The Significant Role of Ludwig von Mises; L. Fertig

THE SIGNIFICANT LUDWIG VON ROLE MISES OF tg ofawrence :J.erlig ONE DAY several years ago I attended a dinner party at the home of a friend who is a knowledgeable defender of private capitalism and one of the best-known anti communists in the United States. This man had been a socialist a generation ago. Also attending this party was Dr. Mises. Toward the end of the evening our host de scribed how Mises had changed his life. It seems that he had come upon Mises' Socialism one evening and sat up all night to read it. He was completely shaken by this experience, he said, and from that point on he re evaluated his socialist concepts and finally repudiated them. He described in glowing terms the impact of Mises' Socialism, upon his maturing mind, and he attributed the complete change of his intellectual life to the power and logic of Mises' concepts. How many minds have been similarly influenced it is not possible to say. But there is no question that the clarity and vigor of Mises' thinking has had a powerful influence on our times. For he is a scholar's scholar. The Mr. Fertig is economic columnist for the New York World-Tele gra,m and Sun and other Scripps-Howard newspapers. He is author of the book, Prosperity through Freedom, Regnery, 1961.

93 94 LAWRENCE FERTIG force of his ideas has been multiplied by the many able young economists he has trained and influenced. They have gone forth into public service and the academic world to spread the gospel of the free market and free dom. It is not given to many people to have such influence. While it is true that the world in the last generation has moved appreciably toward the collectivist state, it is depressing to think how much further we might have gone had there not stood a valiant guard to lead at least some intellectuals in the direction of the free society. And foremost of this small but valiant group who, de spite great odds, have continued to mold the thinking of many intellectuals in the Western world undoubtedly is Ludwig von Mises. In his prophetic essay published in 1949, Friedrich Hayek defined the intellectual in a very interesting way_ "The term intellectuals," he said, "does not at once con vey a true picture of the large class to which we refer, and the fact that we have no better name by which to describe what we have called the secondhand dealers in ideas is not the least of the reasons why their power is not better understood . . _ What qualifies him (the intellectual) for his job is the wide range of subjects on which he can readily talk and write, and a position or habits through which he becomes acquainted with new ideas sooner than those to whom he addresses himself."

This is a succinct and quite accurate description of intellectuals-"secondhand dealers in ideas." In other words, they are not the seminal thinkers, nor are they THE SIGNIFICANT ROLE OF LUDWIG VON MISES 95 usually great scholars, but they are people in various walks of life who latch on to important ideas of famous scholars and retail those ideas to the circle in which they are influential, large or small. Among the teachers, journalists, authors, and others with whom I am ac quainted, I can testify that Mises is the kind of original thinker who molds the concepts of many intellectuals in ways in which they themselves are often not aware. The fact that his following is not legion is, of course, disturb ing to those who are fighting for individual freedom. But it is well to remember that the leaders in the battle for free enterprise and freedom would not be so effec tive if they had not been inspired and taught by Mises.

For they speak his ideas even though they modify and popularize his concepts. Champion of the Free Market Mises' monumental work, Human Action" is a case in point. Certainly it is not widely read-in terms of a popular best seller; nevertheless, it daily influences the minds of countless students, writers, and teachers. When this book was published in 1949, I devoted a column to reviewing it for the public. "It is about time," I said, "that some truly great advo cate of liberal capitalism restated for our time the case of the free market and the sovereignty of the consumer, as opposed to the philosophy of government interven tion and the sovereignty of the bureaucrat. "But there is need for a much more comprehensive 96 LAWRENCE FERTIG work which would give intellectuals of traditional lib eral persuasion a fountainhead for their gospel-the kind of inspiration and argument supplied to the opposing school by such writers as Karl Marx, Thorstein Veblen, and John Maynard Keynes. The need for such a work has been filled by Ludwig von Mises, one of the world's truly great economists. His book is entitled Human Ac tion, which indicates the scope of his thinking.

"Economic man as such is pure fiction. Man is a whole being and all his actions and choices are interrelated. A definitive work of economics, therefore, can well be called Human Action. "The planned economy is Dr. Mises' target. He says, 'The alternative is not plan or no plan. The question is: whose plan? Should each member of society plan for himself or should a benevolent government alone plan for them all?' And Mises is not afraid to use the words laissez-faire. 'Laissez-faire,' he says, 'means let each in dividual choose how he individually wants to cooperate in the social division of labor-let the consumer deter mine what the entrepreneurs should produce.' "The interventionist is always looking for stability. To bring about this impossible state he must force the public into a rigid economic mold of his own making. As a traditional liberal Dr. Mises' objective is a flexible economic system, which is the only kind of system that can exist in a world of action and change. This may be a book for scholars but it will undoubtedly have a pro found effect upon public opinion."

In the long run Human Action, Socialism, The THE SIGNIFICANT ROLE OF LUDWIG VON MISES 97 Theory at Money and Credit) and Mises' other great books continue to affect the minds of men and thus even if imperceptibly-to have their effects upon events. But in judging Mises' influence, one should not under estimate the power of his person. His personality is unique, as those who have listened to him well know. His seminar at New York University is a rallying point for the faithful of the libertarian cause who want to engage in serious study. Mises' ability to clarify an ab struse subject is truly remarkable. His lectures are not only scholarly, but lively, which is an unusual combina tion. Another very important function which Mises per forms is that of consultant and guide to those of us who are engaged in the daily battle. As an economic journal ist whose function it is to interpret and comment upon ideas and events which are shaping the world of our time, I can bear witness to this.

