“Ludwig von Mises argued that the “mixed economy” was an unstable system, because each new government intervention would lead to undesirable consequences that would then invite further interventions.”Yet, in Human Action: A Treatise on Economics. The Scholar's Edition, Mises explicitly denies there is any such thing as a “mixed economy,” in a remarkable passage:
Robert Murphy, “ObamaCare Is Just a Stepping Stone to Nationalized Health Care,” Free Advice, 26 September.
“The market economy must be strictly differentiated from the second thinkable—although not realizable—system of social cooperation under the division of labor: the system of social or governmental ownership of the means of production. This second system is commonly called socialism, communism, planned economy, or state capitalism. The market economy or capitalism, as it is usually called, and the socialist economy preclude one another. There is no mixture of the two systems possible or thinkable; there is no such thing as a mixed economy, a system that would be in part capitalistic and in part socialist. Production is directed by the market or by the decrees of a production tsar or a committee of production tsars.According to the logic of this passage, a nationalised healthcare system would not even cause the US to have a “mixed economy” or cease to have a market economy, even if it were a non-profit system and subsidised from taxes.
If within a society based on private ownership by the means of production some of these means are publicly owned and operated—that is, owned and operated by the government or one of its agencies—this does not make for a mixed system which would combine socialism and capitalism. The fact that the state or municipalities own and operate some plants does not alter the characteristic features of the market economy. These publicly owned and operated enterprises are subject to the sovereignty of the market. They must fit themselves, as buyers of raw materials, equipment, and labor, and as sellers of goods and services, into the scheme of the market economy. They are subject to the laws of the market and thereby depend on the consumers who may or may not patronize them. 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 a 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.” (Mises 2008: 259–260).
Of course, maybe Murphy was thinking of Mises’s theory of the “hampered market economy” (Mises 2008: 712–857). Here Mises says that certain oppressive types of taxation, restriction of production, price distortions (such as price controls or minimum wage laws), central banking and credit expansion, confiscation and redistribution of income and total war hamper the market economy.
But even in these chapters Mises is often vague in the details: for example, Mises says that government taxes are appropriate when they take a “modest” amount of people’s income, but when they “grow beyond a moderate limit, they cease to be taxes and turn into devices for the destruction of the market economy” (Mises 2008: 733–734). But at what level of taxes does the transition occur?
In reality, the “hampered market” section of Human Action is one of the most incoherent and stupid set of arguments Mises ever made.
The overwhelming proof of this was given to us in the remarkable success of command economies in the West during both World War I and World War II. In these wars, Western nations like the UK, the US, Canada, Australia and New Zealand had moderate command economies with massive government planning of production, price controls, high taxes, and even monetisation of budget deficits. According to the logic of Mises, all Western command economies should have quickly simply descended into utter chaos and collapsed in WWI or WWII. The allied governments should have been incapable of planning production and winning the war. Needless to say, Mises’s theory of the “hampered market economy” and its inevitable collapse is totally and completely refuted by history. (And, notably, even the losing sides such as Germany and Japan had considerable success with command economies during the time when they had early military victories and access to resources.)
Yet, according to Mises, even moderate interventions that create a “hampered market” outside of wartime are unstable and will lead to chaos from which either socialism or capitalism will emerge. Mises’s whole theory sounds like a libertarian version of vulgar Marxism, where history is governed by “iron laws” and “historical necessity,” and in which historical contingency is thrown to the wind.
But history also shows us many examples in peacetime of what Mises called “hampered market” economies that never descended into totalitarian socialism and chaos, and either were stable (e.g., the UK in the 19th century even thought it had a central bank and credit expansion, post-WWII mixed economies, the high interventionists states of South Korea, Taiwan, Singapore, etc.) or even changed in ways that made them more laissez faire (e.g., the transition from mercantilist economies to those with free trade, the transition from mixed economies of the 1940s-1970s to neoliberalism).
And, above all, we can only notice how Mises’s comments in original passage above denying that there is any such thing as a “mixed economy” bizarrely contradict his comments on the “hampered market” economy.
