The Philosophy of Ludwig von Mises; E. Opitz

Edmund A. Opitz The Philosophy of Ludwig von Mises .AN invitation to speak at Grove City College is a great honor, doubly so, in that I've been asked to talk about Ludwig von Mises. But I am hum bled when I contrast the size of the debt lowe to Mises with the meager gesture that is all I am able to offer as a token payment. I had read Mises' major works before I met the man. I then had the rare privilege of getting to know one of the finest minds in our time, a man who belongs with the great masters of his discipline, Economics; a scholar who advanced that disci pline in several particulars by his own genius. And not only that, Mises was an inspired teacher; from The Reverend Mr. Opitz I. a member of the .taft· of The Foundation for Economic Education. Thl. article appeara here, by permlalon, from a lecture of February 26, 1180at Grove City College a. part of a ..rIe. In tribute to Ludwig von MI... and hi. work.

430 the days of his celebrated Vi enna Seminar almost till the end of his life, men and women sat at his feet, and some of them have become famous in their own right. The Mis esian influence spreads and will continue to manifest itself. Mises lived his active life during the first two-thirds of this cen tury-a period of world turmoil which affected him personally and tragically, forcing him out of his native land and finally out of Europe, losing most of his precious library and other belongings in the course of his escape. Some refugee scholars came to America in the late thirties and early forties and we rolled out the red carpet for them. But not for Mises. Mises had set his entire life resolutely against the ideological absurdities of the twen tieth century which produced the THE PHILOSOPHY OF LUDWIG VON MISES 431 totalitarian upheavals in Europe, as well as the milder but related politi cal and social events in America.

Those European intellectuals who had opposed European fascism and communism in the name of so cialism were welcomed here by their domestic counterparts-American socialists, liberals and New Dealers. Lectureships, academic appoint ments and other honors were made available to them. With Mises it was different. His teachings were a threat to every variety of statism, whatever the label: communism, fascism, Naziism, state interven tionism, national planning. Communist and fascist gangs fought pitched battles in the streets of European cities, but these brawl ers were really brothers under the skin; both were statists and collec tivists. They fought each other for power; they hankered for the au thority to put a nation under red shirts versus brown shirts versus black shirts. But they had a common enemy, and they knew it. The com mon enemy of all the totalitarians was the old-fashioned Whig philoso phy, which, in the second quarter of the nineteenth century began call ing itself ttliberalism."

Classical Liberalism Classical liberalism believed in liberty and justice for all; it severely restricted the role of government and politics; it stood for the Rule of Law, private property, and the free market economy. It designed a set of rules which maximized every per son's opportunity to pursue his per sonal goals; it worked for equal free dom. by abolishing the legal privileges which had hitherto given some groups in society unfair ad vantages over others. It got rid of serfdom and slavery. Mises was a liberal in this old fashioned sense, at a time when the intellectual currents in Europe and America were nearly all moving in other directions. And so, his arrival in New York went almost without notice. But Mises did have readers in this country, and one of them was Henry Hazlitt, who had reviewed Mises' great book, Socialism, shortly after the English translation be came available. Mises and Hazlitt had exchanged letters, and Hazlitt tells about receiving a phone call one day in 1940, a short time after Dr. and Mrs. Mises arrived in Man hattan. ttThe voice at the other end of the line," Hazlitt recalls, Hsaid tThis is Ludwig Mises.' It had the same effect on me," Hazlitt con tinues, ttas if the voice had said tThis is Adam Smith'." Such-in the eyes of a select few-was the stature of the man who arrived in New York on the 2nd of August, 1940.

Cast your mind back about a quar ter of a century, to the mid-fifties. Mises had been here for fifteen years, he had gained a number of 432 THE FREEMAN July friends and his influence was spread ing. Yale University had published his monumental Human Action and reprinted his Theory of Money and Credit and Socialism. These are among the great books of our time, although their time is yet to come. The news began to filter down into the universities that here was a man of massive intellect and broad culti vation who had devoted a lifetime of rigorous thought to expounding and defending the free market economy -eall it capitalism-together with its correlate, the old-fashioned liberal social philosophy. This was but the echo of a forgotten language on most campuses, where orthodoxy in the social sciences included central planning of the society and governmental regulation of the eco nomy among its basic tenets. It occurred to several faculties that it might be a nice gesture in the direction of academic balance to give Mises an hour on campus to tell the students all about capitalism.

