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Ludwig von Mises on Collectivist Fallacies and Interventionist Follies

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For more than a century the world has been caught in the grip of social engineers and political paternalists determined to either radically remake society from top to bottom in collectivist directions, or to use various government regulatory and redistributive policies to try to modify existing society into desired “social justice” forms and shapes. Both are based on false conceptions of man and society.

One of the leading voices challenging the social engineers and the interventionist-welfare statists in the twentieth century was the Austrian economist, Ludwig von Mises. In such important works as Socialism (1922), Liberalism: The Classical Tradition (1927), Critique of Interventionism (1929), Planning for Freedom (1952), and in his monumental treatise, Human Action (1949; 1966), Mises demonstrated the economic unworkability and negative unintended consequences resulting from attempts to impose systems of socialist central planning on society, as well as the social quagmire brought about by introducing piecemeal regulations and interventions into the market economy.

But it was in his often-neglected work, Theory and History: An Interpretation of Social and Economic Evolution, that Ludwig von Mises systematically challenged the underlying philosophical premises behind many of the socialist and interventionist presumptions of the last one hundred years. This year marks the sixtieth anniversary of the publication of Theory and History in 1957, and it seems, therefore, worthwhile to appreciate Mises’s arguments and their continuing relevance for our own time.

The Illusive Search for Meaning and Purpose in Life

The world is a confusing and uncertain place. While we may live in communities and societies the values, traditions, customs and routines of daily life of which we have grown up in and tend to take for granted, and which provide us with degrees of orienting certainty and predictability in our everyday affairs, they still fail to answer a variety of “big questions.”

Among these big questions are, why am I here? What is the meaning of life? What is it – life and reality – all about? Why do bad or disappointing or “evil” things happen to others and to me? Who’s to blame? How do we make a “better world”? Ludwig von Mises argued that attempts to find and pursue particular answers to these questions have sometimes brought with them disaster and destruction to society.

Over the ages, people have turned to religious faith and philosophical reflections to try to “understand it all and how it all fits together,” and to find ways to accept and live with those things that seem to be unchangeable (at least in one’s lifetime) and to try to improve those things in society that do seem to offer avenues and openings for personal and social betterment.

The Rise of Modern Science and Its Positive Impact

In the nineteenth century, Mises explained, there arose new ideas about man, society and social change. Out of the Enlightenment era of the earlier eighteenth century had come an increased freeing of the human mind from constraining superstitions and political prohibitions on the freedom to inquire into and discover the reality of the natural world surrounding man. The problem was that the unaided human mind is not only limited and faulty in its powers to correctly see the world as it really is, but that same human mind is often filled with ghostly fantasies and thought-confining superstitions about the universe and man’s place in it.

In place of these fantasies and superstitions there arose modern science with its method of observation, conjecture and empirical testing. The physical world around us has shape, form and size. If we are to know this world, we need to quantify and measure its magnitudes and dimensions, to have benchmarks for understanding outside of the subjective and unreliable belief systems in any one person’s imperfect mind.

The development of this scientific method was and has been transformative. It has enabled man to understand many of the past mysteries of physics, biology and chemistry. And now, knowing more of the objective “laws of nature” and their workings, men were and have been able to harness them for changes and improvements in the physical and social surroundings of humanity.

The Error of Reducing Man to Merely Measurable Matter

But a fundamental misstep was taken, Mises argued, when a further conclusion was drawn. If we needed to give up the faulty and imperfect surface impressions about the physical or natural world provided by the unaided “subjective” human mind, and we needed to step out of ourselves to, instead, look at that physical reality in terms of its “objective” and quantifiable characteristics to really understand it, then if we are to better understand man, we need to similarly ignore the human mind’s pretentious beliefs about itself, and study man, as well, in terms of the measureable and quantifiable.

It is no denying that man, too, is a physical, biological, and chemical entity, just like everything else in the world in which he lives. But man has something that most other life forms on earth do not possess – a self-reflecting, thinking, conceptualizing, planning and acting mind.

Even in the twenty-first century’s scientific advancements, including the accelerating attempts to develop robots possessing “artificial intelligence,” the workings of the human mind and the “mystery” of how the impact and impressions of the external, physical world generate the creative act and form of human ideas remains unanswered.

Some developers of robots with artificial intelligence consider an achievable goal to be when the complexity of the robot’s computer “mind” will enable it to absorb external sense data and information, and then devise “solutions” to unique and unplanned for problems and situations not already programed into the machine.

