Kim Gentes

Of the thousands of pages of text among the dozens of now iconic books written on economics, there is no more succinct and penetrating exploration of the ties of economic capitalism with political liberalism than the relatively short work of "The Road To Serfdom" by Friedrich A. von Hayek. Having read several of these voluminous texts myself, I can say unequivocally that "The Road To Serfdom" is the singular text that simultaneously explains the simplicity and benefits of the free market system while profoundly destroying the notion that personal liberty could be found within the socialist economic framework. Hayek, as he admits of himself, is an academic and technical economist who felt compelled to write a defense of the basics of liberalism (in the 19th century classical definition) as the unique and necessary combination of economic freedom and personal liberty only after it was clear that many of his influential political contemporaries in WWII Europe had vastly misunderstood the workings of socialism, and that it's ultimate outcome would always be totalitarianism- either in the form of Communism, as in Russia, or in the form of Fascism, as in Nazi Germany.

In fact, this book outlines the progression of what exactly happened in Germany to produce the society and opportunity for Hitler's regime to become the tyrannical monster of the modern world. Hayek clearly and convincingly explores how the fears of individuals based in economic instability of a free market system can lead people to eventually surrender their individual liberties in hopes of economic and nationalistic security. This surrendering becomes a downward spiral of personal liberties as the willing (at least initially) cost of an ever-expanding socialist economic state. A state in which the individual hopes of security and sustenance become permission for an eventual autocracy that maintains all decisions for all peoples at all times.

The observations of Hayek are not meant merely as a history lesson, but were a clear warning to England and America of the dangers of socialist economic thinking (and socialism in general), because Hayek believed that the rise of socialism in those countries would eventually set the stage for a totalitarian regime to be possible. In fact, Hayek's thesis and warnings are so cutting, and so well defended that he almost single-handedly inspired a renaissance of 20th century liberalism (though it more often went by the label of conservatism by its adherents such as Margaret Thatcher and Ronald Regan).

"The Road To Serfdom" is not just about the political and economic threads that led to Nazi Germany, it is about the true balance of power between personal liberties and state control. If you have never read an economics book in your life, you MUST read this one. It is by far the most powerfully written, yet simply understood, philosophical explanation of liberalism and the free market system- and why the combination of free market economy is the central component to ensure the other freedoms that accompany modern liberty (emancipation, universal suffrage, free speech and more). The ability to make self-determined decisions about work and economic exchange imbues in itself the power to allow both individuals and entities to pursue success. The natural balance of the free market is not only clearly articulated, Hayek contrasts it with the inherent weaknesses of the planned economic socialist state.

This is a political book, but whatever your politics are- you cannot afford to ignore this book. Whatever your political understanding or persuasion, this book is an absolute "must read" text. While books like Mises' "Human Action" and Adam Smith's "Wealth of Nations" provide more technical details and examples on how the free market system works, neither of those books provide so clear and convincing a treatise on the benefits and perpetual health of a economic liberalism, as "The Road to Serfdom".

Once beginning to read this book 4 days ago, I could not put it down. I am now on my third time through and continue to find it as enthralling and engaging each time through. A truly brilliant articulation of economics, freedom, free market, and the dark path of socialism that eventually leads to totalitarianism. If you believe you understand economics and have never read this book, you have missed one of the greatest texts in this field, in history.

Amazon Link: http://amzn.to/XJKd8j

Review by Kim Gentes

Economics is often a much maligned area of study. Say the word "economics" to a bunch of bankers and you will doubtless get endless theories of investment vehicles, interest rate charts and inflation debates. Say the same word to government officials and you will get long monologues on monetary policy, interventionism vs social responsibility and unemployment numbers. Say "economics" to a person balancing their checkbook or a small business owner and you will get responses about debt, taxes, capital expenditures and return on investment. However, each of these responses are centered around a manifestation of economic ideas- but they are not truly what economics is. In the massive volume "Human Action: A Treatise on Economics", Austrian professor Ludwig von Mises explains economics as the meaning and conduct of people towards a specific end. It is, above all else, action and its meaning. To quote von Mises:

Economics is not about things and tangible material objects; it is about men, their meanings and actions.1

To grasp von Mises entire thesis, you must understand his perspective for which economics is primarily aiming. Specifically, von Mises believes that action is taken to achieve a goal. He says:

Strickly speaking the end, goal, or aim of any action is always the relief from a felt uneasiness.2

For von Mises, the study of economics is the study of human actions meant at achieving relief from uneasiness (or "want satisfaction"). Based on that premise, "Human Action" became the seminal text of what is commonly called the Austrian School of economics. The book is long (about 1150 pages) and delves as much into the nature of human decision making as it does in its results. It is for this reason that the book is rife with long and detailed arguments in support of laissez-faire economics and the free enterprise system as the only way in which successful "want satisfaction" can be achieved for the broadest benefit of the society. Most succinctly, von Mises ties the ideological superstructure of liberalism, constitutions, bills of rights, and laws- all forms of social, religious and political freedoms- to their counterpart in economic freedom that is instantiated in free market system of modern capitalism. Ludwig von Mises spares no words on his socialist, interventionist and Marxist counterparts, and provides extensive and clear explanations on the errors of such economic thought.

