Human Action: The Scholar's Edition

Ludwig von Mises was one of the intellectual giants of the twentieth century. His contributions to economics, political theory and the social sciences were profound. Born in Lemberg in the Austro-Hungarian empire in 1881, Mises graduated from the University of Vienna with a Doctor of Laws in 1906. From 1909, he worked in economic public policy for the Austrian Chamber of Commerce, combining this with research, writing scholarly works and lecturing at the University. In the twenties, he ran a fortnightly Privatseminar for a select group of young Viennese intellectuals many of whom later became famous in their own right; they included economists Gottfried von Haberler, Friedrich Hayek, Fritz Machlup, Oskar Morgenstern, Richard von Strigl, and Paul Rosenstein-Rodan, plus philosopher Felix Kaufmann, sociologist Alfred Shutz, and philosopher of history Erich Voegelin. During this period he wrote his path-breaking work on monetary theory, The Theory of Money and Credit (1912), Nation, State and Economy (1919), Socialism (1922), Liberalism (1927), Monetary Stabilization and Cyclical Policy (1928), A Critique of Interventionism (1929), and Epistemological Problems of Economics (1933). In 1934, after forty years in Vienna, concerned about the inevitability of Nazi takeover, Mises accepted a position at the Graduate Institute of International Studies in Geneva. Here he was able to devote himself completely to his study of economics which resulted in Nationalokonomie, the basis for his magnum opus Human Action. In 1940, blacklisted by the Nazis and feeling unsafe, he and his wife Margit escaped to America. He arrived in New York, aged nearly 60, with no job and without complete familiarity with English. The first few years were not easy; a grant from the Rockefeller Foundation to the National Bureau of Economic Research provided a modest livelihood; with support from Henry Hazlitt, he undertook a number of assignments for the National Association of Manufacturers; he gave guest lectures at Columbia, Harvard, and Princeton. Two books, Omnipotent Government and Bureaucracy were published by Yale University Press in 1944. By 1946 he held a visiting professorship at New York University’s Graduate School of Business Administration and a staff position at Leonard Reed’s Foundation for Economic Education. In 1949, he published Human Action; it is a comprehensive treatise on economics. Although built on his Nationalokonomie, it is not a translation; all parts were rewritten and additions made. This is Mises’ magnum opus where he integrates the elements of economic theory that had been his life’s work. He sets economics within a more universal science of praxeology – the pure logic of choice. People have purposes. They try to achieve goals. They act because they want to change things for the better; to eliminate some felt dissatisfaction. Action is the use of means to achieve ends. People choose their most highly valued preference. All action is rational in that it is attempting to use a means to achieve an end. (That does not preclude people making mistakes!) He believed that our knowledge of praxeology was a priori; “the only way to a cognition of these theorems is logical analysis or our inherent knowledge of the category of action”. From this base, Mises developed universal laws of economics. This differed from his contemporaries such as Schmoller of the German Historical School who thought that economic laws were true only for particular historical periods and conditions; that each age had its own way of thinking about things. Mises pointed out that attempts to define economics by what has happened historically fail because they are subject to individual, different interpretation (or understanding) of what happened. He explained that economic society is so complex that analysis needs to be based wherever possible on reason, as there are always multiple interpretations of real life events. The champions of logically incompatible theories claim the same events as proof that their point of view has been tested by experience. History cannot teach us any general rule, principal, or law. So Mises theories apply to all peoples and all times. His contributions are vast. Some of the more significant are: that prices are determined by subjective values; that economic calculation requires the price mechanism to determine the most economic use of resources; that socialism cannot allocate resources efficiently because it lacks this price mechanism; that social cooperation through the free market makes possible the division of labor; that trade and specialization are keys to continued prosperity; that the role of the entrepreneur is crucial - not only to correct disequilibria in the market place but to discover opportunities; that government manipulation of the money supply and interest rates causes recessions; and that humans gain more from peaceful exchange than from destructive struggles. Mises had many years’ experience advising government. He said, “Economic history is a long record of government policies that failed because they were designed with a bold disregard for the laws of economics. Economics … is a challenge to the conceit of those in power. An economist can never be a favorite of autocrats and demagogues. With them he is a mischief maker, and the more they are inwardly convinced that his objections are well founded, the more they hate him.” In retrospect, it seems that Mises spent his whole life at odds with the prevailing views of the economics profession. He began by disagreeing with the German Historical School which dominated European economics and provided the economic ideas for socialism; he disagreed with Keynes and the interventionism of the New Deal; and he was never a fan of the movement to mathematical economics and econometrics. Nonetheless, he continued to write prolifically and to lecture – he was still presenting seminars at the age of 90! His wife Margit later claimed that the post-War period was his most productive. Now, years after his death, there is a resurgence of Austrian Economics; his contributions are being recognized and his ideas understood. The Ludwig von Mises Institute, founded in 1982, is a thriving research and educational center for classical liberalism, libertarian political theory, and the Austrian School of economics. It provides scholarships, educational materials, conferences, media, and literature. There is a Mises Academy providing on-line courses. Here was a genius whose persistence in challenging the intellectual and political consensus of his day has left us with one of the greatest books on economics ever. Human Action is a masterpiece.

