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)