Mises has told us why he refused to accept these invitations. ~~Some of these teachers," he wrote, ~~try ... to demonstrate their own impartiality by occasionally inviting a dissenting outsider to address their students. This is mere eyewash. One hour of sound economics against several years of indoctrination of errors! ~~If it were possible to expound the operation of capitalism in one or two short addresses," he continued, Uit would be a waste of time to keep the students of economics for several years at the universities. It would be difficult to explain why voluminous textbooks have to be written about this subject. It is these reasons that impel me reluctantly to decline your kind invitation." I am in perfect accord with the sentiments expressed in this letter of Mises; Mises' philosophy is not to be summarized; not in an hour, not in a semester. I shall not try; but if I succeed in intriguing even one per son into reading Human Action who otherwise might have neglected it the purpose of this lecture will have been achieved.

Mises as a Man of Thought A Man of Action Ludwig von Mises was a man of action; but by action I do not mean Uactivity." As the world tends to judge activity, men of action are presidents, generals, explorers, mountaineers, race car drivers and the like. Mises' action was thought, and thought is the most intense form of action there is, and the most enduring. If some present day Emerson were to write an essay on Man: As Thinker, he could do no better than to hold up Mises as his exemplar. In Mises, thought and ac tion joined, and were as one. I do not mean to suggest that when Mises was asked to list his occupation he wrote in ~~Thinker," or 1980 THE PHILOSOPHY OF LUDWIG VON MISES 433 "Philosopher." I suspect he wrote uEconomist." In popular under standing, an economist is someone who concerns himself with the work ings of business, in~ustry, and trade or one who forecasts the ups and downs of the stock market. Now, these are indeed important human concerns; and Mises did write sev eral big books about production and distribution, capital and interest, money and credit,work and wages, the business cycle, and the several other topics dealt with in academic courses in economics. But Mises' thought and his writings ranged over the whole spectrum of knowl edge, from epistemology to history; he wrote about human action over time-from the inner motivations which give rise to action to the re mote consequences of a person's de cision to act one way rather than another.

I used to walk past a store window in a town where I lived, in which was displayed a drawing of the old pirate symbol, a skull and cross bones. As you walked past this drawing of a death's-head it changed, all of a sudden, as if by magic, into the portrait of a lovely woman. Change perspective and things have an entirely different focus. Misesian economics repre sents a new focus; the subject matter changes from a mere bread-and butter affair into an affair of the mind and spirit; economics deals with valuing, purposeful, goal seeking man. uProduction is not something physical, natural and external," writes Mises, "it is a spiritual and intellectual phenomenon. Its essen tial requisites are not human labor and external natural forces and things, but the decision of the mind to use these factors for the attain ment of ends. . . . The material changes are the outcome of spiritual changes."

A DispositionToward Freedom Nearly everyone in the modern world has a disposition toward free dom, and this disposition is power fully strengthened by the Christian philosophy. Nevertheless, freedom lives precariously in our time in the few places where it survives at all. Freedom may be lost because people do not care enough for it, but that is not our trouble. We want it, but perversely we try to implement freedom by social policies which in hibit and destroy it. There is an anti-economic mentality; it is a re fusal to face up to the way-things are in this significant portion of the human situation. The theologian may give lip ser vice to the idea of God's overlordship of the whole of life yet in practice refuse to admit the existence of an economic realm in which prevails a regularity of phenomena to which he must adjust his action. Man may 434 THE FREEMAN July try to deny his creaturehood in this area, and think to annul economic laws by statute. But if there are regularities here, man must reckon with them; or they will have their reckoning with him.

It is a fact of the human situation as such-regardless ofthe nature of the social order-that mankind does not find, ready-made in its natural environment, the wherewithal to feed, house, and clothe itself. There are raw materials only, and most of these are not capable of satisfying human needs until someone works over these natural resources and transforms them into consumable goods. Man learns to cooperate with nature and make use of natural forces to serve his ends. He has to work in order to survive. Work is built into the human situation; the things by which we live do not come into existence unless someone grows them, harvests them, manufactures them, builds them, transports them. Learning to Economize Work is irksome and things are scarce, so people must learn to economize and avoid waste. They invent laborsaving devices; they manufacture tools, they specialize and exchange the fruits of their specialization. They learn to get along with each other, our natural sociability reinforced by the discov ery that the division of labor· bene fits all. Division of labor and voluntary exchange constitute the market place, which is the greatest labor saving device of all.