The author provides deft guidance to his book's approach in these introductory sentences:

What is commonly called the "industrial revolution" was an offspring of the ideological revolution brought about by the doctrines of the economists. The economists exploded the old tenets: that it is unfair and unjust to outdo a competitor by producing better and cheaper goods; that it is iniquitous to deviate from the traditional methods of production; that machines are an evil because they bring about unemployment; that it is one of the tasks of civil government to prevent efficient businessmen from getting rich and to protect the less efficient against the competition of the more efficient; that to restrict the freedom of entrepreneurs by government compulsion or by coercion on the part of other social powers is an appropriate means to promote a nation's well-being. British political economy and French Physiocracy were the pacemakers of modern capitalism. It is they that made possible the progress of the natural sciences that has heaped benefits upon the masses. What is wrong with our age is precisely the widespread ignorance of the role which these policies of economic freedom played in the technical evolution of the last two hundred years. People fell prey to the fallacy that the improvement of the methods of production was contemporaneous with the policy of laissez faire only by accident.3

"Human Action" is not a book for casual reading, and requires you to learn and maintain a new subset of vocabulary which will be needed for interpreting this book. The terms "praxeology" (which means, actions) and "catallactics" (meaning- exchanges) are used hundreds of times and become self-evident within the text, but von Mises layers on this dozens of words which have limited meaning outside of scholars and university studies. Still, the book is deeply enthralling. If you are a logician, you will find his arguments and structured presentation to be euphoric.

Above everything else, Ludwig von Mises is a champion of freedom. Certainly, this thesis aims at the freedom of economics, but he attacks, and defeats with logic, dozens of misguided theorems which come from the the impulse of people to control others. It seems he doesn't believe in capitalism because of its benefits only, but because it is an expression of freedom, as much as speech, political liberalism, freedom of religion and any other form. In that vein, he confronts the manifestations of doctrines which oppose freedom up to and including war-mongering. His summary sentences on aggression are poignant and brilliant:

How far we are today from the rules of international law developed in the age of limited warfare! Modern war is merciless, it does not spare pregnant women or infants; it is indiscriminate killing and destroying. It does not respect the rights of neutrals. Millions are killed, enslaved, or expelled from the dwelling places in which their ancestors lived for centuries. Nobody can foretell what will happen in the next chapter of this endless struggle. This has nothing to do with the atomic bomb. The root of the evil is not the construction of new, more dreadful weapons. It is the spirit of conquest. It is probable that scientists will discover some methods of defense against the atomic bomb. But this will not alter things, it will merely prolong for a short time the process of the complete destruction of civilization. Modern civilization is a product of the philosophy of laissez faire. It cannot be preserved under the ideology of government omnipotence. Statolatry owes much to the doctrines of Hegel. However, one may pass over many of Hegel's inexcusable faults, for Hegel also coined the phrase “the futility of victory” (die Ohnmacht des Sieges). To defeat the aggressors is not enough to make peace durable. The main thing is to discard the ideology that generates war.4

This is just one example of von Mises broad but systematic approach to understanding human action and its good and bad forms of expression.  This example highlights his broadness of vision, his highly developed understanding of philosophical underpinnings of humanity, and above all, his ability to clearly distinguish the ideas of human intention from the realities of human action.

Of course, there are the long and extensive descriptions of dozens of items such as monetary, inflationary, and governmental policies, interest rates, free trade, taxation, theory of value and much more.

What you gain from reading the book is an exploration of the ideas and motivations that lead to decisions, that produce specific results, and that assist or hamper the actual perpetuation of a free market system. This is a scholarly book and delves deeply into its subject of praxeology and catallactics. The minor errors with this book are centered mostly around the attempt it makes to be progressive relative to the time of writing- by including relevant "current" examples, the subject and examples are dated to the era in which the original and revisioned versions were printed. None of us can escape our time period of existence, but Mises exposes some of his own prejudices and angst by doing so. The book could have done without those. At times as well, his deriding of socialist and interventionist motivations run far deeper than probably most people's intentions who take opposing views. It is understandable that Mises is trying to hold serve against the prevailing Keynsians and New Deal advocates of his era, but at times Mises rhetoric becomes so sarcastic as to be vitriolic.

