Mises as Antidote
Address given at The Ludwig von Mises Institute
February 6, 1999
At the beginning of the fall semester last August, I was interviewed by our university's school newspaper, The Omnibus. After the usual questions like, "Do you like it here in Bolivar" and "What courses do you teach?" the reporter asked me "Why did you decide to become an economist?" as if she wanted to get at the mystery of why not just me, but anyone would want to pursue such a profession. Without a moment's hesitation I spun my chair around, reached up to the second shelf of my bookcase, and pulled down my worn copy of Human Action.
This book has had huge effect on the course of my life. It was reading Human Action that convinced me to major in economics, to want to teach economics, to go to graduate school, and to become a scholar. It was this book that showed me what economics is, why economics is important, why liberty is important, and what true scholarship is all about.
As I was beginning to stretch my sophomore mind, (not to be confused with my sophomoric mind) I joined Neil McCaffrey's Conservative Book Club. Within the next few weeks, I received their bulletin advertising the magnum opus of some Austrian economist named Ludwig von Mises. The book looked big and was called Human Action. The advertisement featured high praise for both the author and the book, but I had heard of neither. It cost in the neighborhood of $35.00 (a lot of money for a college student in 1986), but it counted for two required book purchases. I will be forever grateful to Dr. Elder, my economics professor at Northwestern College, for encouraging me to buy it if I had the money. I did, and it was one of most profitable investments I have ever made.
When a rocket is launched, if its trajectory is off target just a degree or two, it can miss its destination by miles. The same holds true with scholarship. When one sets out on the path of the academic, it is important that he is starting from a firm foundation and that the course is true. Human Action was such a foundation for me in many ways, and continues to be an intellectual cornerstone for the many students who have discovered its contents.
The chief virtue that Human Action possesses for the student is that it strongly, yet matter-of-factly sets forth economics as the pursuit of truth. Not the truth of the passing fancy, nor the yet-to-be-refuted-with-statistics mini-truths, but of economic laws that will stand for all ages.
Upon beginning the first chapter, the student is immediately set forth on the right road, as Mises begins where economics must begin: Human Action. Mises defines Human Action as "purposeful behavior." All of his economic theorems and corollaries are deduced from this non-controversial axiom. This immediately rests economics on intellectual bedrock.
As I read the opening chapters of Human Action during my Sophomore year, I had a sort of epiphany as the theories I had learned in my classes suddenly fell into logical place. The laws of supply and demand were not merely plausible sounding notions that were true only in an unrealizable ideal world. They were not merely necessary implications of assumptions of the neoclassical model. Those assumptions may indeed be plausible, but they are assumptions nonetheless, with no necessary logical linkage between them. Along came Mises who showed me that economics is logically whole and that supply and demand are rooted in the law of marginal utility which itself is deduced from the axiom that human beings act purposefully.
Mises's defense of the law of demand, for example, is much superior to that of Nobel Prize winning economist George Stigler's. Stigler says there is no rigorous proof that as the price of a good goes up, the quantity of that good that is demanded goes down, other things equal. He merely says that we can be pretty sure this is the case because "if an economist were to demonstrate its failure in a particular market at a particular time, he would be assured of immortality, professionally speaking, and rapid promotion. Since most economists would not dislike either reward, we may assume that the total absence of exceptions is not from lack of trying to find them."
In other words, we think this is the case, because this is the way its always been. However, there is always the possibility that tomorrow people will begin to demand more as the price of a good goes up. We can never be really sure. A student who reads Mises, however, is not left walking on the shifting sand of empiricism, but on the terra firma of true axioms and sound logic.
It is hard to overestimate the importance of Mises's rooting economics in the truth of Human Action. For the student, the intellectual consequences are many. One of the most important is that it allows the student to integrate economics with other bodies of thought. For me this was especially important. As a student being exposed to new thoughts and ideas on both the undergraduate and graduate level, I wanted to make sure that economic theory could be integrated with my primary frame of reference, Christian orthodoxy. Did economic doctrine regarding the nature of the acting person square with this tradition of thought?
Well, Christianity teaches that man is a person who acts with a purpose. As J. Gresham Machen writes in The Christian View of Man, "the actions of a person, just because they are free actions, and no mere meaningless vagaries of blind chance, are determined by motives. When a man is placed before some important turning-point in his life, he sets before himself the considerations on one side and then the considerations on the other side then, in light of those considerations…he acts."
Mainstream economics gives lip service to what it calls "choice theory." However, it starts from the assumptions mentioned above and proceeds to do analysis as if economic agents are more like the inanimate objects of physics, merely reacting to stimuli called relative costs. Mises, on the other hand, takes a different approach. Mises recognized that economic activity was the result of purposeful choices made by individuals: a point of view that fits nicely with Christian doctrine.
