doctrine, Keynesianism is now [1964] dead"
and (pp. 120-21) that with the posthumous publication of the third volume
of Marx's Das Kapital [1894], the "essential dogma of the Marxian
philosophy, the class conflict doctrine..., was unmasked as a flop." But
even now, as much as then, Keynesian doctrine is still alive, and Marxist
doctrine still masquerades as high theory. In fact, these two doctrines
(Keynesian demand failures and Marxist class conflict) plus the equally
fallacious Ricardian production theory have all been combined to produce
the present-day Post Keynesianism.
Today, as always, the general
citizenry needs to understand economic principles and to recognize economic
fallacies. The "champions of freedom," Mises reminds us, can win out only
through economic education. Students of Misesian economics will recognize
Mises as the champion of champions and will be grateful to Bettina Bien
Greaves and the Foundation for Economic Education for giving these essays
and articles a new life.