Mises for the lazy

I was reading the excellent Mises collection of essays and addresses "Planning For Freedom", and it occurred to me that I could kick back and let someone else take the trouble, in this case Gennady Stolyarov II. Thw lecture was originally presented to the University Club of New York, April 18, 1950, and bears the title 'Middle-of-the-road leads to socialism' - also found in the Mises Institute publication "Two Essays".

Orthodox Truth

The following is a quotation from Ludwig von Mises, taken from a lecture he gave in 1945 on the subject of state intervention in the economy. Plus ca change!

Interventionism the Cause of Depression

It is true, many people believe that economic policy should not bother at all about long-run consequences. They quote a dictum of Lord Keynes: "In the long run we are all dead." I do not question the truth of this statement; I even consider it as the only correct declaration of the neo-British Cambridge school. But the conclusions drawn from this truism are entirely fallacious. The exact diagnosis of the economic evils of our age is: we have outlived the short-run and are suffering from the long-run consequences of policies which did not take them into consideration. The interventionists have silenced the warning voices of the economists. But things developed precisely as these much abused orthodox scholars had predicted. Depression is the aftermath of credit expansion; mass unemployment prolonged year after year is the inextricable effect of attempts to keep wage rates above the level which the unhampered market would have fixed. All those evils which the progressives interpret as evidence of the failure of capitalism are the necessary outcome of allegedly social interference with the market. It is true that many authors who advocated these measures and many statesmen and politicians who executed them were impelled by good intentions and wanted to make people more prosperous. But the means chosen for the attainment of the ends aimed at were inappropriate. However good intentions may be, they can never render unsuitable means any more suitable.

It must be emphasized that we are discussing means and measures, not ends. The matter at issue is not whether the policies advocated by the self-styled progressives are to be recommended or condemned from any arbitrary preconceived point of view. The essential problem is whether such policies can really attain the ends aimed at.

It is beside the mark to confuse the debate by referring to accidental and irrelevant matters. It is useless to divert attention from the main problem by vilifying capitalists and entrepreneurs and by glorifying the virtues of the common man. Precisely because the common man is worthy of all consideration, it is necessary to avoid policies detrimental to his welfare.

The market economy is an integrated system of intertwined factors that mutually condition and determine one another. The social apparatus of coercion and compulsion, i.e., the state, certainly has the might to interfere with the market. The government or agencies in which the government, either by legal privilege or by indulgence, has vested the power to apply violent pressure with impunity, are in a position to decree that certain market phenomena are illegal. But such measures do not bring about the results which the interfering power wants to attain. They not only render conditions more unsatisfactory for the interfering authority. They disintegrate the market system altogether, they paralyze its operation, they bring about chaos.

If one considers the working of the market system as unsatisfactory, one must try to substitute another system for it. This is what the socialists aim at. But socialism is not the subject matter of this meeting's discussion. I was invited to deal with interventionism, i.e., with various measures designed to improve the operation of the market system, not to abolish it altogether. And what I contend is that such measures must needs bring about results which from the point of view of their supporters are more undesirable than the previous state of affairs they wanted to alter.

Taken from 'Planning for Freedom'

Tu ne cede malis, sed contra audentior ito

The freedom to make mistakes

I'm reading a relatively short work by Ludwig von Mises, "Economic Policy; thoughts for today and tomorrow", which is the transcription of a series of lectures he gave in 1959 in Buenos Aires. It is a very good introduction to his works, as it lays down in simple terms his overall views. Here's an extract from the lecture on socialism:

The fact is that, under the capitalistic system, the ultimate bosses are the consumers. The sovereign is not the state, it is the people. And the proof that they are the sovereign is borne out by the fact that they have the right to be foolish. This is the privilege of the sovereign. He has the right to make mistakes, no one can prevent him from making them, but of course he has to pay for his mistakes. If we say the consumer is supreme or that the consumer is sovereign, we do not say that the consumer is free from faults, that the consumer is a man who always knows what would be best for him. The consumers very often buy things or consume things they ought not to buy or ought not to consume.

But the notion that a capitalist form of government can prevent people from hurting themselves by controlling their consumption is false. The idea of government as a paternal authority, as a guardian for everybody, is the idea of those who favor socialism. In the United States some years ago, the government tried what was called "a noble experiment." This noble experiment was a law making it illegal to buy or sell intoxicating beverages. It is certainly true that many people drink too much brandy and whiskey, and that they may hurt themselves by doing so. Some authorities in the United States are even opposed to smoking. Certainly there are many people who smoke too much and who smoke in spite of the fact that it would be better for them not to smoke. This raises a question which goes far beyond economic discussion: it shows what freedom really means.

Granted, that it is good to keep people from hurting themselves by drinking or smoking too much. But once you have admitted this, other people will say: Is the body everything? Is not the mind of man much more important? Is not the mind of man the real human endowment, the real human quality? If you give the government the right to determine the consumption of the human body, to determine whether one should smoke or not smoke, drink or not drink, there is no good reply you can give to people who say: "More important than the body is the mind and the soul, and man hurts himself much more by reading bad books, by listening to bad music and looking at bad movies. Therefore it is the duty of the government to prevent people from committing these faults."

