Ludwig von Mises

Von Mises, pictured rolling around in his money bin.

The dismal science Economics

Economic systems

$  Free market   €  Social democracy   ☭ Socialist economy

Major concepts

Das Kapital Roaring Twenties Labor theory of value Hans-Hermann Hoppe Tether

The worldly philosophers

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Ludwig von Mises (1881–1973) is the patron saint of the Austrian school of economics, although not the actual founder of the school (that would be Carl Menger). He is revered as one of the chief gods of libertarianism for developing the Austrian method of praxeology, which he described as a 'general theory of human action.' Mises has had an immense amount of influence on libertarian thought and was greatly admired by the likes of F.A. Hayek, Milton Friedman, Ayn Rand, and Murray Rothbard.

His brother Richard von Mises was a real scientist and doing actually philosophically important work in developing an early definition for randomness. Obviously, they didn't get along.

Human Action

Mises' greatest work is generally considered (among his followers, at least) to be the gargantuan doorstopper called Human Action, which fully codifies the method of praxeology. Unfortunately for Mises, it was pseudoscientific upon arrival in 1949 and is even more pseudoscientific in light of current knowledge.

First, Mises completely rejects reality positivism and the scientific method in the social sciences and humanities:

“”Praxeology is a theoretical and systematic, not a historical, science. Its scope is human action as such, irrespective of all environmental, accidental, and individual circumstances of the concrete acts. Its cognition is purely formal and general without reference to the material content and the particular features of the actual case. It aims at knowledge valid for all instances in which the conditions exactly correspond to those implied in its assumptions and inferences. Its statements and propositions are not derived from experience. They are, like those of logic and mathematics, a priori. They are not subject to verification or falsification on the ground of experience and facts. They are both logically and temporally antecedent to any comprehension of historical facts.

He then proceeds to derive his immutable "laws" of economics from a single axiom, the "action axiom." Mises doesn't formulate it as simply as his followers like Rothbard, who usually state it simply as "humans act" or "Individual humans act with a purpose"; this is the essence of the axiom. Mises, however, distinguishes what he calls "action" from instinctual behavior. Action is defined as behavior that is done with some intention in mind, i.e. a goal-oriented one. While he admits the possibility of materialistic explanations, he argues that the assumptions of dualism and free will are necessary for a "science" of human action. Of course, besides the problem of deriving an entire system of faith-based economics from a single axiom, Mises runs into the problem of making a clear-cut distinction between "action" and "instinct" that doesn't exist in psychology and the cognitive sciences (indeed, he dismisses the whole of psychology, anthropology, etc. as merely "historical" and thus unable to make any predictions). Mises also claims this tautological axiom is irrefutable, and thus a rock-solid basis for all economic theory. If you attempt to refute the claim that humans act, then you are, by definition, acting!

Another flaw in this system is that Von Mises never gave any clear definition of how new theorems are supposed to be proven by this axiom. Methods of mathematical logic that are axiom-like (like natural deduction or sequent calculus) were just being developed when he started, so it's understandable that he didn't mention them. This doesn't change the fact that in order to prove that this axiom implies any particular thing will require background knowledge, observations and other a posterori, challengeable things. So though in theory he developed his system from a single axiom, in practice he added new assumptions ad hoc and use the time honored method of Ipse Dixit to prove them.

Mises was naturally a staunch opponent of Marxism and he held that Marx believed in a fundamentally different logical structure of the mind across different classes. In Human Action, he accuses Marxism of "polylogism," i.e. that different classes use different sets of logic. Mises builds on Menger's notions of subjective value and marginal utility to define people as "economic calculators" (this largely a rehashing of the "economic calculation problem" argument Mises made in the 1920s). The knowledge of prices (which represent peoples' subjective value of goods) is distributed across all people (economic calculators) because value is subjective and thus different for each person. This economic calculation problem provides a philosophical argument against socialism; however, it doesn't make a socialist system logically impossible, e.g., it may just be highly inefficient. As (anarcho-capitalist) economist Bryan Caplan notes:

“”Ever since Mises, Austrians have overused the economic calculation argument. In the absence of detailed empirical evidence showing that this particular problem is the most important one, it is just another argument out of hundreds on the list of arguments against socialism. How do we know that the problem of work effort, or innovation, or the underground economy, or any number of other problems were not more important than the calculation problem?

From here, Mises goes into how awesome completely laissez faire market policy is, gold buggery, and other typical Austrian hijinks. However, sane students of economics probably closed the book way back at the point when Mises declared his "theories" unfalsifiable.

The Anti-Capitalistic Mentality

Generally considered Mises' worst work outside of Austrian circles (the contemporary review in The Economist opens with the words "This is a sad little book..."), The Anti-Capitalistic Mentality represents his attempt to psychoanalyze his opponents. The main thrust of the argument can be summarized in a few brief words: Capitalism is perfectly meritocratic, so if you disagree with him, you're just a free market hater who's jealous and butthurt about your station in life.

Quotes

“”You're all a bunch of socialists.

—Mises on hearing a group of economists, including Friedrich Hayek and Milton Friedman, debate the merits of a progressive income tax.

“”You have the courage to tell the masses what no politician told them: you are inferior and all the improvements in your conditions which you simply take for granted you owe to the effort of men who are better than you.

—Mises in a letter to Ayn Rand

“”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.

—Mises on why the guillotine came into style

“”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. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.

—Mises endorsing fascism as a temporary bulwark against the commies

“”The fact that the capitalists and entrepreneurs [in Germany], faced with the alternative of Communism or Nazism, chose the latter, does not require any further explanation. They preferred to live as shop managers under Hitler than to be "liquidated" as "bourgeois" by Stalin.

—Mises, again apologizing for Hitler rather than criticizing both dictators

“”Nor is it any longer of greater significance that the political rights of women are restricted, that women are denied the vote and the right to hold office... The right to occupy public office is denied women less by the legal limitations of their rights than by the peculiarities of their sexual character.

—Mises on women's rights

“”My view is that Money and Credit is very readable -- compulsively readable, in fact: I have just spent two and a half hours telling myself "it's OK; I will just read one more page..." But it is only readable in a rhetorical-excess-train-wreck mode, for it is also totally bats -- insane.

—Brad DeLong

See also

• Ludwig von Mises Institute
• Austrian school
• Paleolibertarianism
• Neoliberalism

External links

• Human Action, a good cure for insomnia.
• Collection of Mises' works at the Mises Institute
• Maurice Lagueux. Von Mises' apriorism and Austrian economics: From Menger to Mises. Presentation to the Annual European Conference on the History of Economics, Feb. 8-10 1996.