How is it that nationalised industries run for profit or subsidised with taxes do “alter the characteristic features of the market economy,” but other interventions lead inevitably to socialism or chaos?
Mises, L. 2008. Human Action: A Treatise on Economics. The Scholar's Edition. Mises Institute, Auburn, Ala.
"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.”ReplyDelete
Interesting. Factors of production are the inputs to the production process -- so that includes, say, the fuel used to power a workplace.
There are many socialists who recognise the need for commodity exchange. As market socialist David Schweickart observes it "has long been recognised that Mises's argument is logically defective. Even without a market in production goods, their monetary values can be determined." (Against Capitalism, p. 88)
This is not a new notion. For example, Proudhon (who coined the term "scientific socialism") argued for a system in which co-operatives would sell each other the productions of their labour. So a coal-miners co-operative would sell their coal to a rail-workers association who, in turn, would charge other businesses to transport their inputs/outputs.
Proudhon argued this from 1840 to 1865 and Mises was well aware that he existed...So much for "all" socialists!
See section I.1.1 of An Anarchist FAQ for more on this as well as my Proudhon Anthology Property is Theft! (the introduction discusses Proudhon's ideas on socialisation, workers association and so forth and presents numerous quotes where he proclaims himself a socialist).
Suffice to say, Mises had some strange ideas on what socialism and syndicalism are -- at best, you could argue that he, like most Marxists, sought to limit socialism to Marxism (in its social democrat and Leninist forms). However, that does not make his right, or accurate!
An Anarchist FAQ
Yes, this is strange. So Mises would be in support of a form of market socialism? Perhaps it is too early and I have not yet had enough coffee but it seems plausible.ReplyDelete
Well, no, Mises didn't support any kind of "socialism".Delete
Mises's extreme view that no command economy can work at all causes him to deny that there is any such thing as a mixture of a market economy and socialism.
So his idea that "mixed economies" don't exist is just a bizarre consequence of his need explain the real world existence of the mixed economies after WWII and the fact that they worked well.
Ha ha.So,they get old Mises,wrong again and you have to correct the Doctors over at mises.org about their own ones again LK :)? Ah you have to send them a bill for all your educational work.It´s fair.Great post LK.Delete
I feel like you're reaching pretty hard here. Mises said lots of things over a 50+ year writing career. If you want to search each of his books an essays up and down you'll certainly find contradictions, mistakes, and/or logical errors. What he said was in no way critical to establishing Murphy's point. He's saying that this corporatist plan will inevitably fail as well and the calls for further reform will inevitably follow until nationalization happens. This is essentially the pattern Mises cites in "middle of the road leads to socialism". That's why he bothers to cite Harry Reid.ReplyDelete
And of course nationalization doesn't solve anything either it just brings an end to public debate over which petty changes are necessary and makes the whole process bureaucratic.
And I'm sure you're tired of dodging this question but what is it you advocate? Obamacare?
(1) "I feel like you're reaching pretty hard here. Mises said lots of things over a 50+ year writing career. If you want to search each of his books an essays up and down you'll certainly find contradictions, mistakes, and/or logical errors."Delete
And what is described above is a major contradiction/inconsistency, which shows us how Mises's drivel on this subject should not be believed.
(2) And I'm sure you're tired of dodging this question but what is it you advocate?
The US ought to have a universal health care system, free at the point of delivery and funded by progressive taxation, just like every other civilised industrialised nation. The rich, or indeed anyone who wants to pay, can continue to have expensive privatised health care.
But such a "universal" system doesn't entail strict nationalisation of course, since there are many different models (e.g., more market based systems like Germany or France).
The evidence is perfectly clear that these universal systems delivered better health outcomes across the board and proper access for those who cannot pay.
So if one person says a hundred wrongs and only a few that are correct, you ignore the correct ones because of the person's habit? I'd argue it's the opposite case for Mises, but regardless we all make errors, that's part of the human condition. Something Mises himself makes clear repeatedly.ReplyDelete
How does one avoid the cronyism and limits on competition that invariably come with government control, in universal healthcare?