However, we can forgive both these misteps partly because it would take such a strong and detailed opposing voice (which von Mises provides therein) to successfully dismantle the vices and embedded character of government planning, control, and what Mises would consider socialist economic agendas. We can further forgive von Mises because, in the end, he wins. The fall of almost every communist and social planning state in the world (most of which collapsed or revolted during the 20th century) was the ultimate proof that the free market system is its own validation. As is proven by many other texts and studies, capitalism is the resulting manifestation of liberalism being played out in the realm of economic reality- and that reality, however cyclical and unpredictable, has proven for the last 300 years to the be the only system which could produce vast increases in the production, standard of living and per capita income of its entire population. We can forgive Mises bluntness for the simple fact that he has been proven right. 

The book "Human Action" has became the bedrock of Austrian School economics and the cited source that grounded much further work from champion economists who took up the banner of free market thinkers such as Milton Friedman and others. One need not agree with all the sharp criticisms of von Mises towards his opponents, but we are shocked to find out how much of his sharp criticism (that might have sounded preposterous at the time of writing) now seems all too obvious in its results in reality. If you are studying economics, this will doubtless be one of the main works you must read to be thoroughly informed. While it is exceptionally articulate and filled with specifics, it remained unfettered by meaningless side notes (which is often common in economics texts).

An iconic and foundational book on the study of economics from the view of classic liberalism. A landmark.

Amazon Link: http://amzn.to/ZoxhYX

Review by Kim Gentes

1. Mises, Ludwig von (2009-03-30). Human Action: Scholar's Edition (LvMI) (Kindle Location 2413). Ludwig von Mises Institute. Kindle Edition.

2. Ibid., (Kindle Location 2406)

3. Ibid., (Kindle Location 856-865)

4. Ibid., (Kindle Locations 16189-16199)

Of all the documents of economics found in modern (nay, any) times there is no more seminal text than Adam Smith's "The Wealth of Nations".1 In this particular treatise, Smith embarks not on the high-minded work of philosophical argument but in the arduous (sometimes monotonous) task of common sense exploration of the simple, daily, often obvious facts of commerce, production, wages, exchange, labor, value, government (and government corporations such as postal, banking, political and trade organizations), trade, currency, commodities, taxes, militaries, industries, nations, religion, education, inheritance (and inheritance tax), feudal laws, road maintenance (and other public works) and literally almost every conceivable article of economic interest. Because Smith deals with the details is such careful articulation, his larger premise(s) are rarely forcefully declared. Yet, they are become so obvious, they can scarcely be ignored by the observant reader.

With what now seems to be childlike attention to minutia, he articulates a basic course of Euclidian logic in the realm of economics (the axiom from Euclid's Elements that says "Things which are equal to the same thing are equal to one another"). Smith spins dozens of examples against each other to extrapolate nearly every one of his points to show how wages, land/rents and profits/stock have values that combine and compare to various expressions across the economic systems. And he does this kind of thing with nearly every one of his salient points.

Beyond this comparative rendering (that speaks often to Smith's assumptions about value - labor, prices, exchange, land and other items) the book effectively uses categorizing and linear explanation to break down every major principle of economy into its actually understandable (and usable) parts.

For example, on the topic of how a division of labor positively effects the production efficiency of any industry, Smith writes:

This great increase in the quantity of work, which, in consequence of the division of labour, the same number of people are capable of performing, is owing to three different circumstances; first, to the increase of dexterity in every particular workman; secondly, to the saving of the time which is commonly lost in passing from one species of work to another; and, lastly, to the invention of a great number of machines which facilitate and abridge labour, and enable one man to do the work of many.2

He is stating what we now all take for granted- efficiency in division of labor production can be derived from 1) Accentuated individual expertise in a specific skill, 2) no time lost in context switching between different tasks, and 3) automation. And while these things seem obvious, it wasn't to the world in which Smith lived. It was he who introduced these ideas to the broader intellectual and business leaders of his world.

The clear benefits of division of labor related to production here seem obvious to us, yet it is only so because Adam Smith pointed them out and that his work has become such a universally understood and accepted set of axioms of industry. And this is precisely what the entire volume of Smith's work does- point out easily deduced truths that have gone on to become universal business axioms. The power of this work is not in its elegance as much as its utility- for this book has so much detail that one could assume it was powerless, and nothing could be further from the truth.

