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Lift your lamp beside the golden door, Break not the golden rule, avoid well the golden calf, know; not all that glitters is gold, and laissez faire et laissez passer [let do and let pass] but as a shining sentinel, hesitate not to ring the bell, defend the gates, and man the wall

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Wednesday, January 27, 2010

Ludwig von Mises

Ludwig von Mises
Mises.org In The Tradition Of The 'Austrian School' of Economics

Mises has been criticized for sympathizing with fascist movements. In 1927, in his book "Liberalism", Mises wrote: "It cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history.." Mises himself was not a fascist, and he did not think that fascism provided a long term solution. But it is unarguable that he considered fascism's militant stand against Communism to be necessary. This 'anti-democratic' stance was inherited by other Austrian economists, most notably Hans Herman-Hoppe, author of “Democracy: The God That Failed”.  

Milton Friedman considered Mises intolerant in his method and in personal behavior: "The story I remember best happened at the initial Mont Pelerin meeting when he got up and said, 'You're all a bunch of socialists.' We were discussing the distribution of income, and whether you should have progressive income taxes. Some of the people there were expressing the view that there could be a justification for it."
Another occasion which is equally telling: Fritz Machlup was a student of Mises's, one of his most faithful disciples. At one of the Mont Pelerin meetings, Fritz gave a talk in which I think he questioned the idea of a gold standard; he came out in favor of floating exchange rates. Mises was so mad he wouldn't speak to him for three years. Some people had to come around and bring them together again. It's hard to understand; you can get some understanding of it by taking into account how people like Mises were persecuted in their lives.

In a 1957 review of his book, The Anti-Capitalistic Mentality, The Economist said of von Mises: "Professor von Mises has a splendid analytical mind and an admirable passion for liberty; but as a student of human nature he is worse than null and as a debater he is of Hyde Park standard."

In a 1978 interview Friedrich Hayek said about his book Socialism: "At first we all felt he was frightfully exaggerating and even offensive in tone. You see, he hurt all our deepest feelings, but gradually he won us around, although for a long time I had to -- I just learned he was usually right in his conclusions, but I was not completely satisfied with his argument."

Mises wrote and lectured extensively on behalf of classical liberalism and is seen as one of the leaders of the Austrian School of economics. In his treatise on economics, Human Action, Mises introduced praxeology as a more general conceptual foundation of the social sciences and established that economic laws were only arrived at through the means of methodological individualism firmly rejecting positivism and materialism as a foundation for the social sciences. Many of his works, including Human Action, were on two related economic themes:

1. monetary economics and inflation;
2. the differences between government controlled economies and free trade.

Mises argued that money is demanded for its usefulness in purchasing other goods, rather than for its own sake and that any unsound credit expansion causes business cycles. His other notable contribution was his argument that socialism must fail economically because of the economic calculation problem – the impossibility of a socialist government being able to make the economic calculations required to organize a complex economy.  

Mises projected that without a market economy there would be no functional price system, which he held essential for achieving rational and efficient allocation of capital goods to their most productive uses. Socialism would fail as demand cannot be known without prices, according to Mises. 

Mises' criticism of socialist paths of economic development is well-known, such as in his 1922 work Socialism: An Economic and Sociological Analysis: "The only certain fact about Russian affairs under the Soviet regime with regard to which all people agree is: that the standard of living of the Russian masses is much lower than that of the masses in the country which is universally considered as the paragon of capitalism, the United States of America. If we were to regard the Soviet regime as an experiment, we would have to say that the experiment has clearly demonstrated the superiority of capitalism and the inferiority of socialism." These arguments were elaborated on by subsequent Austrian economists such as Nobel laureate Friedrich Hayek and students such as Hans Sennholz.

In Interventionism, An Economic Analysis (1940), Ludwig von Mises wrote: "The usual terminology of political language is stupid. What is 'left' and what is 'right'? Why should Hitler be 'right' and Stalin, his temporary friend, be 'left'? Who is 'reactionary' and who is 'progressive'? Reaction against an unwise policy is not to be condemned. And progress towards chaos is not to be commended. Nothing should find acceptance just because it is new, radical, and fashionable. 'Orthodoxy' is not an evil if the doctrine on which the 'orthodox' stand is sound. Who is anti-labor, those who want to lower labor to the Russian level, or those who want for labor the capitalistic standard of the United States? Who is 'nationalist,' those who want to bring their nation under the heel of the Nazis, or those who want to preserve its independence?"  

Robert Heilbroner opined after the fall of the Soviet Union, that "It turns out, of course, that Mises was right" about the impossibility of socialism. "Capitalism has been as unmistakable a success as socialism has been a failure. Here is the part that's hard to swallow. It has been the Friedmans, Hayeks, and von Miseses who have maintained that capitalism would flourish and that socialism would develop incurable ailments."
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