If this point were ever reached, then the robot’s “mind” would have a degree of unpredictability similar to the human mind that had created it. The robot’s mind, just like man’s, would be an autonomous source of non-deterministic causal change, which even the human creator of the mechanical brain cannot fully predict and determine ahead of time.  It may still be inappropriate, at that point, to assert that such a robot had transcended its own origin as a machine, and now possessed human-like consciousness and qualities, and therefore “human rights” (as some are already suggesting). But it would no longer be a mere “calculating machine” in the traditional meaning of that concept.

Our Mind and Not “Observations” Explain Human Action

Mises insisted that if man is to understand himself and the social world in which he lives, he must accept the fact that the working of the human mind cannot simply or merely be reduced to physical matter and external measurable influences on it, on the basis of which human actions may be predicted, manipulated and controlled.

In his many writings on these wider “philosophical” issues, Mises pointed out, and especially in Theory and History, that is there is one certain fact that man can know about himself if he but undertakes an introspective reflection on the workings of his own thought processes, and that is that there exists a logical structure to his own mind, which guides his thinking and his acting. It tells us that two plus two cannot equal five, that an object defined as a triangle cannot have four sides, and that “A” cannot simultaneously be “non-A.”

Human action, Mises said, is nothing more than our reason applied to the pursuit of our purposes under conditions of scarcity. And, thus, the logic of choice and action, are not something “out there” in the physical world to be learned about through “observation,” “measurement” and “empirical testing.”

From only physical observation all that would be seen in the actions of men would be “movements,” no different than billiard balls bouncing off the felt sides of a pool table or a rock falling to earth. We know that our own actions are not such because our very consciousness tells us that they are intentional actions, and we make the same assumption about the “movements” of others based on the “empirical” observation that the observed object is a conscious human being like ourselves.

The fundamental relationships and “laws” of economics, therefore, are not “out there”; they are inside each of us and are derived from the inescapable ways that our minds work. Weighing alternatives, comparing “costs” and “benefits,” deciding on desirable “trade-offs,” undertaking “exchanges” in terms of what’s worth giving up to get something the decision-maker prefers more, are all aspects of the logic that guides our practical and inescapable actions when we discover that means are too scarce to satisfy and fulfill all the imagined ends for which they might be applied.

But Mises also emphasized that what men may concretely imagine, what specific ends they may want to pursue, which particular types of things might be judged to be useful means, what terms of trade would or would not be acceptable to justify entering into an exchange, these are not known “ a prior” from the logical structure of our minds. These depend on the “empirical” reality and circumstances of the physical and social world around each of us.

We discover these things through our lived experience in society and among other humans who are also choice-making and action-undertaking beings. The logic of choice and action is the template within which our own decision-making is undertaken, and which provides us with an interpretive method for understanding and discerning the underlying logic in the actions of others.

But within all this, the human mind remains the creative and never fully predictable agent of imagination, possibility and change. It has been and remains the ideas that form in men’s minds that drive “the course of human events,” that is the source of all that we call the products and residues and forms of human history. The future ideas of others and even ourselves can never be deterministically predicted from the observed experiences and actions of people in the past. Ideas remain an inexplicable “cause” of the various consequences that comprise the subject matter and content of history.

Furthermore, it is only individuals who have minds, individuals who conceptualize, who imagine, who project themselves into possible futures, who design mental blueprints of plans for possible action, and then attempt to bring to fruition the ends and goals that seem worth the costs to do so, rather than to follow some other future possibilities that they may have imagined.

Marxism and Imaginary “Laws” of History

So what does all of this have to do with the collectivists, social engineers and “social justice” regulators of our own time? The task that Ludwig von Mises primarily set for himself in Theory and History was to show the philosophical and ideological house-of-cards upon which the designs and plans of these political paternalists are all built.

Fascinated and, indeed, overpowered by the successes of the scientific method in the natural sciences, some thinkers wondered if the use of the same tools might open the door to discovering the “laws” of human societal development and change. At the same time, if such laws of societal evolution could be discovered, might not man have it within his powers to bend society into the shapes and patterns of his own desire? This could give “meaning” to the “why?” of life and the course it follows, and provide hope that the world could be and will be redesigned for greater happiness and the illusive security for which many yearn.

The most revolutionary of these theories of societal evolution, Mises argued, in terms of its impact on history during the twentieth century, was Karl Marx’s theory of dialectical materialism. Marx offered an image of the social world in which technological means and methods of production follow an autonomous trajectory of evolutionary development that leads to a final state of mechanical sophistication at which point machines will produce such a degree of material abundance that work, worry and human hardship will finally be a closed chapter in the history of mankind.

