Ludwig Von Mises Research Articles

What should economists do?: A historical perspective

The purpose of this paper is to present “What Should Economists Do?”, an article written by James Buchanan and published in 1964, in an historical perspective. We put forward an important point, namely the opposition with Ludwig von Mises, and Buchanan’s attempt at differentiating his approach from Mises. Instead of in addition to Robbins, that he nominally targeted, Buchanan was actually criticizing Mises. Buchanan thus defined economics in a very specific way, as a science that studies exchange but only when it results from a desire (or a propensity) to exchange.

Creative Destruction versus Robert Frank’s Progressive Consumption Tax

Joseph Schumpeter, like Ludwig von Mises, thought of capitalism as a process that often, over time, turned luxuries into necessities. Schumpeter warned that assessments that ignored this process, which he termed creative destruction, would misconstrue the social results that arise from capitalism in practice. This article exposes the applicability of this warning to the analyses of positional-good consumption presented by Robert Frank which led him to conclude that a steeply progressive tax on consumption would constitute a free-lunch, bringing in “trillions of dollars” without the loss of “anything of enduring value.”

The economic institutions of artificial intelligence

Abstract This paper explores the role of artificial intelligence (AI) within economic institutions, focusing on bounded rationality as understood by Herbert Simon. Artificial Intelligence can do many things in the economy, such as increasing productivity, enhancing innovation, creating new sectors and jobs, and improving living standards. One of the ways that AI can disrupt the economy is by reducing the problem of bounded rationality. AI can help overcome this problem by processing large amounts of data, finding patterns and insights, and making predictions and recommendations. This insight raises the question: can AI overcome planning problems – could it be that central planning is now a viable option for economic organisation? This paper argues that AI does not make central planning viable at either the nation-state level or the firm level, simply because AI cannot resolve the knowledge problem as described by Ludwig von Mises and Friedrich Hayek.

Австрійська школа як напрям дослідження в економіці – правда та міфи

The article is concerned with studying of the Austrian school of economics, comparison of approaches of different representatives of the school to the analysis of basic economic phenomena and processes, determining differences between scientists' views and their research methods. The importance of the ideas of Austrian economists for modern economic theory in the context of interaction between the state and the market is emphasized. The purpose of the article is to study the theoretical concepts of the Austrian school in the context of the search for new theoretical approaches to solve modern economic problems. The methods of comparative studies and the problem-personified approach to the study of the history of economic ideas are used. A comparison of the main ideas of the representatives of the Austrian school is carried out in historical and logical sequence. The results of the study give a description of the main theses of Carl Menger, Friedrich von Hayek, Ludwig von Mises and their scientific followers. The nature of prices and subjective valuation as well as price stabilization policy are revealed in the paper according to Austrian tradition. Attention is paid to the subjective approach, namely subjective information and costs. It is emphasized that entrepreneurship is a major force and Austrian believe that an entrepreneur's profit comes from the assumption of simple identification of risk with error. Today, the Austrian approach is of particular relevance, according to which it is impossible to scientifically know what will happen tomorrow, since it depends mainly on knowledge and information that has not yet been created in the entrepreneurial process. The results of research are important for understanding the need to revival of interest in this strand of economics, which for decades had been treated marginally in textbooks of economic thought. Austrian theoretical approaches should be used to analyze the processes of modern economic development and solve complex multifaceted economic problems.

ESG en Route to Statism

The following is the text of the 2023 Henry Hazlitt Memorial Lecture, sponsored by Harvey and Mei Allison, given at the Austrian Economics Research Conference, Ludwig von Mises Institute, Auburn, Alabama.

Laws of Economics under Socialism

This article argues that praxeology, as a general theoretical approach, can explain the emergence of the socialist doctrine. However, socialist laws of economics cannot be derived from praxeology. It is specifically shown that the immutability of market economic laws does not allow society to achieve a full-fledged communist reality. Using the Soviet Union as an example, this article demonstrates that the market economy cannot be eradicated, despite government efforts, but is omnipresent even if it is ostensibly outlawed. Also, this article demonstrates that Ludwig von Mises’s conclusion about the principal impossibility of economic calculation under socialism is fully applicable to the highest stage of communism, as theorized in Marxism. In relation to socialism in a broader sense, as the collectivization of the means of production grows, the magnitude of the impairment of economic calculation grows with it. Socialist thinkers failed to rebuff Mises’s reasoning because all their proposals violated the economic uncertainty principle: the exact price structures before the exchange are unknown and are in superposition.

