Friday, April 18, 2014

Mises on the four classes of people and the basis of the market society

"Saving—capital accumulation—is the agency that has transformed step by step the awkward search for food on the part of savage cave dwellers into the modern ways of industry. The pacemakers of this evolution were the ideas that created the institutional framework within which capital accumulation was rendered safe by the principle of private ownership of the means of production. Every step forward on the way toward prosperity is the effect of saving. The most ingenious technological inventions would be practically useless if the capital goods required for their utilization had not been accumulated by saving.

"The entrepreneurs employ the capital goods made available by the savers for the most economical satisfaction of the most urgent among the not-yet-satisfied wants of the consumers. Together with the technologists, intent upon perfecting the methods of processing, they play, next to the savers themselves, an active part in the course of events that is called economic progress. The rest of mankind profit from the activities of these three classes of pioneers. But whatever their own doings may be, they are only beneficiaries of changes to the emergence of which they did not contribute anything.

"The characteristic feature of the market economy is the fact that it allots the greater part of the improvements brought about by the endeavors of the three progressive classes—those saving, those investing the capital goods, and those elaborating new methods for the employment of capital goods—to the nonprogressive majority of people. Capital accumulation exceeding the increase in population raises, on the one hand, the marginal productivity of labor and, on the other hand, cheapens the products. The market process provides the common man with the opportunity to enjoy the fruits of other peoples's achievements. It forces the three progressive classes to serve the nonprogressive majority in the best possible way.

"Everybody is free to join the ranks of the three progressive classes of a capitalist society. These classes are not closed castes. Membership in them is not a privilege conferred on the individual by a higher authority or inherited from one's ancestors. These classes are not clubs, and the "ins" have no power to keep out any newcomer. What is needed to become a capitalist, an entrepreneur, or a deviser of new technological methods is brains and will power. The heir of a wealthy man enjoys a certain advantage as he starts under more favorable conditions than others. But his task in the rivalry of the market is not easier, but sometimes even more wearisome and less remunerative than that of a newcomer. He has to reorganize his inheritance in order to adjust it to the changes in market conditions. Thus, for instance, the problems that the heir of a railroad "empire" had to face were, in the last decades, certainly knottier than those encountered by the man who started from scratch in trucking or in air transportation.

"The popular philosophy of the common man misrepresents all these facts in the most lamentable way. As John Doe sees it, all those new industries that are supplying him with amenities unknown to his father came into being by some mythical agency called progress. Capital accumulation, entrepreneurship and technological ingenuity did not contribute anything to the spontaneous generation of prosperity. If any man has to be credited with what John Doe considers as the rise in the productivity of labor, then it is the man on the assembly line. Unfortunately, in this sinful world there is exploitation of man by man. Business skims the cream and leaves, as the Communist Manifesto points out, to the creator of all good things, to the manual worker, not more than "he requires for his maintenance and for the propagation of his race." Consequently, "the modern worker, instead of rising with the progress of industry, sinks deeper and deeper.... He becomes a pauper, and pauperism develops more rapidly than population and wealth." The authors of this description of capitalistic industry are praised at universities as the greatest philosophers and benefactors of mankind and their teachings are accepted with reverential awe by the millions whose homes, besides other gadgets, are equipped with radio and television sets."

Ludwig von Mises
Grove City, PA: Libertarian Press, originally published 1956, p. 31-33
(h/t Sandwichman at EconoSpeak)

9 comments:

Anonymous said...

If only this were true, but there's more to it. The people who save, invent, and invest are entitled to a reward for what they do. But, they are not the people who get the big rewards. The big rewards go to the people who cleverly manipulate the system, exploit the savers, inventors, and investors, and eventually capture the government to help them extract the rents and accumulate the assets that could be put to more productive use. When inventors go to work for a large corporation they sign away their patent rights. The rewards go to a few executives and oligarchs that have captured control of the company. The millions of savers who invest have to settle for a pittance so traders and hedge fund managers can rake off the big profits. The investing decisions are made by people who can decide that speculating in foreign currencies is more lucrative for them in terms of big payoffs and bonuses, when investing in the productive economy would benefit the savers more. And, people whose incomes are squeezed to the bone so they can barely survive have the choice of saving or going hungry, so they choose the latter. What this piece illustrates more than anything is the bankruptcy and naivete of the libertarian philosophy.

Peter Pan said...

Where the hell are the consumers in this fantasy land?

Anonymous said...

Quote from Von Racist: Saving—capital accumulation—is the agency that has transformed step by step the awkward search for food on the part of savage cave dwellers into the modern ways of industry....The most ingenious technological inventions would be practically useless if the capital goods required for their utilization had not been accumulated by saving.'

Circular logic and self refuting in the physical sense i.e. capital as a perpetual motion machine. Saving capital created the capital needed for technological invention i.e. capital creates it's own transformation ex nilo.