But each step and stage in this evolution of the technology around men requires its own particular social institutional setting for its full transformative development, before the next step and stage in this evolutionary process requires a new and different set of human institutions to sustain its further development.

Hence, the slave society, the system of feudalism, the capitalist system of profit-oriented production have all been necessary and inescapable stepping-stones to the final stage of societal change, that being post-scarcity socialist and communist societies. Here was a vista and vision that could make sense of it all to the poor and the weary – and more especially to the many intellectuals who are always asking “why” in a world that often seems to not make sense.

The poverty and hardships experienced by many are part of history’s preordained path, Marx explained. But the abuse and misery born by untold generations under the boot of the feudal lord or the capitalist exploiter would all come to an end with the arrival of socialism and communism. The world of material plenty would belong to all humankind once the autonomous technological evolution of the methods of production had reached the point at which they could shed the last vestiges of the cruel, unjust and exploitive institution of private property. Salvation is coming – the “laws of history” dictate it. Praise Marx, for “scientifically” showing us the way, the truth and the collectivist light at the end of the capitalist tunnel.

Carried away by this vision of a historical force of technological change that is on a seemingly teleological mission to take humanity from poverty to plenty, the revolutionary Marxist high priests saw it as their duty and destiny to be the “mid-wife” to the final radical change to socialism and central planning. Their task, as the “vanguard” of the revolution, was to lead, guide and impose the new collectivist order on “the masses” who were too ignorant or brainwashed by their former capitalist bosses to fully know where their “true” workers’ interest lie. Freedom for mankind would come through a transition period of the dictatorship of the proletariat. And if the blood of many individuals had to flow to bring it about, the collective interests of all took precedence over the personal desires of any one, even if that personal interest by any individual was to be simply left alone to live his life peacefully as he chose in voluntary association with others.

Men Make Machines, Machines Do Not Impose Ideas on Men

While claiming to be objectively scientific, at the heart of Marx’s conception of “history” is an unspoken mystical notion of “technology gods” who decide on how and when they will develop, and what they will dictate as the social arrangements that they need and want at each stage of their pre-ordained path to a final stop at the doorstep of socialism. Machines become the acting agents on the stage of history, and man the mind-passive entity carried on the back of technological transformations outside of human understanding and control.

Mises challenged this mystical belief in technologies and machines that followed autonomous paths of evolution and change. Machines do not make and dictate the actions and institutions of men. Machines are inanimate objects made of physical materials. It is the human mind that imagines and manufactures the machines that serve men’s purposes. How could a technology or method of production dictate the social conditions and thoughts of men, when it is human ideas about imagined productive possibilities that bring technologies into existence, and which are facilitated in their forms and uses by the social institutional setting within which they are applied? Mises emphasized:

A technological invention is not something material. It is the product of a mental process, of reasoning and conceiving new ideas. The tools and machines may be called material, but the operations of the mind which created them is certainly spiritual.

Furthermore, Mises asked, on what basis do these purveyors of the “law” of predetermined historical transformation claim to know what are the “true” and “real” interests of “the workers” versus that of the property-owning capitalists? In each of his actions, the individual manifests and demonstrates what he considers to be his “interests,” whether this concerns the breakfast food he eats, the clothes he likes to wear, or the political and social ideas and beliefs he holds.

The Marxists, and all other collectivists like them, merely have shown their personal arrogance and dictatorial hubris, Mises said, in asserting and claiming the right to impose a particular set of values and governmental policies on all through the use of political force to make everyone conform to the central plans within which they wish to confine humanity.

The Planner’s Hubris vs. Unintended Consequences

All philosophies of history, including Marx’s, presume that “history” follows a special and particular course, a predetermined path leading to a specific outcome and end result. In analyzing these claims, Mises insisted upon playing the role of the boy in the story who announces loudly that the ideological and philosophical “emperors” have no cloths.

If “history” is on some “mission” or is following some predetermined course, this is beyond any common sense or “scientific” human understanding. History, Mises explained, is the story of human actions guided by the ideas men come to have about ends worth wanting, means chosen to try to attain them, and the intended and unintended consequences that have followed in the wake of men undertaking the actions and interactions that we call the cumulative course of human events.

Human history is the record of all the successes and failures, the triumphs and tragedies of men along the way of the lives they have lived. History recounts the beliefs and ideas men have held and which have guided their implementing economic and social changes, institutional reforms, and political policies.