Blockchain and the information – calculation problem

Ludwig von Mises produced an impossibility theorem indicating that economic calculation in the absence of market prices was impossible. This gave rise to the ‘socialist calculation debate’ in the first half of the twentieth century. This paper makes use of the insights of that debate to shed light on other situations where decision makers are required to allocate resources in areas where there are no market prices. A pertinent example would be most corporate social responsibility programs. In the absence of market prices local information cannot be communicated to decision makers. The paper further argues that blockchain technology can create the institutional environment for markets to emerge and consequently overcome the problem of missing prices.

Eugen von Böhm-Bawerk's "Interest Theory of 1876"

To our knowledge, this is the first English translation of Eugen von Böhm-Bawerk’s seminar paper of 1876. Böhm-Bawerk apparently thought his 1876 seminar paper had some significance. Still, he chose not to publish it during his lifetime. This is understandable given that _Capital and Interest_ was available, but it is more difficult to understand why it was not published after his death in 1914. This English translation draws from three sources in German: (1) the original handwritten seminar paper located in the Hayek Library at the University of Salzburg; (2) a transcription from the Ludwig von Mises Collection in the Grove City College Archives; and (3) a transcription published by Kiichiro Yagi in March 1983.

Externalities and the State

Murray Rothbard and Ludwig von Mises argued that cases of negative externalities all turn out to be instances of failure of government to enforce individual property rights adequately. This article goes beyond Rothbard and Mises in claiming that failure to enforce property rights is far from the only way in which government gives rise to externalities. Indeed, rather than externalities requiring government intervention to remedy the problems they cause, this article argues that most actions of the government actually cause externalities. Looking at externalities in this way leads to the logical conclusion that government interventions are the main obstacle to markets’ attaining maximum social utility. The line of reasoning leading to this conclusion is as follows: (1) government failures lead to externalities; (2) externalities lead to market failures; ergo (3) government failures lead to market failures. Specific government actions whose externality-generating effects are analyzed include taxes, subsidies, price controls, government spending, monetary policy, prohibitions, and income redistribution.

The German historical school on monetary calculation and the feasibility of socialism

AbstractSeveral scholars anticipated Ludwig von Mises's calculation argument against socialism. The present paper summarises the contributions by the members of the German Historical School of Economics who preceded Mises and provides several examples of anticipation that have not been discussed in the literature. Furthermore, the paper explains why it is not a coincidence that members of the Historical School claimed as early as the nineteenth century that socialism was unfeasible due to calculation and knowledge problems. In their attempts to understand historically specific features of capitalism, they developed an approach to capital that involved the institutions of private property, money, the market, the enterprise, and monetary calculation. Starting from this institutional approach to capital and capitalism, it was only a small step to the question of what it means for socialist systems that those institutions are lacking.

Helene Bauer and Austrian school of economics

Helene Bauer was one of the leading economists of Austromarxism, an intellectual circle close to Austria’s Social Democratic Workers’ Party between the two world wars, which aimed to create a new socialist society by democratic means. Between 1923 and 1926, she contended with what would later become known as the Austrian School of Economics and its most remarkable theoreticians: Ludwig von Mises, Friedrich Hayek, and Joseph Schumpeter. Although important for the history of economic theory and methodology in the social sciences, these debates have largely been forgotten. The present article aims at filling this gap by revisiting the debate between Helene Bauer and the Austrian School of Economics around the general conceptions of the theory of value, attribution of value, and an appropriate methodology for the study of economics as a social science. The last part of the article describes a discord between Helene Bauer and Ludwig von Mises on social justice, democracy, and authoritarianism in interwar Austria.