Quote from Von Racist: ""The entrepreneurs employ the capital goods made available by the savers for the most economical satisfaction of the most urgent among the not-yet-satisfied wants of the consumers. "

Bullshit. Nobody is sitting around with old capital waiting for a new type of technology which nobody has made before to produce it.

In order to produce, capital is retooled and the new orders are considered "consumption" for the legacy capital. It's not savings.

The reality is that there is no division between producers and consumer. Everyone is prosumer in manufacturing. Only an economist would make such a fictional binary framework.

Quote from Von Racist: "The characteristic feature of the market economy is the fact that it allots the greater part of the improvements brought about by the endeavors of the three progressive classes—those saving, those investing the capital goods, and those elaborating new methods for the employment of capital goods—to the nonprogressive majority of people."

Wrong! So these lowely "nonprogressive majority" i.e. the consumers are simply dictated to as to how capital is employed?

WTF? Isn't the reason capital is employed to sell to a market? If the capital doesn't know what these "nonprogressive majority" want that capital to produce then how are suppose to know how employ said capital into production?


Von Racist is simply stating the refuted Says Law. We know the opposite is the case.

Continues...

Anonymous said...

Quote from Von Racist: "Everybody is free to join the ranks of the three progressive classes of a capitalist society. These classes are not closed castes. Membership in them is not a privilege conferred on the individual by a higher authority or inherited from one's ancestors. These classes are not clubs, and the "ins" have no power to keep out any newcomer. What is needed to become a capitalist, an entrepreneur, or a deviser of new technological methods is brains and will power"

Wrong! Utter Nonsense. A prisoner in a jail cell can use his brains all he wants and remain nothing but a prisoner.

Wealth is created by the social relations one has with a social group and if one does not understand the rules and receive the need permissions to operate in said "market" then one will not.

Anyone who's ever been in high school or even a prison knows you have to know the right people in order to move your shit or get in with the right crowd to created a client list. You can't use new technological methods, brains, and will power only to create a consumer base ex nilo.

I suggest Von Racist look a biology text on "sexual selection" for understand the very first market i.e. the one for sex.

Everything about it is based on preselection. Everything in behavior economics is based on that fact that humans form cliques and acted according to preselective biases.

The Rigidity of class based on wealth and status is perhaps the most important feature in all human social biology and yet Von Racist denies its existence and thus proves he not an economist and has never thought about a real economy in his life.

Quote: ""The popular philosophy of the common man misrepresents all these facts in the most lamentable way. As John Doe sees it, all those new industries that are supplying him with amenities unknown to his father came into being by some mythical agency called progress. Capital accumulation, entrepreneurship and technological ingenuity did not contribute anything to the spontaneous generation of prosperity. If any man has to be credited with what John Doe considers as the rise in the productivity of labor, then it is the man on the assembly line"

Really? Who the hell thinks like that? I'm a common man and certainly don't. Von Racist is simply throwing insults at anyone who disagrees with his insane ranting about the Greatness of those frugal capitalist and how all us "nonprogressive" surfs should worship our entrepreneurial overlords and master classes of capital "accumulators."

No mention of how said "accumulations" where actually made...on a pile hundreds of millions of Native American, African, Indian, and Chinese corpses.

Screw Von Mises and his delusional classist, sexist, racist, imperialist, and pro-nazi corporatist tripe.

Roger Erickson said...

Biology 101 says you have to count to more than 4.

He might want to look at the NAICS codes?

How many species to an ecosystem?

How many genes/human cell?

How many distinct cell types per human body?

How many distinct organs/human?

How much diversity to make any adaptive system?

Remedial math is suggested.

Anonymous said...

What is needed to become a capitalist, an entrepreneur, or a deviser of new technological methods is brains and will power"

So, other words, its a genetic aristocracy?

David said...

brains and will power and leisure, I would say.

So, yea, he's talking about a sort of aristocracy. One characteristic assumption of aristocrats seems to be that everyone has the leisure they do. It's just one of the things they take for granted.

Tom Hickey said...

The rationale for aristocracy was heredity, noble meaning being "well-born." In the 19th c. this became Lamarckism. I persists in Herrnsteins and Murray's The Bell Curve in linking disparity to both environmental and genetic factors.

Sandwichman said...

Although it appears that way in the published work, I suspect that the "those investing the capital goods" should have been "those inventing the capital goods." The way it is doesn't sound grammatical.

Although I have foresworn arguing against von Mises's fable, it has occurred to me that a less flattering alternative to von Mises three progressive classes would be "those taxing (finance ministry and banking industry), those instigating hostilities ("statesmen") and those carrying out the pillage and plunder (elite officer corps and war profiteers)."

Under that formulation capital accumulation would then be understood as "booty". It follows then that "every step on the way toward prosperity is the effect of taxation." And that those who fight and die to accumulate the spoils of war are "enjoying the fruits" of the whole bloody swindle. So to speak.