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The Essential Ludwig von Mises
"In the market economy, consumer wishes are the guiding stars of production."
An essential feature of money prices is that they share a common denominator, so they can be subjected to arithmetic. Entrepreneurs can use them for cost accounting, and to determine if their investments resulted in profit or loss. The great economist Ludwig von Mises (1881-1973) identified such “economic calculation” as the key characteristic of the market economy. “Profit and Loss” (which is the name of an included essay) give the entrepreneur a simple metric that communicates how much his or her rearrangement of production has either boosted or impaired consumer welfare.
As Mises brilliantly demonstrates in “Planned Chaos” (also included), there can be no economic calculation under socialism. This is because there would be nothing to calculate in the absence of money prices, which presuppose market exchange and private property. Without profit and loss, socialist planners are economically adrift at sea without a compass.
Also featured is “Liberty and Property,” a speech in which Mises presented the most important features of free market capitalism. In order to earn profits and avoid losses, entrepreneurs must strive to arrange production so as to please consumers. Thus in the market economy, consumer wishes are the guiding stars of production. Mises called this “consumer sovereignty.”
Moreover, the serious money is to be made by serving mass markets. Therefore it is the average, not the elite, consumers who most sway and are served by the market. Capitalism, as Mises argues, means "mass production for the masses” and widespread, ever-rising prosperity for humankind.
Socialism is no substitute for capitalism. And neither is the “middle road” of “interventionism.” Every market intervention by the government harms the general public by countermanding the orders delivered by the sovereign consumers. If the government tries to address the ill effects of intervention with further intervention, the maladies will mount and elicit ever more intervention until every corner of the economy is subjected to government control. Thus, “Middle-of-the-Road Policy Leads to Socialism,” as Mises titled another included essay.
An essential feature of money prices is that they share a common denominator, so they can be subjected to arithmetic. Entrepreneurs can use them for cost accounting, and to determine if their investments resulted in profit or loss. The great economist Ludwig von Mises (1881-1973) identified such “economic calculation” as the key characteristic of the market economy. “Profit and Loss” (which is the name of an included essay) give the entrepreneur a simple metric that communicates how much his or her rearrangement of production has either boosted or impaired consumer welfare.
As Mises brilliantly demonstrates in “Planned Chaos” (also included), there can be no economic calculation under socialism. This is because there would be nothing to calculate in the absence of money prices, which presuppose market exchange and private property. Without profit and loss, socialist planners are economically adrift at sea without a compass.
Also featured is “Liberty and Property,” a speech in which Mises presented the most important features of free market capitalism. In order to earn profits and avoid losses, entrepreneurs must strive to arrange production so as to please consumers. Thus in the market economy, consumer wishes are the guiding stars of production. Mises called this “consumer sovereignty.”
Moreover, the serious money is to be made by serving mass markets. Therefore it is the average, not the elite, consumers who most sway and are served by the market. Capitalism, as Mises argues, means "mass production for the masses” and widespread, ever-rising prosperity for humankind.
Socialism is no substitute for capitalism. And neither is the “middle road” of “interventionism.” Every market intervention by the government harms the general public by countermanding the orders delivered by the sovereign consumers. If the government tries to address the ill effects of intervention with further intervention, the maladies will mount and elicit ever more intervention until every corner of the economy is subjected to government control. Thus, “Middle-of-the-Road Policy Leads to Socialism,” as Mises titled another included essay.
- GenresEconomics
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Published January 1, 2016
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Displaying 1 - 2 of 2 reviews
April 27, 2018
Language sometimes stilted, but these essays are filled with gems and worthwhile insights.
The section on government price controls describes the Venezuelan crisis perfectly, despite being written decades earlier. And of course the same thing will keep on happening whenever governments try to control prices, as they’ve apparently been unable to learn the the lesson since at least 301, when the Roman emperor Diocletian issued the Edictum de Pretiis Rerum Venalium.
The section on government price controls describes the Venezuelan crisis perfectly, despite being written decades earlier. And of course the same thing will keep on happening whenever governments try to control prices, as they’ve apparently been unable to learn the the lesson since at least 301, when the Roman emperor Diocletian issued the Edictum de Pretiis Rerum Venalium.
February 10, 2017
A good overview of Mises writings on socialism, capitalism, and the so-called "third way." The basis of our radio show on February 10, 2017, The Soul of Enterprise (www.thesoulofenterprise.com), episode #129.
Displaying 1 - 2 of 2 reviews