Additionally, a great tension was resolved in my mind as I read Mises's exposition of self-interest. This is so important for a student, because in so many other classes he is being told that economists assume that people are motivated only by selfish greed and a desire to gain only the things of this world. Mises destroys this criticism as he writes:
"What a man does is always aimed at an improvement of his own state of satisfaction. In this sense—and in no other—we are free to use the term selfishness and to emphasize that action in necessarily always selfish. Even and action directly aiming at the improvement of other people's conditions is selfish. The actor considers it as more satisfactory for himself to make other people eat than to eat himself."
Mises allowed me to see that economics takes into account all of the various motivations that people have. He explains that humans are motivated to increase their level of satisfaction, not because they are necessarily greedy. This is one of the most important stumbling blocks that students, especially at Christian colleges and universities, have to overcome.
Another important distinction students need to make is that between economics and ethics. Mises clearly makes the distinction. Theorizing about the economic consequences of a particular policy is not the same thing as deciding whether such a policy is good or bad. Economics as a science cannot by itself tell us if a policy should or should not be undertaken. My early reading of Human Action made me rightfully skeptical of any intervention in the economy in the name of efficiency.
Besides increasing my understanding of economics, my reading Human Action set me forth on my career. Reading Human Action made me want to become an economist. Few college students know exactly what they want to do once they graduate. Of course, they all want to make a living, but they don't want just any job. They look for vocations they feel are worth pursuing. After my exposure to Human Action, I knew what I wanted to do. I wanted to do this. Economic theory isn't a waste of one's life. It is furthering a body of knowledge. It is teaching more students the fundamental truths of economic law.
Human Action was also encouraging because, while it was high-level economics, I could read and understand it [most of the time]. Mises's prose was clear and his logic made sense, unlike the professional economics journals that were on the periodical shelves of our school library. I never would have become an economist if all there was to read was the American Economic Review. One of my economics students, who happens to be from China, has read all of Human Action and has praised it for its readability.
I was further encouraged as I read Human Action because it became apparent that good economics provides knowledge very relevant to the world in which we live. Mises did not spin out some sort of ideal theory of "perfect competition" that is removed from life. As I sat in my microeconomics classes and heard the professor describe the characteristics of perfect competition, I joined my fellow students in doubting whether any market is like this. While the model may provide some helpful conclusions, it is unrealistic enough to cause even the most earnest economics student ample cognitive dissonance.
As I describe to my students the same market construct for the sake of exposing them to the model, they give me the same reaction. This is another great hurdle to jump. I often hear my students ask, "Does it really work like this?" This is a perfectly reasonable question. In Human Action Mises gives a picture of the real market where real entrepreneurs make decisions under real uncertainty in real time with real information limitations. As a student, I was able to compare the standard textbook model with the real economy as described by Mises. This kept me from changing majors and also gives my students a better theory on which they can hang their hat.
One of most important benefits a student receives from reading Human Action is its authoritative commentary on poliitcal issues. When assigned to write a paper on the viability on social security, the first place I turned to was Human Action. The passage I read then I have never forgot. It is a passage that is as timely as today's headlines. Mises writes,
"One may try to justify [social security] by declaring that the wage earners lack the insight and the moral strength to provide spontaneously for their own future. But then it is not easy to silence the voices of those who ask whether it is not paradoxical to entrust the nation's welfare to the decisions of voters whom the law itself considers incapable of managing their own affairs."
This question rings as true today as it did when it was written.
Upon doing research for a policy paper in my American Public Policy course, I learned from Mises the negative consequences of the welfare state. I became quickly acquainted with the insight that any sort of middle-of-the-road welfare policy can never be a stable solution. If we subsidize anything, we will get more of it. If we subsidize grain farmers, we will get more grain. If we subsidize poverty, we will get more poverty. If we subsidize more illegitimate children, we will get more illegitimate children. Such interventions quickly create new problems that call for even more intervention until we are on the doorstep of full blown socialism.
When confronted with pure socialist ideology in my cultural anthropology course, again I found Human Action to be a fount of much wisdom. (My professor even looked like Karl Marx. Just so there was no confusion as to where his sympathies lie, the wall behind his desk sported a huge poster of Marx.) Early on Mises exposed to my mind the hypocrisy of much egalitarian rhetoric. When a leftist begins chanting "Fraternity! Equality!" he is really yelling "What about my needs!?!" In a passage that has ever stuck with me Mises writes,
"When the American wage earner refers to equality, he means that the dividends of the stockholders should be given to him. He does not suggest a curtailment of his own income for the benefit of those 95 per cent of the earth's population whose income is lower than his."
A young student needs this kind of guidance if he is to avoid the pitfalls of interventionist dogma that he is daily being fed in the classroom, from the media, and from his friends.