((Thisdivision of labor, from which so many advantages are derived," wrote Adam Smith, cCis not origi nally the effect of any human wis dom which foresees and intends that general opulence to which it gives occasion. It is the necessary, though very slow and gradual, consequence of a· certain propensity in human nature ... the propensity to truck, barter, and exchange one thing for another .... It is common to all men, and to be found in no other race of animals." The longest journey must begin with a single step, and it is a very long journey that leads from those primitive beginnings to the complex economic order of our time. But at every step along the way there is that human need to cope with scar city, to satisfy creaturely needs, to provide for material well-being. And it is just as true now as it ever was that human labor is required before goods appear, and that prosperity depends upon productivity.

Signs of the Market The visible signs of our economic activities are all about us; factories, stores, offices, farms, mines, trans portation systems, power plants, and so on. These are the locations where work is performed, things transformed, services rendered, goods 1980 THE PHILOSOPHY OF LUDWIG VON MISES 435 exchanged, wages earned, money spent. This is the economy, and the hallmark of the free society is that the economy is not under govern mental control; politicians do not regulate the economy, consumers regulate the economy by their buy ing habits. The billions of consumer decisions made daily in the market place to buy or not to buy determine what goods will be produced, in what quantities, sizes and colors. Consumers, by their marketplace decisions, determine who shall stay in business, and how large and pros perous a business shall be. The changing needs, desires, and tastes of consumers regulate wages and salaries. If an entrepreneur makes a profit it is a sign that consumers approve of the services he renders them. In the market place the con sumer is sovereign.

The free society has an indispens able role for government. The law, in a society offree people, protects the life, liberty, and property of all per sons alike, ensuring peaceful condi tions within the community. Gov ernment performs as an impartial umpire, by interpreting and enforc ing the previously agreed upon rules. A free society endeavors to se cure and preserve freedom of per sonal action within the rules, and the rules are designed to maximize liberty and opportunity for every one. Government, in the interest of maximum freedom, uses lawful force against criminals in order that peaceful citizens may go about their business. The use of lawful force against criminals for the protection of the innocent is the earmark of a properly limited government, and it stands in utter contrast to the state's use of tyrannical force on peaceful citizens-whatever the excuse for such action. It's the contrast be tween defensive force and aggressive violence; it's the rule of law versus oppression.

Laissez-faire Capitalism In a society where people are free the economic order is referred to as capitalistic. Some prefer to call it the market economy, or the private property order. Laissez-faire capi talism-when the term is shorn of the pejorative connotations that opponents have injected into it laissez-faire· capitalism is the ideal of individual liberty and voluntary association applied to the workaday economic world. It is the economic counterpart of a social order where individual persons have maximum latitude to pursue their personal goals. Mises believed in the unhampered market economy, and with enor mous erudition in several large vol umes he expounded the operations of this intricate system. Starting with the self-evident truth that peo ple would rather be more prosperous 436 THE FREEMAN July than less prosperous, other things being equal, Mises demonstrated with devastating logic that every political interference with the mar ket hurts some people and makes the entire society poorer. The way to make the nation richer and benefit everyone is to turn the market loose; remove every obstruction that inter feres with people's freedom in the market place and the nation's wealth will be maximized. There is no way to upgrade the general wel fare except by increasing productiv ity, and a free people is more produc tive than a politically regulated people.

Political Intervention Government is not an economic institution; government is a politi cal institution, and there's no way that you can employ a political means to accomplish an economic end. All political interventions can do is transfer wealth from one set of people to another set; political ac tion does not produce the wealth it redistributes. Furthermore, gov ernment is society's power struc ture, and when the government uses a power play to garnishee wealth from producers it will redistribute that wealth to those who possess enough political clout to go to Wash ington and lobby for subsidies. And this will not be the poor. The welfare state operates, osten sibly, for the benefit of ttthe poor," but ttthe poor" are in reality its prin cipal victims. Every economic pro gram launched by government defeats the purposes for which the program is proposed. For example, government embarks on a vast pub lic housing project, and Mises dem onstrates that the end result will be a misallocation of resources and fewer housing units than would be available were housing left to the market.

