Sunday, March 24, 2013

Lord Keynes — Mises on Mixed Economies and Socialism: He is Incoherent

Just reading Human Action on these issues, it is astonishing to me that anyone can ever declare that Mises was the greatest economist who ever lived (as some Austrians actually do). On this subject, Mises was an ignorant and muddle-headed idiot, and it is not surprising that after 1945 he was ignored by serious economists.
I can just imagine economists reading these passages of Human Action and then throwing the book in the dustbin as they moved on to more important matters.
Social Democracy For The 21St Century
Mises on Mixed Economies and Socialism: He is Incoherent
Lord Keynes

I have to disagree with Lord Keynes on, "I can just imagine economists reading these passages of Human Action and then throwing the book in the dustbin as they moved on to more important matters." Considering how mainstream economists are given to just making stuff up, they probably would  be OK with Mises on this score. It seems that economists will say anything no matter how ridiculous or incoherent if their assumptions call for it  — like asserting that "all employment is voluntary" in order to save the assumption of equilibrium. Facts? Meh.


Lord Keynes said...

Well, I am thinking of post-WWII Keynesians above in the comment about throwing "Human Action" in the bin.

When they read Human Action, they were -- I am sure -- able to see very quickly that it was rubbish. You can see this old reviews of the book where they tore its internnal logic it to pieces:

Schuller, G. J. 1950. Review of Human Action: A Treatise on Economics by Ludwig von Mises, American Economic Review 40.3: 418–422.

Schuller, G. J. 1951. “Mises’ ‘Human Action’: Rejoinder,” American Economic Review 41.1: 185–190.

And just on the issue of neoclassicals: do you know it is very paradoxical, but the Walrasian GE economists actually disagreed with the Austrians over the socialist economic calculation debate!

Even Schumpeter (who had gone over to Walrasian theory) declared that Mises was wrong and that socialist calculation was possible.

And even Hayek -- in contrast to the strident position of Mises -- conceded that rational economic calculation under socialism might be a theoretical possibility, but he just thought that in practical terms it was impossible, because of knowledge issues.

Bob Roddis said...

Please note that the 1966 edition of Human Action does not have any mention of Churchill or the allegedly offending passage on or around page 855:

Further, Mises actually published “Human Action” in German in 1940 as “Nationalokonomie”. It was the ENGLISH version that was published in 1949. I suspect (it’s now 2:15 a.m.) that the 1998 “scholar’s edition” that LK cites included some material from the original version not found in the later updated 1966 edition. 1940 is not 1949.

Is this all you can dig up, LK? Your desperation is again showing.

Lord Keynes said...

No, bob roddis:

(1) the 1949 English book Human Action was a completely rewritten version of “Nationalokonomie”, because Mises tells us himself in the 1949 foreword to the book:

"The present volume is not a translation of this earlier book [Nationalökononie]. Although the general structure has been little changed, all parts have been rewritten"
Human Action, p. xxv.

(2) Also, it is clear from the passage I cite that Mises wrote this after 1945 since he refers to the UK labour party's nationalisation of some industries.

Therefore he was certainly declaring post-1945 Western Europe and the UK "socialist".

(3) A look at the 1966 edition of Human Action shows that he did indeed purge some of these ridiculous passages. That only strongly confirms my argument: Mises later realised he had made a bad mistake in these outlandish statements.

Bob Roddis said...

So, the latest edition (1966) of Human Action published before Mises’ death at age 93 in 1973 no longer had the offending passage from page 855 that is the basis of LK’s present attack on Mises. LK failed to mention that. Further, he conveniently omitted the remainder of the passage from pages 259-260 that put it in context (and which also mentions attempts at pricing in the USSR):

They must strive for profits or, at least, to avoid losses. The government may cover losses of its plants or shops by drawing on public funds. But this neither eliminates nor mitigates the supremacy of the market; it merely shifts it to another sector. For the means for covering the losses must be raised by the imposition of taxes. But this taxation has its effects on the market and influences the economic structure according to the laws of the market. It is the operation of the market, and not the government collecting the taxes, that decides upon whom the incidence of the taxes falls and how they affect production and consumption. Thus the market, not the government bureau, determines the working of these publicly operated enterprises. Nothing that is in any way connected with the operation of a market is in the praxeological or economic sense to be called socialism. The notion of socialism as conceived and defined by all socialists implies the absence of a market for factors of production and of prices of such factors. The “socialization” of individual plants, shops, and farms—that is, their transfer from private into public ownership—is a method of bringing about socialism by successive measures. It is a step on the way toward socialism, but not in itself socialism. It is a step on the way toward socialism, but not in itself socialism. (Marx and the orthodox Marxians flatly deny the possibility of such a gradual approach to socialism. According to their doctrine the evolution of capitalism will one day reach a point in which at one stroke capitalism is transformed into socialism.)

Government-operated enterprises and the Russian Soviet economy are, by the mere fact that they buy and sell on markets, connected with the capitalist system. They themselves bear witness to this connection by calculating in terms of money. They thus utilize the intellectual methods of the capitalist system that they fanatically condemn. For monetary economic calculation is the intellectual basis of the market economy. The tasks set to acting within any system of the division of labor cannot be achieved without economic calculation. The market economy calculates in terms of money prices. That it is capable of such calculation was instrumental in its evolution and conditions its present-day operation. The market economy is real because it can calculate.

Bob Roddis said...

Typo. In the above passage, I inadvertently inserted the following sentence twice:

It is a step on the way toward socialism, but not in itself socialism.

That sentence, of course, puts what Mises said in context which is why it was omitted by LK.

Tom Hickey said...

So Mises ended up agreeing that there is virtually no socialism operative in the world, North Korea being a possible exception, and that countries not operating iaw market fundamentalism, which includes all of them, are slipping into socialism?

Bob Roddis said...

Mr. Hickey:

Based upon Mises' technical definition of socialism, I would agree with your statement. Even socialists found that prices were necessary to some degree or else complete impoverishment resulted.

Further, "Human Action" is chocked full of critiques of "interventionism" which other folks might label as a "mixed economy". It is not as if that concept disappeared from Mises' analysis.

In the comments to LK's post, he gets real excited due to a mention that the Soviets engaged in pricing to some degree. Of course, they had to. The Soviets could also check and examine the existing prices for goods and services in the west which their planning system could mimic. If the entire planet had banned free exchange and pricing, the Soviets would have been in even deeper shit than they actually were.