History also reminds us, Mises pointed out, that much of what we consider the social results and institutional products of human design are in fact the unintended, longer-run consequences of choices and actions, the later outcomes and impacts of which none of the human actors in their own, earlier time could have even imagined. As Mises expressed it:

But the historical process is not designed by individuals. It is the composite outcome of the intentional actions of all individuals. No man can plan history. All he can plan and try to put into effect is his own actions that, jointly with the actions of other men, constitute the historical process. The Pilgrim Fathers did not plan to found the United States . . .

The monumental tombs of the Egyptian kings still exist, but it was not the intention of their builders to make modern Egypt attractive for tourists and to supply present-day museums with mummies. Nothing demonstrates more emphatically the temporal limitations on human planning than the venerable ruins scattered about the face of the earth.

The inescapable humility that such things should guide men to have, based on the misplaced attempts by earlier generations to “plan for the ages” or to presume to know what their own actions will bring about when it was beyond their own mental horizons to even fully imagine, highlights how pretentious and presumptuous all recent and present-day social engineers and economic planners have been and continue to be. As Mises also said:

The utopian author wants to arrange future conditions according to his own ideas and to deprive the rest of mankind once and for all of the faculty to choose and to act. One plan alone, viz., the author’s plan, should be executed and all other people be silenced . . .

[The central planner] will . . . reduce all other people to pawns in his plans. He will deal with them as the engineer deals with the raw materials out of which he builds, a method pertinently called social engineering.

Historicism and the Denial of Economics

One other variation of this theme, Mises argued, was that of the “Historicists,” the social philosophers who have insisted that there are no “laws” or patterns or regularities to be persistently discovered in the course of human events. Here we find, Mises explained, those who deny or implicitly reject the notion of there being “laws of economics,” such as those of supply and demand and the coordinating order that tends to emerge out of the competitive interactions of consumers and producers, buyers and sellers, in the arenas of market exchange.

For the Historicist, governments may do anything they want with no noticeable negative consequences in terms of the policy goals they insist upon pursuing. Workers’ incomes are “too low,” then simply impose a minimum wage above those wages set in the market; there will be no loss of jobs, they assert, due to employers concluding that some workers are not worth what the government says they are now to be paid.

Some are “too poor” while others are “too rich,” then simply impose higher and higher taxes on the wealthy “Peter” to redistribute to the “Paul” who has “too little.” This can all be done with no negative effects on the those bearing this greater tax burden in terms of their willingness and ability to save and invest so as to maintain or increase the overall output of goods and services upon which everyone is ultimately dependent in terms of their material betterment and standards of living in society.

All such interventionist and redistributive policies, Mises insisted, ignore that there are patterns and coordinative regularities discoverable in the competitive interactions of the marketplace. They are the interpersonal market manifestations of those basic and inescapable laws of economics that originate in and emerge out of the logic of choice and action that start in the minds of men, that we discussed earlier.

Government dictating what people must pay for something if it is bought, does not necessarily make it worth that amount in the mind of a person who is weighing his personal, or subjective, costs and benefits, and deciding whether the price the government commands to be paid is worth the cost and would still generate a profit rather than a loss. Hence, the worker may remain or become unemployed due to the government pricing that worker out of the market in terms of the subjective valuations and appraisements of those who might otherwise have hired or retained him in their enterprise’s workforce.

Taxing even the very wealthy does not change the fact that the individual having great financial means still weighs and compares the trade-offs of the benefits versus the costs from continuing to save, invest, and produce as much as they have been or could be as enterprisers, entrepreneurs and businessmen when, at the margin, the net gains from the effort after the higher taxes reduces the ability for or incentive from doing so.

As long as men think, plan, choose and act, there will be the resulting “laws of economics” in their own minds and lives, and in their interactions with others in the arenas of exchange. Governments may try to ignore these elementary laws of choice and action, and impose commands, controls and restrictions on people in the marketplace. But at the end of the day, the economic logic of the human mind will prevail over the dictates of political paternalists and the hubris of the social engineers.

These lessons, and many others that space does not permit highlighting, are easier to learn and understand due to the arguments and insights to be found in Ludwig von Mises’s Theory and History. For this reason, sixty years after its original publication, the words on its pages still relevantly speak to us in our own time.

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    Dr. Richard M. Ebeling is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel. He was formerly professor of Economics at Northwood University, president of The Foundation for Economic Education (2003–2008), was the Ludwig von Mises Professor of Economics at Hillsdale College (1988–2003) in Hillsdale, Michigan, and served as vice president of academic affairs for The Future of Freedom Foundation (1989–2003).