And, as you know, for many hundreds of years governments and authorities believed that this really was their duty. Nor did this happen in far distant ages only; not long ago, there was a government in Germany that considered it a governmental duty to distinguish between good and bad paintings—which of course meant good and bad from the point of view of a man who, in his youth, had failed the entrance examination at the Academy of Art in Vienna; good and bad from the point of view of a picture-postcard painter, Adolf Hitler. And it became illegal for people to utter other views about art and paintings than his, the Supreme Führer's.

Once you begin to admit that it is the duty of the government to control your consumption of alcohol, what can you reply to those who say the control of books and ideas is much more important?

Freedom really means the freedom to make mistakes. This we have to realize. We may be highly critical with regard to the way in which our fellow citizens are spending their money and living their lives. We may believe that what they are doing is absolutely foolish and bad, but in a free society, there are many ways for people to air their opinions on how their fellow citizens should change their ways of life. They can write books; they can write articles; they can make speeches; they can even preach at street corners if they want—and they do this in many countries. But they must not try to police other people in order to prevent them from doing certain things simply because they themselves do not want these other people to have the freedom to do it.

This is the difference between slavery and freedom. The slave must do what his superior orders him to do, but the free citizen—and this is what freedom means—is in a position to choose his own way of life. Certainly this capitalistic system can be abused, and is abused, by some people. It is certainly possible to do things which ought not to be done. But if these things are approved by a majority of the people, a disapproving person always has a way to attempt to change the minds of his fellow citizens. He can try to persuade them, to convince them, but he may not try to force them by the use of power, of governmental police power.

Ambrose Evans Ex Cathedra Pritchard

Apparently I should be enraged. In an article entitled 'You are all wrong, printing money can halt Europe's crisis', Ambrose declares:

'This will enrage many readers — especially the "Austrian" internet vigilantes — but I have to say it. A near universal view has emerged that Europe's crisis can only be solved by governments and fiscal policy, with varying views over the proper dosage of pain. I beg to differ ...'

I'm actually quite pleased. I didn't know anyone in the establishment media had heard of Austrian economics, or if they had, were allowed to mention it. Not that he seems to grasp what Austrian economics teaches on the subject of money and government policy, over and above the simple conclusion that its acolytes are against inflationism.

Austrian economics is 'wertfrei' - value free. It doesn't deal with ends, only with means to those ends. So it doesn't say printing up warehouses full of pallets stacked with $100,000,000 notes is right or wrong. It only tells you what the likely effects of that will be, and points out that these effects are no doubt contrary to your stated goals.

The problem for Austrian economists is knowing what to suggest at this point in time, given that the political world has been blithely ignoring their prognoses for many decades and has now arrived at the place the Austrians told them they would, teetering over the brink of utter monetary disaster.

We've been hanging on to a rising balloon. The Austrians told us that, but it's one thing to take that into account and act accordingly when you are three feet in the air, and another when you are 300 feet up. Austrianism should not allow itself to be used as the banner for austerity measures, which punish the people but leave untouched, or rather entrenched, the forces which engendered the crisis.

I shall end with a quote from Ludwig von Mises, taken from an essay entitled 'The stabilization of the monetary unit', which notes the interrelation between inflationism and the ideologies in which it is enmeshed. This does not, I recognise, give a simple answer to the question of what 'we' should do in the current crisis, but it may help illuminate the nature of the crisis.

VIII The ideological meaning of reform

1. The ideological conflict

The purely materialistic doctrine now used to explain every event looks on monetary depreciation as a phenomenon brought about by certain “material” causes. Attempts are made to counteract these imagined causes by various monetary techniques. People ignore, perhaps knowingly, that the roots of monetary depreciation are ideological in nature. It is always an inflationist policy, not “economic conditions,” which brings about the monetary depreciation. The evil is philosophical in character. The state of affairs, universally deplored today, was created by a misunderstanding of the nature of money and an incorrect judgment as to the consequences of monetary depreciation.

Inflationism, however, is not an isolated phenomenon. It is only one piece in the total framework of politico-economic and socio-philosophical ideas of our time. Just as the sound money policy of gold standard advocates went hand in hand with liberalism, free trade, capitalism and peace, so is inflationism part and parcel of imperialism, militarism, protectionism, statism and socialism. Just as the world catastrophe, which has swept over mankind since 1914, is not a natural phenomenon but the necessary outcome of the ideas which dominate our time, so also is the monetary crisis nothing but the inevitable consequence of the supremacy of certain ideologies concerning monetary policy.

Statist Theory has tried to explain every social phenomenon by the operation of mysterious power factors. It has disputed the possibility that economic laws for the formation of prices could be demonstrated. Failing to recognize the significance of commodity prices for the development of exchange relationships among various moneys, it has tried to distinguish between the domestic and foreign values of money. It has tried to attribute changes in exchange rates to various causes—the balance of payments, speculative activity, and political factors. Ignoring completely the Currency Theory’s important criticism of the Banking Theory, Statist Theory has actually prescribed the Banking Theory. It has moreover even revived the doctrine of the canonists and of the legal authorities of the Middle Ages to the effect that money is a creature of the government and the legal order. Thus, Statist Theory prepared the philosophical groundwork from which the inflationism of recent years developed.

The belief that a sound monetary system can once again be attained without making substantial changes in economic policy is a serious error. What is needed first and foremost is to renounce all inflationist fallacies. This renunciation cannot last, however, if it is not firmly grounded on a full and complete divorce of ideology from all imperialist, militarist, protectionist, statist, and socialist ideas.