All Commentary
Thursday, May 1, 1997

Wisdom of a Liberal Giant

Mises and His Magnum Opus Await Rediscovery

Dr. Peterson, Heritage Foundation adjunct scholar, is Distinguished Lundy Professor Emeritus of Business Philosophy at Campbell University, Buies Creek, North Carolina.

He knew Milton Friedman, Henry Hazlitt, William F. Buckley Jr., Ayn Rand. He was the mentor of F. A. Hayek, who went on to win the Nobel Prize in economics. He was a key teacher of Gottfried Haberler of Harvard and Fritz Machlup of Princeton, each of whom went on to become president of the American Economic Association. That association appointed him distinguished fellow. His name adorns a think-tank at Auburn University, a professorial chair at Hillsdale College in Michigan, a library building at Francisco Marroquin University in Guatemala.

In 1920 he foresaw the end of the Soviet Union for its lack of market calculation. A prominent Polish socialist economist, Oskar Lange, conceding the lack but holding it could still be met, proposed a statue in his honor.

In 1949 he set forth a monumental book on philosophy, economics, and politics, Human Action, now out in a fourth revised edition prepared by Bettina Bien Greaves (The Foundation for Economic Education, Irvington-on-Hudson, N.Y., 928 pages, $49.95). Other editions have been published in German, French, Italian, Spanish, Portuguese, Chinese, and Japanese.

Yet he has been largely ignored by professional economists who feel he is too literary, too nonquantitative, too down on macroeconomics, too opposed to social engineering by the state. First-edition reviews were mixed. Vermont Royster praised the book in the Wall Street Journal, John Kenneth Galbraith panned it in the New York Times. Yet The Economist, while wary of the work’s libertarian implications, still said: Intellectual power roars through it like a great wind; it has the impetus of a first-rate polemic and the impeccable coherence of Euclid.

He is Ludwig von Mises (1881-1973), the modern leader of Austrian free-market economics.

The Nazis had three strikes against him: he was a Jew; he was anti-socialist and championed the free market; and he refused to compromise. In 1938 the Nazis confiscated the contents of his apartment in Vienna. (His personal papers were in turn seized by the Soviets and preserved in Moscow. These newly discovered treasures should soon be available to the world.)

Soon after the fall of Paris in June 1940, he and his wife, Margit, bravely fled from Switzerland through occupied France to America.

Human Action says it all. It is a paean to freedom and free enterprise, a classic on voluntarism and laissez faire. In it Mises employs an odd word, praxeology, as the science of human action or choice. He says the drive behind choice is ineptly described as the profit motive even though the end of any action is always satisfaction of some desire of man—ever choosing, acting, rejecting.

Choosing determines all human decisions. In making his choice man chooses not only between various material things and services. All human values are offered for option. All ends and all means, both material and ideal issues, the sublime and the base, the noble and the ignoble, are ranged in a single row and subjected to a decision which picks out one thing and sets aside another (p. 3).

Choosing reflects man’s free will, ongoing reasoning, subjective evaluation: a process of continual removal of felt uneasiness. The process evidences the fact that man thinks, that thought distinguishes him from the lower animals.

Man is a being capable of subduing his instincts, emotions, and impulses; he can rationalize his behavior. He renounces the satisfaction of a burning impulse in order to satisfy other desires. He is not a puppet of his appetites. A man does not ravish every female that stirs his senses; he does not devour every piece of food that entices him; he does not knock down every fellow he would like to kill. He arranges his wishes and desires into a scale, he chooses; in short, he acts (pp. 16-17).

What also distinguishes man is his very social being. He engages in extensive human interaction, including unforced exchanges of goods and services. Society, says Mises, is social cooperation, concerted action, division of labor, and combination of labor. Even so, he rejects a line by the politically correct who see society as a thinking entity and say society believes this, or society thinks that.

It is always the individual who thinks. Society does not think any more than it eats or drinks. The evolution of human reasoning from the nave thinking of primitive man to the more subtle thinking of modern science took place within society. However, thinking itself is always an achievement of individuals. There is joint action, but no joint thinking (p. 177).

The politically correct also confuse society for the state and use the two terms interchangeably. Too, oblivious to what Hayek called the fatal conceit, they confuse the role of government in society and endow it with omnipotence and benevolence, see it as a somehow wise and compassionate Santa Claus. Mises does not share the confusion. He condemns the modern revival of collectivism as the main cause of all the agonies and disasters of our day. He asks the politically correct to rethink the nature of man, state, and society in light of Adam Smith’s invisible hand of self-interest under the rule of law as the high road to social order and civil society.

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. (p. 149)

The Mises viewpoint is similar to that of Thomas Paine, who called government a necessary evil. But while Mises also regards government as necessary, he does not regard it as necessarily evil.

Government . . . is by necessity the opposite of liberty. Government is a guarantor of liberty and is compatible with liberty only if its range is adequately restricted to the preservation of what is called economic freedom. Where there is no market economy, the best-intentioned provisions of constitutions and laws remain a dead letter (p. 285).

