Mises Institute

Mises says, "Life itself is exposed to many risks. At any moment it is endangered by disastrous accidents which cannot be controlled, or at least not sufficiently. Every man banks on good luck. He counts upon not being struck by lightning and not being bitten by a viper." The social engineer attempts to bring about a desired outcome by forcing people to behave in a certain way. Mises sees the engineer and the social engineer as having parallel tasks: one manipulates lumber and iron, the other attempts to manipulate human beings.

Human Action is indispensable for comprehending the operation and consequences of interventionism, which is the least understood economic system. The treatise is the culmination of Mises's long-standing research program, which was to analyze and compare the three possible economic systems—capitalism, socialism, and interventionism—from the viewpoint of which best promotes social cooperation under the division of labor. Almost all contemporary progressives have embraced interventionism as the true path to socialist bliss.

Is Human Action the Hidden Impact Crater of Modern Economics? by Mises Institute

Alchian began his seminar by reading a paragraph. It was a paragraph about property, and he asked if anyone in the group could identify it. I was the only one; I recognized immediately that that was from Mises' Human Action. As he developed that first lecture — which became I think one of the most important economic articles of the twentieth century, "Economics of Property Rights" — it was like a light bulb went off in my head, it was incredible. All of a sudden, everything that I had done intellectually for thirteen years came together, with this one idea of Alchian's about the real nature of property rights and the Misesian notion of people making choices.

I thought that before turning to the present-day literature, it would be helpful to take a look at the state of monetary thought at the outset of World War I, in order to appreciate the progress that had been achieved since then. I opened the book at Christmas of 1992 and was in for a great surprise. This old master excelled in clarity of expression, and he had dealt with a subject of immense importance — the nature, causes, and consequences of the subjective value of money. From my previous studies I knew that this topic had not made it into the standard texts in money and banking. Mises demonstrated that this omission had been a grave error.

All human values are offered for option. All ends and all means, both material and ideal issues, the sublime and the base, the noble and the ignoble, are ranged in a single row and subjected to a decision which picks out one thing and sets aside another. Nothing that men aim at or want to avoid remains outside of this arrangement into a unique scale of gradation and preference. Out of the political economy of the classical school emerges the general theory of human action, praxeology.

Keynesian macroeconomics had displaced Austrian business cycle theory and solidly established itself as mainstream macroeconomics. Meanwhile, most of the economics profession sided against the Austrian School in the socialist calculation debate. By the 1940s, the Austrian School was left behind as economic theory developed. Those who were identified as associated with the Austrian School passed away or drifted toward the mainstream. It is not much of an exaggeration to say that by 1950, Mises was the only remaining active member of the old Austrian School.

Mises's response, addressing subsidies more generally, is instructive: "A project P is unprofitable when and because consumers prefer the satisfaction expected from the realization of some other projects to the satisfaction expected from the realization of P. The realization of P would withdraw capital and labor from the realization of some other projects for which the demand of the consumers is more urgent. The layman and the pseudo-economist fail to recognize this fact. They stubbornly refuse to notice the scarcity of the factors of production."

While he was never mentioned in West German economic textbooks, his name figured prominently in Commie East Germany. In one of these textbooks, you could also find some detailed criticisms of Western, so-called bourgeois economics and economists, among them Friedman and Hayek, but in particular also Mises, who was singled out as the most wrongheaded, dangerous, and detestable of them all.

Individuals' time preferences determine the societal rate of interest, which Mises calls the "originary interest" rate. The rate of interest found in the loanable funds market is commonly believed to be the fundamental interest rate. But the loanable funds market only "adjusts the rate of interest on loans to the rate of originary interest." Lower time preferences are expressed through a decrease in consumption spending, an increase in savings and investment, and a decline in the originary interest rate, while higher time preferences cause the opposite.