(1) Your statement 1 attributes a straw man argument to me ("So if one person says a hundred wrongs and only a few that are correct, you ignore the correct ones because of the person's habit?").Delete
(2) "invariably come with government control, in universal healthcare"
What examples of "cronyism" are thinking of?
As for limits on competition, again what examples do you have?
No I'm suggesting you set up a straw man in Mises and I prefer to think I provided a reduction ad absurdam. You haven't disproven that intervention begets intervention.Delete
As for the cronyism, what is the FDA? USDA? EPA? Every regulatory body in the united states is a cronyism-driven, competition-inhibiting protection racket run by big business. Protectionism has been recognized for centuries to be good for a few at the expense of the many, yet still peddled by demagogues, special interest groups, and intellectuals alike. I didn't think you would want me to do work to prove this to you. Or that you would question it at all.
Is this a case where apriorism meets empiricism and fails to meet your approval?
"Protectionism has been recognized for centuries to be good for a few at the expense of the many, yet still peddled by demagogues, special interest groups, and intellectuals alike. I didn't think you would want me to do work to prove this to you. Or that you would question it at all. "Delete
On the contrary, the empirical evidence shows that protectionism can produce either positive effects or negative effects.
The industrialisation of many nations has been strongly aided by infant industry protectionism, e.g., even Britain during its industrial revolution:
And East Asian industrialization generally in
South Korea, Taiwan, and Japan after 1960.
The case for universal free trade is just another neoclassical and Austrian myth:
you stubborn, stubborn man(? i can't know this). you work so tediously to refute apriorism, yet you cannot grasp that there can be no "empirical evidence" if you can't narrow the field of variables in your test. It's merely your interpretation of statistics and history vs someone else's differing view. you claim yours is right, he claims his is right. you cannot prove or falsify any of it. that is the basis of this and i would guess just about all economic arguments.ReplyDelete
I think you should make your next post not about apriorism but whatever you think is positive about the empirical method to economics. because currently i'm convinced its nothing more than stubborn belief in an obviously fallible, or worse, entirely fallacious, system of guess work. before you focus on refuting another's method, at least justify your own.
It's like the goal was never to know the truth, only to convince the reader.
"yet you cannot grasp that there can be no "empirical evidence" if you can't narrow the field of variables in your test. It's merely your interpretation of statistics and history vs someone else's differing view. you claim yours is right, he claims his is right. you cannot prove or falsify any of it."Delete
That is plainly ridiculous. Of course you can narrow "variables": e.g., those associated with the success of British cotton textile industry during the industrial revolution, as I have argued in the post above.
The argument is not just some subjective or unprovable "interpretation of statistics and history vs someone else's differing view" at all.
Statements can be proven inductively. Even a counterfactual can be given a high degree of probability inductively.
If you think the proof offered is apodictic, that is just a straw man argument.
You don't even get apodictic truth in the natural sciences (e.g., evolution and the heliocentric theory of the solar system are only extremely probable), so saying you can't get it in economics is hardly some kind of refutation of my position.
I don't think your statistical references do anything but justify my position, sure protectionism helps those who it's intended to help. But it's still at the expense of everyone else. Britain helped its own industry but hurt its no industry workers. It also hurt India's industry and population. Seeing this as a good thing is where we differ in opinion. It's not a moral approach. It's not even a utilitarian one. It seems like a purely nationalistic mentality. But social democrats usually do go towards collectivism.Delete
"I don't think your statistical references do anything but justify my position, sure protectionism helps those who it's intended to help. But it's still at the expense of everyone else."Delete
False. The industrialisation and higher real per capita GDP in the UK benefited all members of society in the long run.
As for India, if it had been allowed to impose its own tariffs and improve productivity of textile production, it too would have benefited.
This is where I respond with a reductio ad absurdam to which you reply "straw man" and continue on...Delete