Jonathan Newman provides a brief overview of economic fundamentals for a free society in his article What are Mises’s Six Lessons? Excerpts in italics with my bolds and added images.  H/T Tyler Durden

Ludwig von Mises’s Economic Policy: Thoughts for Today and Tomorrow has become quite popular recently. The Mises Book Store has sold out of its physical copies, and the PDF, which is available online for free, has seen over 50,000 downloads in the past few days.

This surge in interest in Mises’s ideas was started by UFC fighter Renato Moicano, who declared in a short post-fight victory speech, “I love America, I love the Constitution…I want to carry…guns. I love private property. Let me tell you something. If you care about your…country, read Ludwig von Mises and the six lessons of the Austrian economic school.”

The “six lessons” he is referring to is Mises’s book, Economic Policy: Thoughts for Today and Tomorrow, which was republished by our friends in Brazil under the title “As Seis Lições” (“The Six Lessons”).  If you are interested in what Mises has to say in this book, which is a transcription of lectures he gave in Argentina in 1959, here’s a brief preview, which I hope inspires you to read the short book in full.

Lecture One: Capitalism

Mises begins his first lecture with an overview of the development of capitalism out of feudalism. Businesses began “mass production to satisfy the needs of the masses” instead of focusing on producing luxury goods for the elite. These big businesses succeeded because they served the needs of a larger group of people, and their success wholly depended on their ability to give this mass of consumers what they wanted.

Despite the amazing and undeniable increases in standards of living, even for a growing population, capitalism had its detractors, including Karl Marx, who gave capitalism its name. Mises says that while Marx hated capitalism and that Marx dubbed it thusly as an attack on the system, the name is a good one:

because it describes clearly the source of the great social improvements brought about by capitalism. Those improvements are the result of capital accumulation; they are based on the fact that people as a rule, do not consume everything they have produced, that they save—and invest—a part of it.

Prosperity is the result of providing for the future—more precisely it is the result of setting aside consumption today by saving and investing resources in production. Mises says that this principle explains why some countries are more prosperous than others. When it comes to economic growth, “there are no miracles.” There is only “the application of the principles of the free market economy, of the methods of capitalism.”

Lecture Two: Socialism

In the second lecture, Mises takes a closer look at Marx’s proposed system: socialism. Economic freedom means that people can choose their own careers and use their resources to accomplish their own ends. Economic freedom is the basis for all other freedoms. For example, when the government seizes whole industries, like that of the printing press, it determines what will be published and what won’t and the “freedom of the press disappears.”

Mises acknowledges that there is no such thing as “perfect freedom” in a metaphysical sense. We must obey the laws of nature, especially if we intend to use and transform nature according to our ends. And even economic freedom means that there is a fundamental interdependence among individuals: “Freedom in society means that a man depends as much on other people as other people depend upon him.” This is also true for big businesses and the entrepreneurs who lead them. The true “bosses” in the market economy are not those who shout orders to the workers, but the consumers.

Socialists despise the idea of consumer sovereignty because
it means allowing mistakes. In their mind, the state should
play the paternalistic role of deciding what is good for everyone.

Thus Mises sees no difference between socialism and a system of slavery: “The slave must do what his superior orders him to do, but the free citizen—and this is what freedom means—is in a position to choose his own way of life.” In capitalism, this freedom makes it possible for people to be born into poverty but then achieve great success as they provide for their fellow man. This kind of social mobility is impossible under systems like feudalism and socialism.

Mises ends this lecture with a short explanation of the economic calculation critique of socialism. When the private ownership of the means of production is prohibited, then economic calculation is made impossible. Without market prices for factors, we cannot economize production and provide for the needs of the masses, no matter who oversees the socialist planning board. The result is mass deprivation and chaos.

Lecture Three: Interventionism

Interventionism describes a situation in which the government “wants to interfere with market phenomena.” Each intervention involves an abrogation of the consumer sovereignty Mises had explained in the two previous lectures.

The government wants to interfere in order to force businessmen to conduct their affairs in a different way than they would have chosen if they had obeyed only the consumers. Thus, all the measures of interventionism by the government are directed toward restricting the supremacy of consumers.

Mises gives an example of a price ceiling on milk. While those who enact such an intervention may intend to make milk more affordable for poorer families, there are many unintended consequences: increased demand, decreased supply, non-price rationing in the form of long queues at shops that sell milk, and, importantly, grounds for the government to intervene in new ways now that their initial intervention has not achieved its intended purpose. So, in Mises’s example, he traces through the new interventions, like government rationing, price controls for cattle food, price controls for luxury goods, and so on until the government has intervened in virtually every part of the economy, i.e., socialism.

After providing some historical examples of this process, Mises gives the big picture. Interventionism, as a “middle-of-the-road policy,” is actually a road toward totalitarianism.

