Friday, July 29, 2011

Voice Recording of Ludwig von Mises

This is a recording of Ludwig von Mises (1881–1973) speaking on May 17, 1962. Mises discusses the history of capitalism and wages, and he was speaking at the height of the era of classical Keynesianism. Curiously, at the end, he proclaims that good profits and high wages “go hand-in-hand.” That was so in the Golden Age of Capitalism (1945-1973), but, with the advent of the new neoclassical economics in the 1970s and 1980s, real wages have stagnated or performed poorly in capitalist country after country.


  1. I am sorry, you have no means for comparing real wages across 30 years. You can compare real wages across at most 5 years, but 30-40 years is being ridiculous.


    The CPI measures a cost of a certain basket of goods in a base year, and the cost of the same basket of goods in another year, and compares.

    That itself makes analysis impossible. The basket of goods of a typical consumer changes little across a few years, but dramatically across decades. Nobody in 1970 has the same basket of goods as a person in 2010.

    They did not have personal computers, internet connections, digital music and video systems, Toyota Priuses, and other such **consumer goods** back 30 or 40 years ago. While camcorders existed 30 years ago, they were luxury goods and are now super-cheap consumer goods. Besides, the number of Americans eating Norwegian smoked salmon in 1970 (then a luxury good) is much fewer than the number of Americans eating it now (now a mass produced cheap consumer good).

    In short, there is no means to compare wages across 30 years, because the conditions are just too different.

  2. Are we then to assume that we have no means of ascertaining whether 19th century capitalism delivered any real wages gains from, say, 1830, down to 1899??

  3. Not statistically, I guess. But aren't these things subjective? Improvement in standard of living,.etc? CPI has a certain tricky nature to it, which makes reasonable interpretation difficult, but flesh-and-blood examples work nicely for me.

    Stockings were once worn only by nobles, but later became a clothing item for even working class girls, for example. People walked once upon a time, and now even people in the bottom 10% of income range in a western nation could be driving to work.

    These are very individual, specific examples of benefits/tradeoffs of capitalism, but I don't think any aggregate statistic can justifiably demonstrate whether everyone's lives as a whole became better or worse. Besides, many industries rose and fell across 1830-1899, and of course there would have been people who lost out as their industries fell. There is no such thing as everybody's life as an aggregate improving or worsening - individual people across times represent varying, mixed sets of fortunes.

  4. "There is no such thing as everybody's life as an aggregate improving or worsening - individual people across times represent varying, mixed sets of fortunes."

    If there is no such way of measuring how living standards in the aggregate develop over time, then there is no way of defending capitalism as a better system for making society wealthier or improving aggregate living standards. Another justification for it falls.

  5. So be it.

    It's not like anyone had to justify capitalism.

    Capitalism was not the result of intellectual debate. It just simply exists. Nobody sat down one day, conceived of this whole system of capitalism, and put it into practice on his or her own.

    Capitalism is not about ideas. It's about demonstrated preference. No matter how much one complains about capitalism, one might still be working for somebody else for money, and spending that money on conveniences for oneself. Only the rare few true believers will grow their own produce and live off the land themselves. Actions are louder than words.

    The truth is that in order to suggest something better than capitalism, I would have to show your own working model. Or I have no proof of concept. Socialism never existed in practice. What was Engel's idea of an ideal people and society? What did he choose as the next best working model? Afghanistan. Yet, by demonstrated preference, not even dedicated socialists would live in Afghanistan.

  6. "show my own working model".

  7. There is one pretty good justification for capitalism, namely toilet paper. I was growing up in 80s in socialist Poland and toilet paper was really hard to come by. My parents were like standing in overnight queues after they heard a rumor that toilet paper should be available next day in some city's shop. Pretty crazy and fun (for a child) to see. And it was not a small city also, population around 400,000.