Economics, however, is not the only area of thought in which Human Action teaches. Mises provided me with an early refutation of deconstructionism, the anti-theory of literary criticism that claims that there is no meaning to be found in what an author says except that which the individual reader constructs for himself. And if what I think an author is saying is diametrically opposed to what you think he is saying, well that's okay, both are equally true constructions. Students need a sure mind now more than ever in these postmodern times, for our very president has taken a stab at deconstructing the meaning of being "alone" and questioning what our definition of the word is is.
Throughout the modern era, different interest groups have argued for what Mises termed polylogism. Marxists thought that there was an inseparable gulf between the proletariat mind and the bourgeois mind. Not that the two classes had different opinions about things, but that they actually used two different forms of logic. Their minds were constructed differently, so lets kill the bourgeois. While working in Washington, D.C., I often saw a popular T-shirt that sports this philosophy along racial lines. It proclaims, "It's a black thing. You wouldn't understand." The same sort of thinking is found in feminist academic circles and in all brands of multiculturalism. Mises points out that Marx, himself, was a bourgeois who never explained how he managed to be blessed with a proletariat mind. Mises concludes his refutation of such illogic by writing, "A theory is either correct or incorrect…But a theory can never be valid for a bourgeois or an American if it is invalid for a proletarian or a Chinese."
As I was a junior, having read this tonic for such diseased thinking, I became fully conversant in the discussions I had with my friend, an English major, about the various schools of literary nonsense. She was taking her senior seminar in literary criticism. Because I had read Mises about polylogism, I was fully equipped to debate the issues. Over lunch we would have much fun deconstructing the deconstructioninsts.
In writing Human Action, Mises did not only provide us with a coherent treatise of economic theory. He did not only set forth a ringing defense of reason and liberty. In Human Action a student holds in his hands a supreme act of scholarship. Human Action did not only made me want to be an economist. It also inspired me (and still inspires me) to be a true scholar.
From the beginning, the reader of Human Action is struck by Mises's sweeping knowledge. Murray Rothbard once recounted how, when someone first recommended the book to him, he asked "What is it about?" The response to Rothbard was "Everything." Just this week a student of mine was impressed with the same observation. For my managerial economics course, I assigned from Human Action a brief section about the distinction between the manager and the entrepreneur. The student volunteered that he liked the section and then reported that it interested him so much that he began to read through the first part of the book and was greatly impressed with Mises's scope of knowledge. He said, "He doesn't write just about economics. It's all there, of course, but he also writes about everything else." This student now has a standard in his mind for what real scholarship is.
Mises's high standard is manifested throughout the book. He was obviously well-versed in economic thought, but he demonstrates his familiarity of history, political theory, philosophy, and culture. Throughout Human Action one finds references to Aristotle, Bentham, Mill, Bismark, Napoleon, Marx, Engles, St. Francis of Assisi, Locke, Leibniz, and Einstein, just to name a few. One facet of Mises's thinking that particularly impressed me was his references to the arts. Whenever Mises discusses art, it is clear that he knew what real art was. He was a man of high culture. His examples of creative genius were Mozart, Dante, and Beethoven.
After reading Human Action as a student, I was left with the feeling that this what real scholarship is. This is the level that I should aspire to. This is the level that all scholars should aspire to. Mises provides for every student a role model of the scholar in pursuit of truth.
Let me hasten to add that none of what I have said has been meant to add a religious-like aura around Mises's great work. From time to time students who have come to believe Mises's theories have been accused of having a religious faith in their master; that Austrian economics is more religion than social science; that engaging in discussions about the implications of Mises's thought is akin to holding prayer meetings.
Nonetheless, this criticism is patently untrue. Of course shallow minds can take any book that they read and turn it into a holy text. The fact is that if a student comes to Human Action with a critical mind, he will find economic truth on page after page. And this is not the truth of dogma, but of objective logic. There is nothing supernatural or mystical about it. Mises simply gets it right time after time. Would that more of today's economists had such a record.
It is impossible to calculate the full benefits I have taken from Mises's Human Action. It showed me the truth of economics. It made me want to become an economist. It inspired me to be a scholar, and it set forth the rational case for liberty. It does the same for my students. I am extremely honored to have the opportunity to speak at a conference celebrating the fiftieth anniversary of this great book. When my economics professor, Dr. Elder, encouraged me to buy a copy of Human Action, neither of us knew where I'd end up. If you want to fan the embers of liberty and economic truth, buy a student you know a copy of Human Action. Someday they will be speaking at a conference like this, explaining the great impact it had on their life.
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See an essay, chronology, and bibliography of Mises.
Read Murray N. Rothbard’s Essential von Mises.
Click here to purchase Human Action: The Scholar's Edition.