Response to Graf

Sinja Graf’s generous reading of Marketing Global Justice is a source of immense gratitude.1 She highlights the best parts of the book and graciously sets aside its shortcomings. She expertly summarises my arguments on what marketised global justice is, how it came about, and how to resist it. Graf poses important questions under the headings of History and Resistance that are an honour to respond to. On the intervention that the book makes regarding the history of international criminal law (ICL)—as part of the history of marketised global justice—Graf poses three questions. I read these questions not only as asking for clarifications about the type of historical intervention Marketing Global Justice is making, but also as demanding a sharpening of the description of the relationship between marketised global justice and capitalism. First, Graf asks: Is there more than a temporal coincidence between neoliberal market rationality and marketised international criminal law? The short answer is: ‘yes’. Marketised international criminal law ‘encases’ the market in the sense that injustice is disassociated from (democatically determined) distributive justice. Marketised ICL is ‘put to work’ in the interests of capital. I return here to Quinn Slobodian’s memorable description of the ‘encasing’ of the market in Globalists because it so excellently describes the project of neoliberalism as one of institutions.2 What makes Slobodian’s book so immensely readable is of course the intellectual history behind these institutions. Describing familiar international institutions like the World Trade Organization (WTO) as emerging from peronal projects doggedly driven forward by certain individuals (including Ludwig von Mises, Friedrich Hayek, and Ernst Ulrich Petersmann) makes for compelling reading. Like international economic law—the institutionalisation of which Slobodian describes as beginning in the wake of the First World War—ICL too has been a discipline shaped by its institutions. The monopolising of power and resources in the establishment of the WTO and the monopolisation of power and resources in the establishment of the International Criminal Court (ICC) are set against the background of the same historical material conditions. They were both institutional projects preventing redistribution, and relatedly projects of keeping democracy from below at bay. Neoliberal market rationality is a part of ICL and, in the institutionalised form it has taken since the 1990s, vice versa. In other words, neoliberal market rationality and ICL are both part of the same material conditions of capitalism and its contradictions. Tracing the enabling of capital flows through the institutions of international economic law, finance, and investment law is perhaps more perspicuous; but the same conditions have also shaped ICL.

The case against formal methods in (Austrian) economics: a partial defense of formalization as translation

ABSTRACT Mainstream economics has been accused of excessive mathematization, whereas the rejection of mathematical and other formal methods is often cited as a crucial trait of Austrian economics. Based on a systematic discussion of potential benefits and drawbacks of formalization, this paper corroborates legitimate concerns that predominant types of mathematization induce a shift of attention away from the key concepts of Austrian economics. Taking this shift to the extreme, predominant modes of mathematization tend to accompany a detachment from ‘reality’ incompatible with Austrian pleas for realisticness. Contrary to popular prejudice however, the most prominent representatives of the Austrian School including Carl Menger, Ludwig Mises, Friedrich Hayek, Israel Kirzner, and Peter Boettke neither provide a justification for a wholesale rejection of formalization nor actually reject it. Adequate formalization can serve as a remedy for lacking logical and semantic rigor in standard mathematical economics as well as in murky verbal chains of reasoning.

План и рынок в смешанной экономике. Обеспечение базового дохода и занятости

Based on the justified criticism of the planned economy (PE) by Ludwig von Mises, the author concludes that the planned economic activity organization will be more effective compared to the market economy if used in combination with the market form in stationary areas of the economy oriented towards irreducible demand while manufactured goods will be distributed equally and free of charge. Criteria are proposed to determine which products are more efficient to produce in a planned manner in a mixed planned-market economy. The author shows that the introduction of a mixed economy makes it possible to best solve the problem of providing citizens with a universal basic income (UBI), simultaneously finding the answer to the issue of ensuring universal employment.

After Shleifer, who needs Mises?

AbstractThe demise of socialism in Eastern Europe and the transition to a market economy in China and India marked the end of traditional comparative economics as a field. The debate between capitalism and socialism was settled. The economic calculation argument of Ludwig von Mises seemed no longer relevant. In its place, the new comparative economics (NCE) arose. The NCE focuses on the institutional differences that affect the protection of contract and property rights. The research program of Andrei Shleifer has provided numerous insights into how markets operate. This paper examines the Shleifer‐inspired program in comparative economics in light of the economic calculation argument Mises made. Although the recent developments in comparative economics have extended and complemented the contributions of Mises, it has not displaced them. An account of the economic calculation problem is still missing in the new comparative economics.