    True, the only thing groceries were selling was vinegar. For some reason there was always tons of vinegar in groceries, except there was nothing else. I guess something must have gone wrong with central planning. Still, there must have been at least tens of thousands of government employees in government statistical offices (very big headquarters still in Warsaw), so I guess they must have democratically calculated that vinegar was the way to go, so what could you do, argue against scientific calculations? But food you could always manage somehow, like from family in the country. Hence the ready availability of toilet paper is I believe the most important justification for capitalism.

  8. Prateek, capitalism in fact was the result of intellectual debate and it finally led (after mercantilism, the most primitive type of capitalism, was rejected) to Industrial Revolution. Read up:

  9. Invoking shortages in former communist states as some form of argument in favour of Austrian-style capitalism is ridiculous.

    At the same time that you were living in 1980s communist Poland, there were highly interventionist mixed economies in the West where consumer goods were abundant. Moreover, the most prosperous period in modern history for the "capitalist" West was the classic era of Keynesianism (1945-1973).

    The Austrian "capitalism" you seem to advocate is as mythical as the stateless, classless communist utopia of Marx. It has never existed anywhere, just like Marx's
    communist utopia. Instead, there are real world capitalist systems that have always had a significant degree of government intervention.

    You are clearly incapable of understanding that a Keynesian system is one where there would be a very large space for private production of commodities, to satisfy consumer demand, but one where the severe problems of real-world capitalism (failures of aggregate demand, financial sector instability, involuntary unemployment, etc) are overcome by macro-interventions.

  10. Moreover, the great enemy of the communism you lived under was not some fantasy Rothbardian anarcho-capitalism or Misesian Classical liberalism, but the highly interventionist, Keynesian mixed economies of the West.

    Reagan, the arch enemmy of communism, was nothing but a big spending Keynesian:

    He was at the head of highly dynamic mixed economy, whose military and superpower status, used to oppose communism, was the result of vast state interventions.

  11. 'Capitalism was not the result of intellectual debate. It just simply exists. Nobody sat down one day, conceived of this whole system of capitalism, and put it into practice on his or her own.'

    A common misconception. Capitalism was as designed as any other system, from the very start. It didn't just appear by magic.

  12. Who said anything about magic? It simply emerged, given the realities of the place and time, and people's reactions and feedback to it.

    No committee was constituted which had to design a blueprint that said that X tonnes of oil are to be transported from ABC Ltd's drilling platform to JKL Ltd's petrol station, and another Y tonnes to MNO's aerial refueling base,.etc.

    It emerged from millions of actions by millions of people. There is no designed system here.

  13. As I said, that is a common misconception.

    I didn't say every action in the market system was planned, I said laws provided for capitalism to work were designed and built. The majority of laws in capitalist countries are meticulously designed to protect a certain type of private property and firms; they did not simply emerge naturally.

    For more on this, see here:

  14. Cahal, I believe you are intending to come to me with your own specific points about your own specific issues (which is fine), but I don't see where this relates to the core of what I was saying. Hopefully, we won't come to the point of two people talking to themselves.

    LK said that an argument for capitalism was lost. I said so what? Why does there need to be an intellectual debate? The existence of capitalism is not contingent on what the debate on it is. The man filling his car with petrol at the gas station isn't worrying about the merits of the system that is putting the gas in his car - he is just filling the gas in his car and paying for it.

    Your linked discussion on state intervention is an entirely different matter.

  15. You are saying capitalism is simply natural, and crystalised of its own accord. I am disputing that.

    If you want to argue that the market system is pretty natural (i.e. propensity to truck, barter & trade) then I might agree. But it still requires specific laws and designs to work.

  16. Cahal, this is actually a good example of leftist thinking. Prateek seems to be pretty sophisticated guy otherwise, but still fails to understand that capitalism requires private property and free market laws. Prateek believes free market is a natural state, whereas in fact people have discovered it merely 200-300 years ago. This can be chalked up to the natural tendency of leftists to take free market benefits for granted.

  17. LK, true, Keynesian government elites try to parasite on the free market rather than eliminate it altogether. However toilet paper is never produced by elites either way. Only capitalism can supply toilet paper in a reliable way. Sure, you can do a lot of parasiting in the process if you have guns, but don't you ever mistake the parasites for the producers.