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Tuesday, September 29, 2015

Mises in the Digital Age

Happy 134th birthday to Ludwig von Mises!


Every year in Silicon Valley, a truly lovely celebration takes place. It is centered on the birthday of Ludwig von Mises, who was born in 1881 and died in 1973. Despite the dark times for human liberty that defined his life, he fought with indefatigable valor.

For many of the technology giants who gather at this event, Mises remains an inspiration. And so they gather to pay homage to his ideas and his enormous contribution to the intellectual life of his times and ours.

This year, the seventh year in which it has been organized, I was honored to be the chosen speaker. We gathered at the offices of Cypress Semiconductor. T.J. Rogers, CEO of the company and a huge fan of Mises, graciously agreed to be the host (and provide all of the awesome wine made in his own vineyards!).

Most of the people who attended — and there was record attendance — had read something by Mises, and many were truly experts in his work. They were academics, students, technology executives, code slingers, writers, and just general fans of freedom.

My task was to illustrate Mises’s relevance in the digital age. I chose three ideas that were unique to Mises in his time that translate beautifully to the digital age.

The value of ideas

A key claim shared by the socialist and fascist central planners one hundred years ago was a materialist conception of history. To the Marxists, the course of history was determined by large impersonal forces that push history through stages of evolution, independent of the ideas that people hold. The central planners imagined that the sum total of life quality could be captured in tangibles that were arranged according to a central plan.

Mises took another direction in pointing to ideas as the “ultimate data of history.” To him, all human action is a manifestation of the mind. That is true of economic value and action but also of political trends. Bad ideas result in bad policies.

But trends can change depending on the ideas people hold. It is within our grasp to shape the course of events. This is the reason that Mises never gave up hope — despite all the horrors he witnessed and experience in his remarkable life.

Ideas are different from physical goods. They are not predetermined by the environment, class, or interest. They are unpredictably mobile. They are not subject to the constraints of scarcity. They are reproducible unto infinity. They do not depreciate. They are both immutable and effortlessly malleable. They are historically decisive. They require no structure of production.

And they are the most powerful force on earth: “In the long run even the most despotic governments with all their brutality and cruelty are no match for ideas.”

The digital age is distinguished by its exaltation of ideas, instantiated in new innovations and transmitted globally at the speed of light. In the last 20 years, we seen a gravitational shift from material factors of production as the decisive historical narrative to intellectual factors of production as the driving force of economic life. Our times are all about the sharing of ideas, the creation of ideas, and new technological possibilities of realizing those ideas in action.

Individualism

In his first book on politics, Nation, State, and Economy (1919), Mises wrote:

The idea of liberalism starts with the freedom of the individual; it rejects all rule of some persons over others; it knows no master peoples and no subject peoples, just as within the nation itself it distinguishes between no masters and no serfs.

That was a remarkable claim to make at the dawn of the age of the total state. Ideologies that regarded the state as the beginning and end of life itself had swept through the intellectual class. Leaders were emerging in all lands who imagined that having and holding power was the pinnacle of human existence. Large group action was seen as the path forward.

But Mises would have none of it. Only the individual thinks. Only the individual acts. Only the individual creates value. And only the individual can bring about sustainable social and economic progress.

Mises went so far as to celebrate individual choice even in politics, even against the rising nationalism of his day. His principle was that “no people and no part of a people shall be held against its will in a political association that it does not want.” He speculated that perhaps this principle of individual choice would someday become decisive in political organization too.

To be sure, individuals can create nothing on their own. We need cooperation with others. And this cooperation with others forms what we call society, without which we would forever remain in a state of nature. But even within society, the individual is the core decision-making unit. He or she must remain free to act and choose the best means and ends to improve his or her own life.

In the digital age, we are seeing this principle realized with vast communication networks that defy national boundaries and are increasingly an extension of our individual choice.

Not too long ago, our communication networks were centralized. But gradually, they came under individual control. The telegraph, controlled by large governments and financial institutions, gradually became the community phone, the party line, the household phone, and finally what people could only dream about a decade ago: the powerful personal computer in our pockets that allow peer-to-peer communication (in thousands of forms) to take place at very low cost.

Entrepreneurship

If there was one feature of the prevailing economic models of Mises’s time to which he objected most strenuously it was their failure to grapple with entrepreneurship as the driving force of economic progress.

Entrepreneurs begin with ideas. They face an uncertain future. They apply real resources in risky environments in order to realize a dream. Their ideas are tested by the market, and success results in profits. Those profits are an indication of the presence of social progress: finding the best possible use of scarce resources to serve humanity in the best possible way.

How can you capture entrepreneurship in a model? How can you account for it in an empirical prediction? How can you make it part of a central plan imposed upon society?

None of this is possible. To innovate and test new ideas requires freedom, private property, a leap into an uncertain future, and the profit and loss test, all of which is made possible through the market economy. States can’t do it. Intellectuals with tenure can’t do it. Committees can’t do it. Entrepreneurship requires individual minds acting within a market economy.

We look around the world today and see amazing progress at every level and nearly every country. It came not because of new funding for government projects or new legislative committees. It came because of a generation that was inspired to dream of new possibilities and to test their ideas against reality.

To return to earlier themes, the driving force of the market is not material; it is a product of the individual human mind. “The tools and machines may be called material,” wrote Mises, “but the operation of the mind which created them is certainly spiritual.”

When you drive around Silicon Valley, you see the offices of companies that are remaking the world. Uber, Google, Twitter, PayPal, Microsoft, Cisco, Cypress, Apple, Samsung, Facebook — these are just the most conspicuous, but there are thousands of others creating new ways of doing, thinking, and living. They work in service of the masses of people who desire a better life. And they do it all despite the incredible risks and massive barriers that governments have put in the way.

Not one of the invaluable technologies we use today was greeted with cheers. Most were put down by the experts. After the dotcom crash of 2000, it was fashionable to disparage the commercial viability of the entire tech sector. But the entrepreneurs pressed forward and remade the world despite every prediction that they wouldn’t be able to do it. And right now, every government, every privileged monopoly, around the world faces enormous pressure from encroaching technology that offers a better way.

I’m proud to be working in digital development for the Foundation for Economic Education, which served as Mises’s home after his immigration to the United States. It was because of FEE that his great work Human Action was published at all. FEE bought the first printing. Throughout the 1950s and 1960s, FEE hosted a seminar where Mises taught. And FEE was the organizational center of the benefactors who made it possible for Mises to teach and write all those years.

How many ways can we say that Mises was right? The rise of the digital age, and the many ways in which it has newly liberated humanity, is the best illustration that he was more right than anyone could have predicted.

If you are new to Mises, consider his mighty essays “Liberty and Property” and “Planned Chaos.” Here is another tribute I wrote to Mises. Here is Robert Murphy’s birthday essay last year. And here are other FEE.org resources by or about Mises.