Human Action is one of the ten most insightful books on economics ever written. This is impressive, but even more impressive that Mises has more than one book on this list (in my opinion). Human Action is the most recent (hopefully not the last) great treatise on political economy. While some treatises compile the ideas of others, there are many original and important insights to this book. Perhaps the most important insight of this book concerns economic calculation. Mises sees economic calculation as the most fundamental problem in economics. The economic problem to Mises is that of action. We act to dispel feelings of uneasiness, but can only succeed in acting if we comprehend causal connections between the ends that we want to satisfy, and available means. Mises is drawing upon Menger's brilliant 1871 book here, but he has his own ideas as well. The fact that we live in a world of causality means that we face definite choices as to how we satisfy our ends. Human Action is an application of Human Reason to select the best means of satisfying ends. The reasoning mind evaluates and grades different options. This is economic calculation. Economic calculation is common to all people. Mises insisted that the logical structure of human minds is the same for everybody. Of course, this is not to say that all minds are the same. We make different value judgments and posses different data, but logic is the same for all. Human reason and economic calculation have limitations, but Mises sees no alternative to economic calculation as a means of using scarce resources to improve our well being. Human Action concerns dynamics. The opposite to action is not inaction. Rather, the opposite to action is contentment. In a fully contented state there would be no action, no efforts to change the existing order of things (which might be changed by merely ceasing to do some things). We act because we are never fully satisfied, and will never stop because we can never be fully satisfied. This might seem like a simple point, but modern economics is built upon ideas of contentment- equilibrium analysis and indifference conditions. It is true that some economists construct models of dynamic equilibrium, but the idea of a dynamic equilibrium is oxymoronic to Mises. An actual equilibrium may involve a recurring cycle, but not true dynamics. True dynamics involve non-repeating evolutionary change. Mises explains dynamic change in terms of `the plain state of rest'. A final state of rest involves perfect plans to fully satisfy human desires. A plain state of rest is a temporary and imperfect equilibrium deriving from past human plans. Though any set of plans is imperfect, to act means attempting to improve each successive set of plans. Movement from one plain state of rest to another represents the process of change, either evolutionary or devolutionary. How then do we experience progress? Mises links progress and profits. Profits earned from voluntary trades are the indicator of economic success. It is monetary calculation of profits that indicates whether an enterprise has generated a net increase in consumer well being over true economic costs. The close association that Mises draws between economic calculation and monetary calculation leads him to conclude that market prices (upon which monetary profits are calculated) are indispensable to progress in bettering the human condition. Without markets there are no prices, and without prices there is no economic calculation. One point that Mises made, but did not get enough attention, is that monetary calculation takes place primarily in financial markets. This is especially clear on page 704 of the scholar's edition. Monetary calculation is vitally important, but who actually carries out these calculations? Mises stresses the importance of entrepreneurship because it is entrepreneurs who actually do monetary calculation. This fact puts entrepreneurs at the center of all progress (and failure). Entrepreneurs who estimate costs more correctly than their rivals earn high profits while also serving consumers. Such men rise to top positions in industry. Entrepreneurs who err seriously in their calculations experience financial losses and cease to direct production. Mises described this market test of entrepreneurial skills as the only process of trial and error that really matters. The concepts of monetary calculation, financial speculation, and entrepreneurship form the basis for the von Mises critique of socialism. Mises has nothing good to say about interventionism either. As for the business cycle, this is generated by the manipulation of interest rates by central banks. It is fairly obvious that Mises opposed the idea of government run economic systems, but Mises did see limited roles for government in providing national defense, police protection, and criminal justice. Some contemporary Mises enthusiasts would disagree, yet the state proposed by Mises would (in my opinion) be a vast improvement over our present state of affairs. There are too many angles to this book to discuss fully in this review, but the more controversial parts concern methodology. Mises rejects positivism and mathematical economics. As for positivism, Mises does not argue that economics should not be empirical. Mises argues that it CANNOT be empirical. Ideas are logically prior to data of complex phenomena. Without ideas to interpret data on social phenomena we could not make sense of anything in society. Critics of von Mises tend to be totally unaware of this argument. Mises sees ideas as all-important. It is our ideas that govern our actions. We act because we have ideas as to particular means of dispelling uneasiness. Some see causal connections between government intervention and increased societal welfare. Students of Mises see things differently, because we hold different ideas. This is a very important angle of the Mises paradigm. As Mises wrote in 1922, only ideas can overcome ideas. Marxian notions of the material forces of history and class interest as the prime movers of history are not only wrong, but dangerous because they are anti-rationalist. Ideas matter above all else, and the ideas developed by Mises in Human Action matter above all others.

