Ludwig von Mises as a pure subjectivist

Abstract

Introduction Subjectivism has been the hallmark of Austrian economics tradition from Carl Menger and Eugen von Bohm-Bawerk to the present-day Austrian economists.2 However, economists of Austrian school pursued the subjectivist position with varying degrees of thoroughness. Among them, the most consistent and complete subjectivist was Ludwig von Mises.3 Indeed, he had pointed out the shortcomings of Menger’s and Bohm-Bawerk’s subjectivism and tried to fill the gaps by providing the fundamental insight that there is no such thing as value calculation. This chapter will demonstrate that Mises was not merely a subjectivist but a pure subjectivist. Here the term “pure” should be understood to mean consistent, logical, thorough, and coherent. In this sense, Mises’s subjectivism is much purer than any of his predecessors in the Austrian tradition, such as Menger, Bohm-Bawerk, and Friedrich von Wieser, or even subsequent ones like Friedrich Hayek and Fritz Machlup. Furthermore, it will also be shown that, for Mises himself, subjectivism was the driving force of his scholarship. In the chapter entitled “The Austrian School of Economics” of his Notes and Recollections (Mises 1978: 33-41), Mises reflected on his first reading of Menger’s Grundsatze der Volkswirtshaftlehre (Principles of Economics) around Christmas of 1903 when he was twenty. He confessed that, “[i]t was the reading of this book that made an ‘economist’ of me” (ibid.: 33). In the publication, Mises mentioned an “economist,” not an “Austrian economist.” The reason for this lack of qualification must be that, for Mises, there was only one correct type of economics, so it is sufficient to refer to himself as an economist. However, substantively Mises identified himself as a continuator in the tradition of Austrian economics, which had begun with Menger’s Principles. Since the essence of Principles lays in its subjectivist orientation, we might qualify Mises’s recollection as “it was the reading of Menger’s Principles that made a subjectivist of me.” For Mises, economics meant only that which was based on subjectivism and the Austrian school of economics was nothing but a subjectivist school of economics. Subjectivism is not only the fundamental starting point but also the driving force of Mises’s quest to enhance the science of human action. It is true thateconomics is a whole and an integral science based on the logical, step-by-step analysis of individual human action. However, a logical, step-by-step analysis is never an autonomous or a mechanical process. It needs something to stimulate the analyst and subjectivism provides just that. The result of Mises’s subjectivist enterprise is a theoretical edifice of human action where his purely subjective theory of value, theory of economic calculation, theory of market and pricing process, theory of money or indirect exchange, and applications of those theories to various fields, including socialism and welfare state, are systematically explained. This chapter is structured as follows. The first and second sections trace Mises’s refinement of subjectivism, which started with a critical scrutiny of the school’s founding fathers’ impure subjectivism in his 1912 book Theorie des Geldes und der Umlaufsmittel (The Theory of Money and Credit) (Mises 1934/1980), followed by several papers written during the late 1920s and the early 1930s and his book Grundprobleme der Nationalokonomie: Untersuchungen uber Verfahren, Aufgaben und Inhalt der Wirtschafts-und Gesellschaftslehre (Epistemological Problems of Economics) (Mises 1960/2003). The third section will discuss the third part of Nationalokonomie: Theorie des Handels und Wirtschaften (Mises 1940), the German-language predecessor of Human Action: A Treatise on Economics (Mises 2007), where Mises completed his theory of money or indirect exchange. The theory of monetary calculation will be specifically examined in this section, from the perspective of Mises’s pure subjectivism. In the fourth section, the relationship between Mises’s science of human action and his pure subjectivism will be explained. Finally, we will make two concluding remarks about his pure subjectivism. First, we will discuss briefly the question of how Mises’s subjectivism is related to the radical subjectivism of Ludwig Lachmann. Second, the possibility of further purification of Mises’s subjectivism will be suggested in terms of a theory of interest.