If you’ve heard of Ludwig von Mises and wondered why his ideas are important to freedom, here’s a chance to easily and quickly gain understanding of this important thinker and the field of Austrian economics.
Or if you’ve not heard of or read about Mises and Austrian economics, here’s your chance. The Institute for Economic Affairs, a free-market think-tank based in London, has just published a short book titled Ludwig von Mises — A Primer. The author is Eamonn Butler.
Butler explains why Mises is important: “Ludwig von Mises was one of the greatest economists and political scientists of the twentieth century. He revolutionised the understanding of money, inflation and recessions; comprehensively refuted the arguments for socialism; and provided a devastating critique of the methodologies of mainstream economics. His contributions to the Austrian School laid the intellectual groundwork for thinkers such as F. A. Hayek, Murray Rothbard and Israel Kirzner.”
The book’s summary gives several points that show why Mises and his ideas are important:
- The market system is much more efficient at allocating resources than political elections, where people get the opportunity to vote only every few years and have to choose between packages of disparate policies. Every penny spent by consumers, in countless daily transactions, acts like a vote in a continual ballot, determining how much of each and every good should be produced and drawing production to where it is most urgently required.
- Free markets have no natural tendency to monopoly or monopoly prices; on the contrary, they have a powerful tendency towards diversity and differentiation, which bid quality up and prices down. Few cartels and monopolies would ever have come into being had it not been for government and the efforts of those with political power to stifle competition. Monopoly would be at its zenith under socialism, where all production is in state hands.
- Policies that are intended to “improve” the market economy may in fact strangle it. Intervention may lead to unwelcome side effects that are then wrongly used to justify further interference, which in turn creates new problems, and so on. Eventually, although the economy still looks capitalist, it ends up being completely controlled by the authorities.
- The belief that state institutions can improve on the market by taking what it does and somehow doing it better is a dangerous conceit. In the absence of the profit motive, there is no obvious way of measuring the success of public agencies in delivering their objectives. Incentives for entrepreneurship are weak, and managers are likely to become risk-averse and bureaucratic.
One of the greatest contributions of Mises was explaining that under socialism, the lack of prices and profits lead mean there is no efficient way of allocating resources. Without markets, he said, economic calculation is impossible.
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