It is essential and inspiring for us to have ready ac cess to that inexhaustible mine of lore, philosophy, and theory-the mind of Ludwig von Mises. His comments upon some passing event, or upon a problem of national significance, never seem to follow the beaten path. Al ways he brings to bear upon a subject a wealth of his torical information and an insight that is the very heart of wisdom. To those of us who write upon economic and political subjects his suggestions and counsel-which al ways seem to be available without limit-are invaluable. It is Mises' function to state the truth about the mar ket economy without quibble and without qualification. Many authors who write for a more popular field may, 98 LAWRENCE FERTIG on occasion, find it advisable to qualify a blunt truth, or to express their ideas with tenderness fOf the incon sIstencies, illogic, and foibles of their audience. But not Mises. He states his principles in clear-cut fashion with out regard for anything but the truth itself as he sees it. This is of high importance in guiding those who need some star by which to set their compass.

A Guiding Light to Clear-cut Thinking If one is guided by the principles of the market econ omy as expounded by Mises, there is no excuse for fuzzi ness in thinking about the validity of any new economic proposal. These principles permit the writer who is a student of Mises to view with a clear and discerning eye every new utopian proposal for improving the world. Thus he can avoid falling into the many traps which are hidden in the new schemes. I will mention here only one of many such proposals which seem to be gaining ground not only in the United States but in Britain and other countries as well. It is the theory that when an individual acts, he must ponder not only his own self-interest but the public interest as well. He must go about his business with two hats, so to speak. He is supposed to wear one hat when he acts as a private individual who decides what is best for himself.

He is supposed to remove this particular hat and put on another one when he acts as a self-appointed public functionary, deciding what is best for the country and for humanity. Apparently he is to wear each hat sucTHE SIGNIFICANT ROLE OF LUDWIG VON MISES 99 cessively, never permitting his own self-interest to inter fere with the course of action which he finally decides to be in the public interest. According to this theory, when a producer of goods sets his price, he must decide not only what is good for him but what is good for everybody else. When a labor union leader approaches the employer, he must fre quently say, "I can get ten cents an hour more for my men, but it is not in the public interest to take it." When an investor decides what to do with his money, he must think not only of interest rates and dividends but also of what is in the national interest. This is the new philosophy which is gaining. ground here and abroad. It is unworkable, it runs contrary to human nature, it distorts market factors, and it is com pletely utopian. Its only reason for existence is the at tempt to relieve government from the evil effects of bad laws which disturb the market.

How Much Is Enough? In Britain, the London Economist recently recom mended that the Treasury publish a statistic concerning "the amount of wage increases that would be likely to topple the economy off-course ... If these estimates were published," said the Economist~ "and if they found their way into the headlines ... public pressure against in flation could be built up at just the right time." The editorial then goes on to say that the Treasury should publish "the safe permissible limit for increases in wage 100 LAWRENCE FERTIG rates." Thus the government creates inflation of the money supply in the first place and then tries to regi ment the economy so that no individual or group would take advantage of all the inflationary money which is lying around. A similar proposal was made by Henry C. Wallich of Yale University, in a letter to the New York Times. He suggests that wage increases be limited by consensus to 2 per cent a year. He identified this figure as the long range historical rate of productivity gain. It may be asked why Dr. Wallich is searching around for a new formula to supplant the result which the market would give. Plainly the answer is that labor union power is so great that temporarily it can get any wage rate it insists upon. But this uneconomic wage rate eventually is the cause of recession and unemployment, and at that point political pressure causes the federal government to in flate the money supply and to create deficits which are financed by the banking system. The way to cure this situation is to re-establish market conditions, not to im pose some rigid formula which will make bad matters worse.

But perhaps. the most curious suggestion of all was re recently made by an economist who is considered rather conservative in some quarters. He is David Rockefeller, President of the Chase Manhattan Bank, one of the larg est in the United States. When there was a great out flow of American dollars in the latter part of 1960 and the beginning of 1961, Mr. Rockefeller suggested that American corporations holding large funds for investTHE SIGNIFICANT ROLE OF LUDWIG VON MISES 101 ment should not seek the highest return for their funds in international markets. He said, "It would seem wise and responsible-in a time such as the recent past, when the national interest clearly is involved-to exercise re straints in responding to a differential in foreign inter est rates, particularly when the gains are incidental to a company's main business, and loom relatively small on the income statement. Here, as in so many areas, the business community has an opportunity, even an obliga tion, to lead the nation in a rational pattern of behavior, consistent with our growing role in the world."

But in all of the cases cited above did not Mr. Rocke feller, Professor Wallich, and the Editor of the London Economist really beg the question? Did they not assume that they really knew what is in the public interest? In the case of investing funds, one might well assert that the outflow of dollars seeking higher interest returns in other countries is definitely in the public interest, and not against it. It is the exodus of dollars which alerts the United States to the importance of curbing its infla tionary policies. When public policy becomes even slightly anti-inflationary, investors retain their funds in the United States and do not seek to place them abroad. This pressure upon the government for some restraint upon inflation is certainly beneficial to the public. Yet in this particular instance it was asserted that the in dividual knew very well that it was in the public interest not to send his money abroad.

The lesson to be learned in all these. cases is the lesson that Mises has devoted his life to teaching. There is no 102 LAWRENCE FERTIG substitute for the -free market. What is "right" and what is "wrong" is to be determined by each individual, weighing his decisions in a climate of freedom. The world does not seem to" have learned this lesson well. But concepts' and intellectual trends do change over a long period of time. There is no reason why the present trend toward collectivism may not be altered in another generation. In this event there will undoubtedly be many monuments dedicated to the unswerving defender of the market system whose scholarship, wisdom, courage, and integrity have been such a shining example for more than half a century.