Economic planning must be polycentric, not monocentric: Introduction to a symposium on Mises and Hayek on socialism and knowledge

AbstractThe roaring (20‐) 20s are a decade of anniversaries and milestones. 2020 was the 100th anniversary of Ludwig von Mises's seminal article “Economic Calculation in the Socialist Commonwealth” and the 75th anniversary of F.A. Hayek's seminal article “The Use of Knowledge in Society.” 2022 brought a series of significant anniversaries: the 100th anniversary of Mises's Socialism: An Economic and Sociological Analysis as well as the 60th anniversary of James M. Buchanan and Gordon Tullock's The Calculus of Consent: Logical Foundations of Constitutional Democracy, Milton Friedman's Capitalism and Freedom, and Murray Rothbard's Man, Economy, and State. It was also the 20th anniversary of Vernon Smith's Nobel Prize. The works and milestones celebrating anniversaries in 2022 owe much to Mises's and Hayek's pathbreaking contributions. This paper summarizes and contextualizes Mises's and Hayek's arguments about socialism and knowledge and introduces a Southern Economic Journal symposium on the anniversaries of “Economic Calculation in the Socialist Commonwealth” and “The Use of Knowledge in Society.”

Economic Calculation in Light of Advances in Big Data and Artificial Intelligence

In his 1920 essay “Economic Calculation in the Socialist Commonwealth,” Ludwig von Mises argued that economic calculation is impossible in a socialist system absent private property and exchange in the means of production. Without the social appraisement process by which the actions of consumers and entrepreneurs produce a money price structure, the commensurate cardinal numbers necessary to engage in capital accounting are not available. We argue that any claims regarding how advances in computer technology can solve the problem of economic calculation are based on an insufficient understanding of Mises' original argument. We restate Mises’ argument in consideration of recent developments in big data and artificial intelligence and argue that Mises’ original argument concerning the impossibility of economic calculation absent the institutional prerequisites of private property and monetary exchange in goods of all orders remains unrefuted.

Objectivism and Libertarian Political Thought: A Comparative Introduction

ABSTRACT The purpose of the present article is to provide a comparative introduction to Ayn Rand’s philosophy of Objectivism by exploring her most significant intellectual interactions with some of the leading figures of the libertarian movement. While revolving around Ludwig von Mises, Friedrich Hayek, Murray Rothbard, and Robert Nozick, it nevertheless pays attention to Rand’s and Objectivism’s relationship, affinities, and differences with additional authors belonging to this tradition.

On the feasibility of technosocialism

Technological advances associated with computing power and the prospect of artificial intelligence have renewed interest on the economic feasibility of socialism. The question of such feasibility turns on whether the problem of economic calculation has fundamentally changed. In spite of the prospect of what King and Petty (2021) refer to as “technosocialism,” we argue that technological advances in computation cannot replace the competitive discovery process that takes place within the context of the market. We do so by situating the case for technosocialism in the context of the socialist calculation debate. Understood in these terms, technosocialism represents a restatement of the case for market socialism, which incorrectly framed the “solution” to economic calculation under socialism as one of computing data, rather than the discovery of context-specific knowledge that only emerges through the exchange of property rights. Therefore, the arguments put forth by Ludwig von Mises and F.A. Hayek, and later Israel Kirzner and Don Lavoie, regarding the impossibility of economic calculation under socialism remains just as relevant today.

The Road Less Travelled: Keynes and Knight on Probability and Uncertainty

ABSTRACT Knight’s risk/uncertainty distinction is reviewed in its original context as a contribution to the theory of profit. Knight’s approach to probability is paralleled by Ludwig von Mises, as emphasised by recent developments in strategic entrepreneurship theory. Von Mises distinguishes between class probability (i.e., risk) and case probability (i.e., uncertainty) in contrast to the frequentist approach of his brother, Richard von Mises. Keynes’s contribution to probability and uncertainty is reviewed, focusing on his logical theory of probability in A Treatise on Probability which he more fully contextualised subsequently in the General Theory. Keynes’s fragmentary later philosophical writings are reviewed to provide some insight into the contextual issues encountered. The key contributions of Knight and Keynes are summarised as signposts for ‘The Road Less Travelled’. The possibilities of a Keynesian-Knightian synthesis as a way forward are considered by comparing these signposts. However, it is concluded that, although there is some common ground between Knight and Keynes, there are fundamental differences particularly associated with the definition of confidence that preclude any meaningful synthesis.