Socialism may be a dead letter today across the world but not its vigorous half-brothers—welfarism and interventionism—both of which similarly lack the corrective action of market calculation. Interventionism tallied a home run when Congress recently raised the minimum wage by 90 cents an hour, a bit unmindful of its hit on entry-level employability. So Mises cues you on state boomerangs, to explain why government help is an oxymoron.

All varieties of [government] interference with the market phenomena not only fail to achieve the ends aimed at by their authors and supporters, but bring about a state of affairs which—from the point of view of their authors’ and advocates’ valuations—is less desirable than the previous state of affairs which they were designed to alter (p. 858).

So the irony of today’s play on democracy is that—via protectionism, welfare, intervention, hyper-regulation, egalitarianism, and so on—the state ignores or overrules individual rights, the market rule of majority and minority rights, and thus reaps a whirlwind.

Egalitarianism plays on group rights to compensate for past inequities, to promote equality of outcomes. Mises disagrees. He espouses equal individual rights but sees natural inequality in terms of intelligence, drive, integrity, beauty, talent, and other attributes. (His use of the word liberal in the following is in the nineteenth-century sense of the word.)

The liberal champions of equality under the law were fully aware of the fact that men are born unequal and that it is precisely their inequality that generates social cooperation and civilization. Equality under the law was in their opinion not designed to correct the inexorable facts of the universe and to make natural inequality disappear. It was, on the contrary, the device to secure for the whole of mankind the maximum of benefits it can derive from it. . . . It leaves it to the voters to decide who should hold public office and to the consumers to decide who should direct production activities (pp. 841-842).

Note that Mises holds that consumers are sovereign—the real bosses in the democratic marketplace. Here every day is Election Day, every candidate runs scared, and every consumer, young and old, daily has an economic vote. Indeed, every consumer has quite a few such votes.

The consumers patronize those shops in which they can buy what they want at the cheapest price. Their buying and their abstention from buying decides who should own and run the plants and the farms. They make poor people rich and rich people poor. They determine precisely what should be produced, in what quality, and in what quantities. They are merciless bosses, full of whims and fancies, changeable and unpredictable. For them nothing counts other than their own satisfaction. They do not care a whit for past merit and vested interests (p. 270).

Such reasoning clashes with the modern liberal battlecry of entrenched wealth, with the Hobbesian argument of war of all against all—of, for example, the rich against the poor. If anything, it’s practically the other way around. Mises says the wealthy are at the mercy of consumers, even poor consumers. Wealth, once invested, becomes a social liability.

Ownership of the means of production is not a privilege, but a social liability. Capitalists and landowners are compelled to employ their property for the best possible satisfaction of the consumers. If they are slow and inept in the performance of their duties, they are penalized by losses. If they do not learn the lesson and do not reform their conduct of affairs, they lose their wealth. No investment is safe forever (pp. 311-312).

Well, if consumers are so powerful, why the Welfare State, why the Nanny State, why so many governmental agencies designed to protect the hapless shopper? And, with government taking 47 percent of the national income, with entitlements alone running at $1.1 trillion a year—and growing fast—why the persistence of planning in a thousand beguiling guises?

The alternative is not plan or no plan. The question is whose planning? Should each member of society plan for himself, or should a benevolent government alone plan for them all? The issue is not automatism versus conscious action; it is autonomous action of each individual versus the exclusive action of the government. It is freedom versus government omnipotence (p. 731).

But surely the government should intervene against any type of excessive or dangerous consumption such as cigarettes. Recall America’s backfiring Noble Experiment, its violent episode of Prohibition (1920-1933).

Opium and morphine are certainly dangerous, habit-forming drugs. But once the principle is admitted that it is the duty of government to protect the individual against his own foolishness, no serious objections can be advanced against further encroachments. . . . Is not the harm a man can inflict on his mind and soul even more disastrous than any bodily evils? Why not prevent him from reading bad books and seeing bad plays, from looking at bad paintings and statues and from hearing bad music? The mischief done by bad ideologies, surely, is much more pernicious, both for the individual and for the whole society, than that done by narcotic drugs (pp. 733-734).

For many, Mises, who proved so right on socialism, remains too unappreciated. He and his magnum opus, Human Action, await discovery or rediscovery as the New Deal and the Great Society live on, as many wonder anew if the era of big government is really over, as social insurance and social justice—indeed all manner of subtle and unsubtle state interventions—continue to mushroom and self-destruct.

The market economy needs no apologists and propagandists. It can apply to itself the words of [architect] Sir Christopher Wren’s epitaph in St. Paul’s [Cathedral in London]: Si monumentum requiris, circumspice. [If you seek his monument, look around] (p. 854).

  • William H. Peterson (1921-2012) was an economist, businessman and author who wrote extensively on Austrian Economics. He completed his PhD at New York University in 1952 under the supervision of Ludwig von Mises.