Lecture Four: Inflation

There can be no secret way to the solution of the financial problems of a government; if it needs money, it has to obtain the money by taxing its citizens (or, under special conditions, by borrowing it from people who have the money). But many governments, we can even say most governments, think there is another method for getting the needed money; simply to print it.

If the government taxes citizens to build a new hospital, then the citizens are forced to reduce their spending and the government “replaces” their spending with its own. If, however, the government uses newly printed money to finance the construction of the hospital, then there is no replacement of spending, but an addition, and “prices will tend to go up.”

Mises, per usual, explodes the idea of a “price level” that rises and falls, as if all prices change simultaneously and proportionally. Instead, prices rise “step by step.” The first receivers of new money increase their demands for goods, which provides new income to those who sell those goods. Those sellers may now increase their demands for goods. This explains the process by which some prices and some people’s incomes increase before others. The result is a “price revolution,” in which prices and incomes rise in a stepwise fashion, starting with the origin of the new money. In this way, new money alters the distribution of incomes and the arrangement of real resources throughout the economy, creating “winners” and “losers.”

The gold standard offers a strict check against the inflationist tendencies of governments. In such a system, the government cannot create new units of money to finance its spending, so it must resort to taxation, which is notably unpopular. Fiat inflation, however, is subtle and its effects are complex and delayed, which makes it especially attractive to governments that can wield it.

In this lecture Mises also executes a thorough smackdown of Keynes and Keynesianism, but I’ll leave that for readers to enjoy.

Lecture Five: Foreign Investment

Mises returns to a principle he introduced in the first lecture, that economic growth stems from capital accumulation. The differences in standards of living between countries is not attributable to technology, the qualities of the workers, or the skills of the entrepreneurs, but to the availability of capital.

One way that capital may be accumulated within a country is through foreign investment. The British, for example, provided much of the capital that was required to develop the rail system in the United States and in Europe. This provided mutual benefit for both the British and the countries on the receiving end of this investment. The British earned profits through their ownership of the rail systems and the receiving countries, even with a temporary “unfavorable” balance of trade, obtained the benefits of the rail system including expanded productivity which, over time, allowed them to purchase stock in the rail companies from the British.

Foreign investment allows the capital accumulation in one country to speed up the development of other countries, all without a one-sided sacrifice on the part of the country providing the investment. Wars (especially world wars), protectionism, and domestic taxation destroy this mutually beneficial process. When countries impose tariffs or expropriate the capital that belongs to foreign investors, they “prevent or to slow down the accumulation of domestic capital and to put obstacles in the way of foreign capital.”

Lecture Six: Politics and Ideas

The classical liberal ideas of the philosophers of the eighteenth and early-nineteenth centuries helped create the constrained governments and economic freedom that led to the explosion of economic growth Mises discussed in the first lecture. But the emergence of minority “pressure groups,” what we would call “special interest groups” today, directed politicians away from classical liberal ideals and toward interventionism. The groups that would benefit from various interventions lobby the government to grant them favors like monopoly privileges, taxes on competition (including tariffs), and subsidies. And, as we have seen, this interventionist spiral tends toward socialism and totalitarianism. The “resurgence of the warlike spirit” in the twentieth century brought about world wars and exacerbated the totalitarian trends even in the once exemplary nations.

The concomitant rise in government expenditures made fiat money and inflation too tempting. The wars and special projects advocated by the pressure groups were expensive, and so budget constraints were discarded in favor of debasement.

This, Mises says, explains the downfall of civilization. He points to the Roman Empire as an example:

What had taken place? What was the problem? What was it that caused the disintegration of an empire which, in every regard, had attained the highest civilization ever achieved before the eighteenth century? The truth is that what destroyed this ancient civilization was something similar, almost identical to the dangers that threaten our civilization today: on the one hand it was interventionism, and on the other hand, inflation.

Mises finds hope in the fact that the detractors of economic freedom, like Marx and Keynes, do not represent the masses or even a majority. Marx, for example, “was not a man from the proletariat. He was the son of a lawyer. … He was supported by his friend Friedrich Engels, who—being a manufacturer—was the worst type of ‘bourgeois,’ according to socialist ideas. In the language of Marxism, he was an exploiter.”

This implies that the fate of civilization depends on a battle of ideas, and Mises thought that good ideas would win:

I consider it as a very good sign that, while fifty years ago, practically nobody in the world had the courage to say anything in favor of a free economy, we have now, at least in some of the advanced countries of the world, institutions that are centers for the propagation of a free economy.

May we continue Mises’s project and fulfill his hope. What the world needs is “Menos Marx, Mais Mises, ”  I.e. Less Marx, More Mises.

Background:  America’s Future:  Market or Jungle

America’s Future: Market or Jungle?