The welfare state is a misnomer; a more apt label for what we have is the provider state. The theory back of the provider state is that govern ment will supply the material wants of the people by way of food stamps, public housing, free schooling, med ical care, direct relief, or whatever. Now, the government has nothing of its own to give away so what it gives to Peter it must have first taken from Paul. The government takes from producers a portion of everything they manufacture or grow, and it takes a portion of every thing people earn by rendering ser vices of one kind or another. The government redistributes a portion of the wealth siphoned into its cof fers by taxation, and thus another accurate label for the kind of gov ernment we now have is the redis tributive state. The market place allocates rewards peacefully, and then government forcibly reshuffies the original apportionments.

It goes without saying that the 1980 THE PHILOSOPHY OF LUDWIG VON MISES 437 market place does not always propor tion reward to merit. But the state is not a meritocracy either! The populace, when free, rewards its heroes, and they may not be yours. On the other hand, the market place never punishes merit; the rack, the wheel, and the stake are exclusively instruments of the state. If the state is allowed autocratic power in the market place it will curb freedom everywhere else. If the mood of the citizens is to demand or accept government handouts a new breed of politicians will emerge, soliciting votes on the promise of more government largess to satisfy the demands of the various pressure groups and lobbies. The siren song is: Vote yourself a raise in pay, or vote yourself better housing, cheaper food, free medical care, and the like. What Government Gives, It Must First Take Away Now we know that this world of ours is not run along the lines of something-for-nothing; there is al ways a quid pro quo. If government gives you something-for-nothing or something-for-Iess, it is obvious that this same government is forcing some of your fellow citizens to take nothing-for-something, or less-for something. Your gain is another's loss; you are living at the expense of someone else. Other people are being victimized for an assumed benefit you enjoy. This is unfair; it is immoral.

The ethical code is violated whenever you pick another person's pocket or steal his purse, and the violation is compounded when you do it legally, that is, when you allow government to do your thieving for you. But only a people with larceny in their souls will write a form of theft into their statutes. Some cynic has suggested that robbery is the first laborsaving device. He's at least half right. And if people do covet their neighbor's property they will surely find legal ways to get their hands on it, and conscience will bend around to approve. An exclusive preoccupation with economizing may lead some people to neglect ethical and other consid erations in their single-minded drive to have their own way, to suc ceed, to get more for less-more re ward for less effort; maximum gain, regardless; something for nothing, whenever possible. So economic sci ence, from the very beginning, has been joined symbiotically to a philos ophy of society called Whiggism or Whiggery in the eighteenth century, later to adopt a more fitting label, liberalism. The term, Whig, derives from Whiggamore, a label contemp tuously applied to some of the seventeenth-century English Dis senters and Nonconformists who led the opposition to the court party.

Adam Smith was a Whig, so was 438 THE FREEMAN July Edmund Burke, and so were most of liberalism, and the free economy the men we speak of as Founding or capitalism-is the only way a free Fathers. The Whig Party of England people can conduct their economic became the Liberal Party in 1829. affairs. The Wealth of Nations Adam Smith, writing in 1776, de scribed the prevailing ~~mercantile system, in its nature and essence a system of restraint and regulation." In contrast to this ~~system of re straint and regulation" Adam Smith offered ctthe liberal plan of equality, liberty and justice." These words of Adam Smith shed a good deal of light on our efforts to understand what men like Mises mean by cClaissez-fairecapitalism." Laissez faire has never meant a free-for-all; capitalism has never implied the absence of rules. Adam Smith does speak of uallowing every man to pursue his own interest in his own way," and if those words are lifted out of context they do suggest a desperate no-holds-barred, rough and tumble struggle for money and power. But when we know that these two lines I have quoted from Smith follow one another in the same sentence his meaning is unmis takable. He is advocating a society based on equality, liberty and jus tice.