Again, this can seem arduous at times, but the beauty of it is in its almost mesmerizing simplicity and reality. Taking into account that Smith wrote about 250 years ago, we must set aside his obvious assumptions based in a time period and culture which demanded such clarity be brought to what is now a much different world. The fact that so much of "The Wealth of Nations" seems so obvious to us is, in fact, a tribute to its practically universal impact on virtually every country, society and economy within 50 years of its writing right up until present times. Literally within a half century of its writing, almost the entire political and economic structures of European countries were revolutionized- and much of that revolution was guided in no small part by the contents of Smith's iconic tome.

Even though "The Wealth of Nations" would be the foundational document for later modern economics, Smith shouldn't be looked at as a revolutionary thinker of new ideas. In fact, it is doubtful Smith would have even considered his ideas new at all. The tone and contents of the book are all delivered as observations, summaries and assumptions based on what Smith was observing in business and trade. For example:

"the wealth of a country consists, not of its gold and silver only, but in its lands, houses, and consumable goods of all different kinds" 3

Here again, Smith is articulating what others would later call "essential", but he saw it as just one of many things that he was correcting that the merchantilists of his time had gotten wrong. Much as Aristotle didn't create biology, metaphysics, politics or zoology- though he did define them for all ages that followed- Smith is an observer and thinker that simply categorized what he saw. He, like his contemporaries, referred to this area of study as political economy but for all practical purposes Smith becomes, with this volume, the father of modern economics. He stands, therefore, as the first major figure to coalesce and categorize the realm of economics and all of its essential parts. It is from this foundational document that later thinkers would attribute everything from free markets, division of labor, money supply (though he never used that term) and laissez-faire to the Smithian vision of economics. For sure, corrections and adjustments to the model outlined by Smith were later made and built on by others. But reading this document will help you understand the scope and architecture of modern free market economics.

While my praise is genuine and in chorus with vast others, it must be, nonetheless, restrained by the ability we hold over Smith- our hindsight and look on history since him. Looking back on "The Wealth of Nations", one could easily become cynical and even critical of Smith's peculiarities on local and current issues. His great ability to critique (the strength that shines so brightly in his book) allows him to make excellent observations into his own nation (United Kingdom) and not withhold appropriate criticism to its corrupt or broken systems. Everything from the merchantilist system (which is, indeed, his chief target of angst for nearly 80% of the book) and it's benefactors, to the government trade monopolies, tariffs, taxation, regulation, and various inefficiencies- Smith takes them all to task as he sees any malignancy in any part. He tackles systems of education and religion as well. At times he is ruthless, but he leaves no aspect of society untouched, including speaking on slavery, educating all ranks of people, need for taxes for public works, standing armies (the need for national security) and dozens of topics. Each of them he relates to their particular connection in economic life.

Because he lives in a time period with obvious prejudices towards classes of people, and nationalities as well, he allows some of that culture to speak out in his writing. This must all be heard and mitigate any grand estimations we might have of Smith as a social reformer in our scope of understanding. He WAS INDEED a huge reformer, and his economic understanding of how free markets can allow nations to raise the standard of living for ALL it's citizens is remarkably prophetic and proven right -- indeed western civilization and its undeniable ability to feed its populations and take care of necessities (and that has been so for almost 150 years since Smith's principles have been assimilated in taken up by every major western society since it's writing) shows the vitality to Smith's claims. However, the depth of social understanding in areas of racial, gender, nationalistic and social standing are not the concerns that Smith could comprehend, and as such we can't become revisionists and acclaim him for anticipating that his economic equality formulae would be one of the most powerful forces that would eventually help give equality to these broken divisions. Smith did not anticipate it, but his truths were still nonetheless effective in assisting and encouraging changes and economic freedom for these divisions just as well as every person was encouraged in the same way through the same terms.

This book is huge- literally. Depending on the version you read, the original volume was published as five  separate books in a collection.  Unabridged versions include all five sections adding up to a massive 640 (plus) pages. Many modern collections of this book feature just the first three sections (books), since the minutia of the last two can be so arduous. No doubt economics students will want to consume the entire tome, but be ready for a few hours of "easy-to-drift-off" details if you venture to tackle this entire collection.

Overall the book was absolutely astounding in keeping the account of such huge proportions still a vital and engaging narrative. I can't recommend it enough- if you have a spare 30 hours, this is your best bet for a truly great read!

Amazon Book Link: http://amzn.to/10DTrTg

Review by Kim Gentes

1. The formal full name of the book as Adam Smith published it first was "An Inquiry into the Nature and Causes of the Wealth of Nations". It commonly became known simply as "The Wealth of Nations".
2. Smith, Adam (2011-04-29). The Wealth of Nations (Illustrated) (p. 3).  Kindle Edition.
3. Ibid. pp. 308-309