I have approached getting through this book multiple times, and had problems. I discovered in reading the forewards and introductions to this, that the edition I had been reading was chock full of printing problems and wasn't fully endorsed by von Mises for content. This is a "compact" (physically), clean (language choice) edition; and though I've only made it through maybe 30% of the book, I'm finding it much easier to read than I remember. If you enjoy von Mises and haven't read this edition, it's worth the (re-)visit.

Human Action What is obvious and must be said first is that this is book is not for everyone. In fact it is not for most. It took me three years to work through this small font and tightly spaced 881 page tome for various reasons not the least of which it was just a hard slog through many of its chapters. I put it aside often but kept picking it up. It is however for those who seek an intellectual challenge. Because that is what it is, a mountain to climb for those who choose to take it on. What you will get from expending the effort to study this book is a taste of what high end scholarship looks like. Von Mises is an intellectual with more than an intellectual pedigree having had a role in guiding economic policy for his own beloved country of Austria. In this work he brings rigorous analysis to the search for the foundational underpinnings of society. In his view, this is rooted in the economic activity of individuals making informed choices in everyday matters that they believe will advance or improve their own condition. This book is a painstaking analysis of economic man with a deep, almost tedious dive into the relationship of such economic concepts and terms as capital, interest, labor, raw materials and other such factors of production. You will grind thru such chapter titled as the following: *The Rate of Interest, *Interest, Credit Expansion and The Trade Cycle, *Work and Wages, *The Data of the Market, *Harmony and the Conflict of Interests, and so forth. But before you enter into this technical analysis that is deep wide and extensive you will first be treated to a comprehensive review of von Mises philosophical and sociological framework of human society which in its natural state von Mises readily and unconditionally proves is in all its essential attributes that of a Free Market; A framework that he describes as self-organizing with a heartbeat that is embodied in the book’s title-Human Action. On page 539 Von Mises sums things up nicely with the following statement: “The market economy is essentially characterized as a social system in which there is an incessant urge towards improvement.” It is the market economy that breathes life and energy into human society according to von Mises and its in understanding this ecosystem that one comes to appreciate the role that freedom, liberty and in particular private property plays in the story of mankind in its incessant struggle over want, ignorance and deprivation. Von Mises is almost epistemological in his approach as he exposes the musculature of the human social organization and the nature of the world everyday human’s inhabit. You will therefor first work thru these setup chapters: *Purposeful Action and Animal Reaction, *The Prerequisites of Human Action, *Human Action as an Ultimate Given, *Rationality and Irrationality, *Causality as a Requirement for Action, * The Alter Ego, and so forth. What von Mises painstakingly bring to light in Human Action is that it is the organic free actions of the individual that makes all the difference, and in the end really advances society and ultimately shapes the course of human history. In this understanding von Mises brings forward the most active force within his explanatory system: The Entrepreneur. Although all individual human action is supportive it is the unique nature of the Entrepreneur and his/her activities that highlight the consciousness of the will to self-improvement and the individual’s striving for self-advancement within the commons. In the actions of the Entrepreneur we witness most clearly the calculating mindfulness of man organizing the stuff of this world and planning beyond the current moment toward a future goal or state. It is this exact thinking so carefully described by von Mises that is the foundation of economic and financial analysis itself. It embodies human imagination, conscious forward projection, risk analysis, concrete planning and ultimately and once again as the title describes - Human Action. In the final section of the book von Mises counterpoises the Free Market up and against the Socialistic model. This final section is setup earlier in the book where von Mises disposes of Karl Marx’s explanation and support for Socialism one which Marx personally viewed as a transitional state that would ultimately lead to the inevitable Collectivist Communist state he envisioned and promoted in both Das Capital and the Communist Manifesto. It is my opinion a golden nugget is captured in a very brief statement on page 676. It is in this short sentence where he- Ludwig von Mise- throws the gauntlet down and the reader should take due note. Von Mise writes the following: “The choice is between Capitalism (Free Markets) and Chaos”. From about this point forward to the end he systematically connects the logical end point of Socialism to all the old tyrannical systems of governance throughout history. Systems where the few