Once you have a society whose rules are designed to offer equal justice for all persons, then everyone is free to pursue his personal goals. This is the free society of classical Spiritual Foundation Classical liberalism presupposes a religious philosophy which regards man as a created being who bears a unique relation to God, being formed in His image-meaning that man possesses free will and the abil ity to initiate and command his own actions. This free being is under the moral law laid down in the original constitution of things, responsible for discovering this law and obeying it. He is given dominion over the earth. He is commanded to work in order that he might eat; he is the steward of the earth's scarce re sources and held accountable for their economic use. Classical liberalism, in other words, is the secular projection of Christian philosophy. The American Dream, as Jacques Maritain put it, kept cCalive, in human history, a fraternal recognition of the dignity of man-in other words, the terres trial hope of man (expressed) in the Gospel." The thing called cCliberal ism" today, bears no resemblance whatsoever to classical liberalism; it has nothing in common with the Whiggism of Adam Smith or the liberalism of Ludwig von Mises.

Mises wrote a book entitled Liberalism, describing liberalism as 1980 THE PHILOSOPHY OF LUDWIG VON MISES 439 U a doctrine directed entirely towards the conduct of men in this world ... it has nothing else in view than the advancement of their outward, material welfare and does not con cern itself directly with their inner, spiritual and metaphysical needs." A Deeper Meaning Now, some critics of classical liberalism have judged it to be crass, too neglectful of man's higher na ture. Not so, says Mises: ttThe critics who speak in this vein show only that they have a very imperfect and materialistic conception of these higher and nobler needs. Social pol icy with the means that are ~t its disposal, can make men rich or poor, but it can never succeed in making them happy or in satisfying their inmost yearnings All that social policy can do is further a system that feeds the hungry, clothes the naked, and houses the homeless.

Happiness and contentment do not depend on food, clothing and shelter, but, above all, on what a man cherishes within himself. It is not from disdain of spiritual goods that liberalism concerns itself exclu sively with man's material well being, but from a conviction that what is highest and deepest in man cannot be touched by any outward regulation." Mises further describes some of the central principles of classical liberalism as individual liberty, equal treatment under the law, and the elimination of class privileges; private property, the free market, free trade, and the peaceful coopera tion of all mankind. Most Americans still respond positively to these ideals because they are part of our heritage inscribed in our basic documents, celebrated on patriotic holidays. Man has an innate urge to live better, including the drive to im prove. his material circumstances and enjoy more prosperity. To this end he has always engaged in some degree of specialization, and he's traded and bartered things he wants less for whatever it is he wants more. These voluntary exchanges are market transactions.

The Cultural Framework The market has always existed; voluntary exchanges occur among primitive peoples, and there is a brisk underthe-counter market in communist nations like Russia and China. But mere wishes do not transform the market into the market economy. The market econo my emerges only when the cultural conditions prepare the ground for it, as was the situation in certain western nations in the eighteenth century. When a nation's cultural framework includes such spiritual ingredients as the rule of law, equal liberty, security for property, a high 440 THE FREEMAN July level of morality, and that respect for rationality which makes science and technology possible, then the impulses and incentives which everywhere produce the market will give rise to capitalism, or the mar ket economy-which is the market institutionalized. uThe reformers of the oriental peoples want to secure for their fel low citizens the material well-being that the Western nations enjoy,"

writes Mises, ~~ they think that all that is needed is the introduction of European and Western technol ogy." What they really need, Mises continues, is ~~the social order which in addition to other achievements has generated this technological knowledge .... The East is foreign to the Western spirit that has created capitalism." How can a society whose world view includes such doctrines as Maya, karma and caste produce the social structure upon which the market economy is based? Accept the idea of Maya and you exclude the idea of a rationally structured, cause and effect universe. The doc trine of karma makes it virtually impossible for individuals to have the necessary self-responsibility and will to succeed which are essentials for a going-concern economy. And caste divisions in a society are in compatible with the idea of inherent rights and equality before the law. Capitalism is rooted in the cultural heritage of the West, Christendom, and you can't have the fruits with out the roots; you cannot merely wish an end result-to will the end is to will the means.

A Creative Intelligence The pivot on which Western cul ture has turned is the conviction that a Creative Intelligence is work ing out its purposes through nature, history and persons; and that every individual enjoys a unique relation ship with this Power. Because he is a created being, there is a sacred essence in man, which, in the full ness of time was understood as con ferring certain rights and im munities in the political sphere. By the eighteenth century, our philosophical forebears regarded as self-evident the truth that all men are created equal, possessing certain rights endowed by the Creator. Gov ernment was to be structured around the sovereign person so as to secure his rights and protect his private domain. Americans or ganized themselves politically around a spiritual framework which, paradoxically, regarded poli tics as relatively unimportant. The law was to protect life, liberty and property, so that men and women could better attend to the more im portant things in life-such as reli gion, art, education, science, socia bility and play.

