Friday, March 15, 2013

Austrians Should Read their Mises

I suggest they read this passage in Interventionism: An Economic Analysis:
“Thus the market in the capitalist economy is the process regulating production and consumption. It is the nerve-center of the capitalist system. Through it the orders of the consumers are transmitted to the producers, and the smooth functioning of the economic system is secured thereby. The market prices establish themselves at the level which equates demand and supply. When, other things being equal, more goods are brought to the market, prices fall; when, other things being equal, demand increases, prices rise.

One thing more must be noted. If within a society based on private ownership of the means of production some of these means are publicly owned and operated, this still does not make for a mixed system which would combine socialism and private property. As long as only certain individual enterprises are publicly owned, the remaining being privately owned, the characteristics of the market economy which determine economic activity remain essentially unimpaired. The publicly owned enterprises, too, as buyers of raw materials, semi-finished goods, and labor, and as sellers of goods and services, must fit into the mechanism of the market economy; they are subject to the same laws of the market. In order to maintain their position they, too, have to strive after profits or at least to avoid losses.” (Mises 1998: 5)
It is quite surprising how much Mises was prepared to concede: an economy with some limited nationalised industry (although run on the principle of profit and loss) where the majority of capital goods are private owned is still a “market economy” with its fundamental characteristics “essentially unimpaired.”

That is a view far from ravings of many internet Austrians.

BIBLIOGRAPHY

Mises, L. von. 1998 [1940]. Interventionism: An Economic Analysis (trans. Thomas Francis McManus and Heinrich Bund). Foundation for Economic Education, Inc., Irvington-on-Hudson, NY.

10 comments:

  1. Or their Croce/Barone; looks like Ludwig von Mises cribbed his most famous ideas from Italians, anyway.

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  2. But he was wrong on this part "In order to maintain their position they, too, have to strive after profits or at least to avoid losses."

    It may have been accurate when he wrote it but the post-1945 experience experience shows many nationalized industries running huge operating losses.

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  3. BS.

    Most misesians today are rothbardians or strongly influenced by public choice theory.

    Anyway, Mises says that public companies are legitimate if they "are subject to the same laws of the market. In order to maintain their position they, too, have to strive after profits or at least to avoid losses".

    The fact is that most "public companies" give losses to taxpayers and don't avoid these losses. Mises was very optimistic about this.

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    1. "The fact is that most "public companies" give losses to taxpayers and don't avoid these losses."

      Many countries do have profitable, productive state owned/run enterprises that produce goods and run profits, e.g.,

      (1) Singapore Airlines
      (2) PSA International
      (3) Neptune Orient Lines
      (4) Chartered Semiconductor Manufacturing
      (5) Sing Tel
      (6) SembCorp
      (7) Petrobras
      (8) CODELCO (Corporación Nacional del Cobre de Chile)
      (9) LKAB (Luossavaara-Kiirunavaara Aktiebolag)
      (10) China National Offshore Oil Corporation
      (11) Anshan Iron and Steel Corp.

      E.g., the profitable Chilean nationalised CODELCO – the biggest copper company in the world – has been state owned since the 1970s.

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  4. It's interesting to note that for Mises, apparently, interfering in the works of the market economy is worse than nationalizing parts of it. This whole passage reads more as an afterthought, as a way for Mises to justify the stability of the existing, obviously mixed economies and to distance himself from too radical libertarianism. Still, this passage is just too good for screwing with internet Austrians (like Bob Roddis).

    In the end, Keynes didn't advocate statism, authoritarianism or dirigism. His call was for more social investment - and Mises was not against social investment per se.

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    1. I don't think there is much doubt he was against social investment but I think you are correct to say that this passage is "a way for Mises to justify the stability of the existing, obviously mixed economies"

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  5. Yes it obviuos now, that von Mises was an advocate for some limited Soviet state without 5 years plans, A market communist one could say.

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  6. Looks to me like Mises is trying to justify the reality of the mixed economy within his free market nonsense.

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  7. He was commenting on the erroneous idea that there could be a mixed economy. It's still a market economy. In fact it's always a market economy no matter what level of government ownership you have it just doesn't work as well.

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