Two Essays by Ludwig Von Mises: Liberty and Property and Middle-of-the-Road Leads to Socialism
(Auburn: The Ludwig von Mises Institute, 1991); 74 pages; $5.00.
Ludwig von Mises’s position as the 20th century’s preeminent advocate of the market economy is based upon his seminal works on economic theory and policy. The Theory of Money and Credit (1912) and Monetary Stabilization and Cyclical Policy (1928) established him as one of the leading monetary theorists of the age. He demonstrated that inflation and business cycles are not inherent in a market economy, but instead are the products of governmental control of money through the device of central banking.
His series of books Nation, State and Economy (1919), Socialism, An Economic and Sociological Analysis (1922), Liberalism (1927), Critique of Interventionism (1929), Omnipotent Government (1944), Bureaucracy (1944), Planned Chaos (1947), and The Anticapitalistic Mentality (1956) secured his position as a leading figure in the area of comparative economic systems. He showed that socialism is unworkable as an economic system and that all forms of governmental control and intervention contain contradictions that lead to economic dislocation and disaster.
And his Epistemological Problems of Economics (1933), Human Action, A Treatise on Economics (1949), Theory and History (1957), and The Ultimate Foundations of Economic Science (1962) won him recognition as a leading philosopher of the social sciences and the greatest economic theorist of the century.
But besides his theoretical work and scholarly contributions, Ludwig von Mises was a brilliant, popular expositor of the free-market economy. Two Essays by Ludwig von Mises: Liberty and Property and Middle-of-the-Road Policy Leads to Socialism, recently issued by The Ludwig von Mises lnstitute of Auburn University, proves why.
In Liberty and Property, Mises explains that the hallmark of the market economy is the sovereignty of the consumer. Under capitalism, he explains, those who own the means of production and direct their use are ultimately subservient to the wishes and desires of the consuming public. “The only source of income for these owners is the revenue they earn by selling products on the market. But in a free market, based on voluntary exchange, the only way any of these owners can earn income is to manufacture a better or cheaper product than his next closest rival, who is also attempting to attract consumers to his place of business.
Thus, those who own productive property must direct its use, not according to their own wishes, but according to the wishes of those to whom they ultimately sell goods and services. “Economic power, in the market economy, is in the hands of the consumers,” Mises reminds us. “Capitalistic business is … ceaseless innovation, daily repeated attempts to improve the provision of the consumers by new, better and cheaper products.”
In Middle-of-the-Road Policy Leads to Socialism, Mises demonstrates the danger and damage that must inevitably arise when government presumes to intervene into the natural course of market events. The market economy is an interrelated and interdependent network of prices and production, in which the occurrences in one comer of the market have unavoidable influences and spill-over effects on other parts of the market.
When the government tries to control the prices or regulate the production of one sector of the economy, this necessarily impacts m the pricing a production decisions of numerous other produced related markets, whose activities are indirectly affected by the control or regulations established the government. For example, if the government tries to set the price of milk below the price that would have prevailed on a free market, retail milk sellers may not be able to afford to purchase as much milk from dairy farmers as they had in the past. If government does not want the supply of milk decrease, it must now extend its price controls to wholesale milk market, so retail milk sellers continue to afford to buy and market a larger quantity of milk.
But, Mises explains, wholesale milk producers themselves are dependent on suppliers in still other markets; and if supply is not to be disrupted, government’s pricing and production controls must be extended to another set of producers. The logical end to this process, Mises says, is complete control of the economy by the government. The market economy is supplanted by state planning via piecemeal controls and regulations over time. What is initially begun as just “a little bit of regulation” can culminate in if followed to its logical conclusion the establishment of the totally planned economy; the socialist states replaces the market economy.
If men are to have prosperity, Mises emphasizes, men must be free from control by the state: “Freedom is to be found only in the sphere in which government does not interfere. Liberty is always from government. It is the restriction of the government interference.” And it was for this mason that Mises defended a policy of laissez-faire: “Under this system called laissez-faire … there is freedom because there is a field in which individuals are free to plan for themselves.” And out of the interactions of these individual plans there arise the market exchanges that produce prosperity.