The philosopher-king idea had 1980 THE PHIWSOPHY OF LUDWIG VON MISES 441 prevailed in most ages: Find the wisest and best men and then give them power over the nation so as to magnify their capacity to do good. The American notion was just the opposite. Americans had had some experience of the corrupting influ ence of power, and they were aware of the depravity of human nature-that man is a fallen creature. So the brand new political idea adum brated on these shores was to limit political power so drastically that even if evil men do seize power they can't do much harm. I'd phrase their insight this way: Never advocate any more power for your best friends than you would want to have wielded by your worst enemies. The Political and Economic Aspects of Freedom Two centuries ago things came to a head, in two great social achieve ments. In the Declaration of Inde pendence and Constitution we had the political philosophy and the legal structures for a society of free people. The economic counterpart of our unique politics was the free economy, which promised a society of prosperous people.

But at this very period, Western civilization was to undergo a process of radical secularization which vir tually destroyed the ideas of human nature and destiny which under girded our freedom and prosperity. The human person underwent a radical devaluation; once regarded as the lord of creation he came to be looked upon as the accidental end product of natural and social forces-ttlittle more than a chance deposit on the surface of the world, carelessly thrown up between two ice ages by the same forces that rust iron and ripen com." Gone was the idea of a moral law for man's guidance and fulfillment; gone was the idea of free will: a man's character was not made by him, but for him. Man was the mere creature of circumstance, deprived of initiative, he could not act, he could only react. An English critic named Chris topher Booker, writing on Samuel Johnson, makes reference to this enormous transformation in the human outlook. ttOn the eve of the French Revolution and the age of Romanticism, European civilization stood on the verge of one of the most astonishing and fundamental shifts in collective consciousness in history-the keynote of which was to be an almost exact reversal of every truth about human nature and experience which Johnson had fought through to with such remorseless honesty and pain ... it was proclaimed that human happi ness could be achieved by political means, that the causes of most human ills did not lie within us, but outside us. If there was one belief which was to characterize western 442 THE FREEMAN civilization with ever increasing force from the time Johnson passed away, it was that most human suf fering is caused by external factors.

In Marx, in Freud, in almost every philosopher and thinker who has shaped western attitudes over the past two hundred years (with one or two towering exceptions, such as Dostoevsky), we find this same overpowering drive to oflload the blame for all our guilt, our pain, onto others, onto society, onto our parents, onto political structures, onto our material circumstances." (The American Spectator, October, 1978.) The Consequences of Error The religious and philosophical errors of the eighteenth and nineteenth centuries produced the social and personal disasters of the twentieth century-faulty thinking and fallacious ideas have come to violent issue in the wars of our time. We tried, and we erred; but we can learn from our mistakes. Try a new direction, and we may succeed. In deed, we are succeeding as more and more thoughtful people examine the philosophy of freedom in its several Books by Mlses dimensions and deeper levels. And as they search, more and more peo ple are encountering the towering figure of Ludwig von Mises. Here was a man of unwavering integrity, a man who lived the truths he taught.

It is impossible to summarize the philosophy of Ludwig von Mises, but I shall close with what might be construed as a personal testimony by Mises himself, which does sum up the character of the man. It is a paragraph from his little book Bureaucracy. HMankind would never have reached the present state of civiliza tion without heroism and self sacrifice on the part of an elite. Every step forward on the way to ward an improvement of moral con ditions has been an achievement of men who were ready to sacrifice their own well-being, their health, and their lives for the sake of a cause that they considered just and beneficial. They did what they con sidered their duty without bothering whether they themselves would not be victimized. These people did not work for the sake of reward, they served their cause unto death." , Of the numerous volumes written by and about this outstanding economist, a dozen or more are stocked for resale by: The Foundation for Economic Education, Inc., Irvington-on-Hudson, N.Y. 10533.

Ask for "A Literature of Freedom" catalogue and order form.