held near total sway over the many. Where the economic needs, desires and hopes of the masses were ultimately subjugated to the dictates and mandates of their wise overlords. In the Socialist system as von Mises describes it the wisdom of free individuals acting in their own best interest as either consumers or as an entrepreneurs (the Free Market) is replaced by that of a single authority(s). Authorities who, lest we forget, are themselves merely human, but place their proprietary assessment and dictates upon all in a totally non-democratic top down system. The collectivistic economic model is cogently summed up on section 3 of chapter 25: “The essential mark of Socialism is that one will alone acts. It is immaterial whose will it is. The director may be an anointed king, or a dictator, ruling by virtue of his charisma, he may be a Führer or a board of Führer’s appointed by the vote of the people. The main thing is that the employment of all factors of production is directed by one agency. It is upon the transparent truth of this statement that I believe von Mises systematically delivers the coup de grace. It is here he takes the kill shot. In this statement the table is set and now von Mises destroys any chance that adherents to Socialism could salvage even a pretense of an argument that Socialism could economically manage even a regional chain of KoolAid stands no less a total economic system. Von Mises goes on to establish why Socialism can not by its very nature assess worth or apply real financial value to the various factors of production. It just can’t. And because it can’t the economic calculation that a society has to make in order to deploy scarce resources to meet the needs, wants and desires of its citizens is simply impossible. According to von Mises value can only be assessed locally by those closest to these factors or means of production. Only by those capable of assessing or projecting the needs, wants and desires of the citizen consumer. Only by those capable of organizing these same factors of production into directed purposeful activities to meet these needs, wants and desires of its citizens. Needs, wants and desires that can and often are discrete, local and unique within a geographic region or unique with in a specific consumer group or class. Who is this person(s) closest to assessing these two requirements? As von Mises points out it is the oft-maligned Entrepreneur. In contrast the single will of the Socialist economic state is clearly demonstrated by von Mises to be blind on all counts. His detailed deconstruction of the problem the state Socialist system faces in its attempt to create and manage a functioning economy- up to and including trying to mimic the free market without free market institutions- is nothing short of devastating. One hair brained concept in particular von Mises includes is a theoretical concoction of having “the director” (single will) pretend to be a bank and make “loans” to mangers for economic projects for which the managers have no real personal financial risk if their project fails. I found myself almost chuckling as I read von Mise both reference and then categorically refute the strained ungrounded apologetic explanations made by Socialist thinkers as they try to concoct any method no matter how unrealistic or absurd to make their beloved scheme work. In this tome you can actually feel the difference between an explanation based in reality and not pie in the sky theorizing. All served up by a true master of the subject counterpoised against the untethered nonsense of ivory tower academics and theorists: NaÏf’s promoting a system that they (the armchair academic theorists) believe creates equity regardless of how unworkable. All up and against a system (the Free Market) for whom most of them never were actually meaningly apart of and have no actual grasp of. One they viscerally and in many cases irrationally despise. Von Mise makes the case that in the end Socialism as an economic order is doomed to failure. It cannot possibly meet the long standing needs, wants and desires of humankind. This system eventually ends in society-wide discontentment. Conflict is in the cards as this discontentment over unfulfilled failed promises reach a crescendo. Why? Because as von Mise clearly shows it leaves real human needs, wants and desires unmet. This leads to revolution thus confirming von Mise’s previously mentioned warning: “The choice is between capitalism (Free Markets) and Chaos”. Von Mises make it abundantly clear that the Free Market has the exact opposite effect. In Free Markets conflict is avoided to the greatest extent possible. The emphasis is placed on cooperation. It is normally some outside force or interest interested in something other than economic advancement that pursue adversarial initiatives. In summation von Mises is one of modern life’s heroic guides. In Human Action von Mise offers the individual a concrete foundation for their deepest intuitive beliefs. He places practical and moral limits on the power of the state and he correspondingly reinforces where the authentic ground of both economic and moral authority actually resides and that is within the individual whose free will and creative acts illuminates the space he or she is organically apart of. A reality where self directed men and women’s day to day decisions create the world reflective of their own special creative energy and God given gifts.

