Happy 133rd Birthday, Ludwig von Mises!
The great Austrian economist, Ludwig von Mises, was born on this day, in 1881, to parents of prominent Viennese families, while the father was on temporary duty in the city of Lemberg (now Lvov) in Galicia, which is now part of the Ukraine. His father was a Jew whose grandfather received the ennobling "von" prefix for his exceptional service to the Emperor Franz Joseph I of Austria.
It is my belief that the Austrians, starting with Carl Menger, but with Mises in particular, have done more than any other economists to correct the confusions of the classical economists.
Speaking of these confusions, I'm thinking particularly of Adam Smith's stumbling over the problem of value, such as the explanation for why diamonds cost more than water or bread. Smith's explanation of value was that the greater labor involved in bringing diamonds to market is why diamonds are more valuable than bread. This labor theory of value makes of everybody else in the economic system, like entrepreneurs, venture capitalists, and factory owners, a pack of parasites living on the backs of labor, a theory which was so gratefully received by Karl Marx! Marx took the labor theory of value and baked it into a poisonous and stinking cake of no nutritional value, that nevertheless intoxicated generations of leftist control freak collectivists ever since, including the current communist occupier of the American White House.
Through his 1922 essay on the problem of "Economic Calculation in the Socialist Commonwealth," and the book, Socialism, that followed shortly, in 1922, Mises also did more than anybody else before him to prove that socialism as an economic system can lead only to chaos because of its singular lack of a viable price system. It is prices, discovered by the choices of consumers in a free economy, that allow rational economic calculation. It is the choices of consumers that direct the flow of scarce resources into those enterprises that stand the best chance of satisfying the most urgent wants and needs of the consumers. Lacking a price system, chaos follows, as central planning bureaucrats guess at what to produce, in which quantities and sizes, employing which and how many workers at which wages, and so forth, with the result that under the interventionist, government planned economy, there are inevitably shortages of everything that people really want, and surpluses of things that nobody wants.
Considering that Mises grew up in the German-speaking world of the late 19th century, which by that time was thoroughly infected by the Kantian skeptic notions, it is astonishing how close Mises came to avoiding the deadly Kantian spore, and naming the actual rational epistemological grounds on which to build a theory of economics.
Mises' approach to the epistemological groundwork of his field begins with unassailable truths we can know by observation and experience, and thence to deduce the logical implications by which we get the truths of human action in the economic realm. He has been lambasted for this approach by everybody from the positivists onwards, although I believe that all of these critics were completely mistaken in their approach to knowledge, and that Mises actually did a much better job of grounding the field than his critics.
Mises came far closer than his peers to naming and bridging the crazy chasm which was Hume's problem of induction, and made a noble effort at bushwhacking his way out of the impenetrable epistemological tangle which was the condition in which the Kantians and Hegelians left the German-speaking universities. It would remain for Ayn Rand and her various associates and allies to dismantle those problems. I believe it remains yet for anybody to apply the available solutions to the problem of induction as it relates to economics and thereby help in grounding Mises' immensely powerful work in a more coherent epistemology.
Hmm. George Reisman, who was a student of both Mises and Rand, has done outstanding work in economics. Now that I mention it, I should go back and have another look his major book, Capitalism, and see how Reisman addresses this groundwork before I say anything more conclusive. He certainly embodies the great strengths of both Mises and Rand.
Mises' life motto, taken up in high school from Virgil and embraced the whole of his life, was: Tu ne cede malis sed contra audentior ito. "Do not give in to evil, but proceed ever more boldly against it."
Mises was a hero whose work was dismissed and attacked by the socialists all his life, and as the socialists began to win over the profession, Mises never gave into pressure, never changed his mind without a proper reason. In the last half of his life, he narrowly escaped Hitler, but lost most of his library and papers in the process of escaping with his life. Thereafter, Mises came to New York University, but never enjoyed a university paid position (while his socialist colleagues, also intellectual refugees from Europe, were feted and celebrated in American universities.)
I believe that Mises was a man of enormous importance in the history of ideas, a thinker of stunning intellectual power, and a man of unbreakable integrity and honor.
If you don't know Mises' work, or much about economics, I recommend starting with Henry Hazlitt's Economics in One Lesson, and then Mises' own collection of essays, Liberalism, then Socialism, and finally read his other works, especially his magnum opus, Human Action. Be sure to get the scholar's edition of Human Action, from the Ludwig von Mises Institute (mises.org) Also be sure to get Percy Greaves' Mises Made Easier, in which Greaves very kindly defines all the arcane terms and translates into English all the quotations in ancient Greek and Latin, which any educated peer of Mises' would have known out of hand, but which tend to have become lost on our later, dumbed-down generations.
A wonderful book on Mises and his times is Jorg Guido Hulsmann's Mises: the Last Knight of Liberalism.
Anyway, bravo, Herr Professor Doktor Mises! Yay, Lu! Blessings on your spirit, honor to your work!
E P N
2014.0930
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