David Strom explains the growing rift between liberals and the extreme left in his article Gulp: Jonathan Chait Is Right.  Excerpts in italics with my bolds and added images.

I often make the distinction between liberals and Leftists.  I understand why many people think I am too generous in doing so because liberals often fly cover for or implicitly coddle the antics of Leftists, but there is a genuine difference. Liberals tend to think the antics of Leftists are a stupid distraction but fear that criticizing them would give aid and comfort to the enemy. 

Conservatives do that, too. Look at Laura Loomer as exhibit one. We have our share of loons, the big difference being that they have less power over our Party and our movement than the Left does over Democrats. And, of course, conservatives don’t control any of the levers of administrative power in America, at least at the federal level. 

There are plenty of principled people on both sides of the aisle, although far too few. Jonathan Chait, with whom I have few views in common, is one of them. 

In a great piece in New York Magazine, he calls out not just the Left, but Democrats on the Leftist authoritarians who are shutting down speech in America.  He notes the obvious: if what is being done by the Left in America was being done by the Right, Democrats would be freaking out.  Of course, Democrats are freaking out anyway, given that not all conservatives are in jail yet, but you get the idea. 

Chait, of course, is particularly bothered by the fact that Leftists are now aiming their fire at Democrats, and thus helping the Republicans. But at least he acknowledges the problem and believes that shutting down speech and harassing anybody is authoritarian. 

“The goal of these maneuvers is not to make the case for pro-Palestinian policy, but to abuse and deny basic rights to those who fail to endorse the protesters’ beliefs. And yes, being prevented from holding a planned speech to supporters, stalked on the street, or subjected to sleep denial are all forms of abuse. Almost nobody believes these are all just natural parts of the give and take of public disagreement.

The most elemental premise of liberalism is that politics
should be governed by a uniform set of
rules or norms that apply to everybody,
regardless of the content of their beliefs.

Over the last decade, an increasingly visible fault line has opened up on the left between political liberals and more radical activists. The illiberal left defines politics as a conflict between oppressor and victim and does not believe the former deserves the same rights as the latter. (Crucially, the special prerogatives of victimhood apply not only to victims but also to those struggling on their behalf.)

Abusive protesters usually meet critiques of their illiberal methods with a facile comparison to the civil-rights movement. But that movement was designed for a political environment in which basic liberal rights did not exist: Black Americans lacked the right to vote, to petition for grievances, or otherwise exert basic freedoms that white Americans enjoyed. The movement’s theorists did not intend their carefully designed arguments to be a permanent license for any progressive cause to declare itself beyond the law for all time.”

The simple truth is that the Right doesn’t do any of these things, despite the fact that the media freaks out any time more than two conservatives get together to say anything. Suddenly we are all Nazis trying to instigate a Beer Hall Putsch.  The Left, though, relies on harassment as their primary tactic. Not speeches. Not protests. But harassment. 

I’m not referring to tactics like holding protest marches, speeches, social-media posts, organizing uncommitted votes in the Democratic primary, or other exercises of First Amendment rights. I’m specifically referring to a campaign to shut down speakers who oppose (or even, in many cases, simply decline to endorse) the movement’s agenda.

Usually, it means interrupting speeches with screaming insults until the protesters are dragged out of the room, which has become the norm at Biden campaign events. At events with sub-presidential levels of security, protesters often succeed in overwhelming the event and its security and shutting down the speech or event entirely, sometimes employing violence.

I’d place in the same category aggressive personal harassment campaigns, like gathering outside somebody’s home at three o’clock in the morning with bullhorns shouting “We will not let you sleep!,” or surrounding individuals on the street to scream insults.

It is refreshing to see liberals beginning to stand up to the bullies on the Left and scream, “Enough!” It is frustrating that it has taken an outbreak of attacks on Democrats to inspire them to speak up, because I am quite certain that they have known for a while–since at least 2020–that the Left unleashed is a very bad thing for the country.

But until recently, the Left’s tactics have worked well enough. Liberals cheered on as Trump appointees were driven out of the public space, unable to even go to a restaurant without harassment.  I don’t know what Chait thought of that, so I will charitably assume he objected. As many liberals quietly did, I suppose.

As a nearly 60-year-old man (who in his head is still in his 30s, despite an aging body) I still hanker for the more sedate and norm-constrained days of the Reagan era.  Politics was still quite rough-and-tumble, and the 60s and early 70s were pretty awful. However, in the 80s and early 90s, both parties were still somewhat constrained and occasionally worked together. (The Robert Bork and Clarence Thomas hearings were very low points, though).

As you know, I cringe at the worst rhetorical excesses of the Right. But they aren’t in even the same universe as what the Left has been doing over the past few years, escalating to what amounts to political violence and harassment.

 

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