The greatness of this work comes from its basic philosophical assumptions: von Mises looks at people as they are, but believes in what they can be. To that end, he avoids ascribing great economic or introspective insight to individuals, but also appeals to the great breadth of skill in those and many other economic arenas. He aggressively builds from first principles rather than appealing to empirical economic data, and presents a compelling argument for this choice (namely that economic data are uniquely deceitful due to the manifold conditions which influence them and the far greater multitude of vital but unrecorded data, thus leaving only underlying principles from the story of past events as the valuable information). He is an unabashed champion of personal and economic freedom, but his frequent diatribes against socialism stay within the context of a broader economic framework (at least in this work).

Finally finished reading the 1170 page book, 'Human Action- A Treatise on Economics' by Ludwig von Mises; first published in 1940 and re-published in 2010; appropriate today as it was at the previous time. The general theme: government intervention between free enterprise producer and the consumer, other than protecting both from anarchy, criminals, foreign manipulation, invaders or any other interference for competitive commerce, usually ends up counter productive to the market. Price/rent controls imposed and usually thought to be a good idea at the time, ends up counter productive.(e.g.: Rent control favors a few; others subsidize the few; new rents skyrocket; no new apartments are built, contractors and investors no longer trust the government not to do the same thing again; housing crisis; how do you reverse the problem; public housing/low cost housing, again paid by you and me, a subsidy; the government becomes a consumer of property at our expense; remember, 35 years ago, it started as a well intended plan to protect the elderly/needy; a good majority of those people are no longer on the planet; the new rent controlled occupants are so attached to the rent 'deal' that they will never venture the idea to buy their own home which ultimately would have been a more secure position for their future needs and investment; they are enslaved to the government intervention through negative incentive. Needless to say, I was quite impressed with this massive undertaking; Mises covers every aspect of economics; This is a thorough book and could be use as a 4 year university study. This book could be called: "How to Run a Country', not with promises of a parent/government with child/consumer relationship, but allowing the adults of society to negotiate the commerce of producer and consumer, whereby the consumer runs the country by making choices that give him/her a continuing better standard of comfort, and the producer/entrepreneur adjusts his production or goes out of business. Yin/Yang; Ann Rand, where are you; Atlas Shrugged, again

This is the brilliant Ludwig von Mises master work. It explains why socialism not only has the widely acknowledged incentive problem that prevents people from offering their intelligence and effort to the efficiency seeking workplace; it also explains that without a market price system their is no possibility, even among people of good will, of knowing what combinations of inputs and what production and organizational procedures as well as what consumer products and services should be offered in the first place. A socialist economy is literally impossible and MIses explains why. There are some astonishing facts as well; the USSR didn't collapse right away so how did it limp along for 70 years? The Soviet Union was in a world that had market prices and the USSR studied them religiously and there were enough market economies in the world that could buy resources from the Soviet Union that the USSR could stay up to date crudely with price information. The price of everything reflects subjective consumer preferences and this is imputed backward to production entrepreneurs. We are so accustomed to this that we forget how critical it is that price are arrived at this way. The Soviet Union's desperation is what happened when prices are not arrived at in the unhampered market. Socialist economies are not just inefficient, a socialist economy is literally impossible.

This is the book. It is an in-depth explanation of the very obvious: Economies and lives cannot be centrally planned and freed and liberty are superior to equality which end up producing mass scale poverty and misery.

En esta gran obra Mises hace una enorme contribución a la ciencia al exponer el método praxeológico como base metodológica para el estudio de los fenómenos sociales, enseñándonos como todos estos fenómenos tienen su punto de origen en la acción individual de cada persona y, por tanto, resulta preciso iniciar su estudio a partir de ese reconocimiento. La praxeología nos permite a todos estudiar y entender científicamente, sin necesidad de recurrir a la metafísica, los fenómenos sociales y económicos, demostrándolo al aplicarlo a la cataláctica. Para el lector atento, esta obra de Mises abre las puertas para todo científico interesado en los fenómenos sociales para realizar su estudio a partir del axioma "El ser humano actua", siendo todo fenómeno social una consecuencia lógica de ello. Imperdible obra y debería ser de lectura obligada para todo estudiante universitario.

Lectura imprescindible

This book is a must read for everyone

L'oeuvre majeure et incontournable de Ludwig von Mises, le pilier central de l'école autrichienne. Les raisonnements praxéologiques et l'individualisme méthodologique utilisés, libérés des nouveaux formalismes macroéconomiques, rendent accessibles à tous un raisonnement clair, logique et brillant.

Anspruchsvolles Werk. Thema ist wie Wirtschaft funktioniert. Wie entsteht Gewinn? Wie interagieren Menschen? Warum gibt es Arbeitsteilung? Subjektive Bewertung von Leistungen und Gütern? Der Leser wird mit dem anspruchsvollen Denken des Autors konfrontiert. Philosophische Kenntnisse sind hilfreich.