Mises Money, Method and the Market Process
.pdfRussian and Chinese methods of unlimited tyranny of those in power, are nowadays called leftists and the advocates of constitutional government and civil liberties rightists. In this terminology not only Lenin, who on January 6, 1918, dispersed the Constituent Assembly by military force, is to be called a leftist, but no less his predecessors in the impolite treatment of parliaments: Oliver Cromwell and the two Napoleons. But Karl Marx, who vehemently rejected this Bonapartist method of suppressing the opposition in one of his best known pamphlets, [1] would have a fair claim to be qualified as a member of the "extreme right."
The truth is that any kind of socialist or communist regime is incompatible with the preservation of civil liberties and representative or constitutional government. Representative government and civil liberties are the constitutional or political corollary of capitalism as unlimited despotism is the corollary of socialism. No semantic prattle can alter this fact. The socialist movement is not a continuation of the liberal movement of the nineteenth century, but the most radical reaction against it. The total state of the Lenin and Hitler pattern is the embodiment of the ideals of all the great tyrants of all ages.
V
Unintentionally the words a man chooses in his speaking and writing reveal something about his ideas that he would not be prepared to express directly.
The noun revolution originally signified a revolving motion and then a transformation. But since the American and the French Revolutions it means first of all violence, civil war, war against the powers that be. When Arnold Toynbee used for his rather biased account of the evolution of modern industrialism in England (first published in 1884) the title Industrial Revolution he unintentionally disclosed his interpretation of history as a succession of violent conflicts, of killing and destroying.
The same disposition explains the use of the expression "the conquest of a market" to describe the fact that Ruritanian merchants succeeded in selling their wares in Laputania.
Many more examples could be quoted. But it is sufficient to mention one: the United States' "war against poverty." The only method of reducing poverty and of supplying people more amply with consumers' goods is to produce more, better, and cheaper. This is what profitseeking business aims at and achieves, provided sufficient capital has been accumulated by saving. All that a government can do in this process is to protect the operation of the market economy against violent or fraudulent aggression. What lessens poverty is not taking something away from Paul and giving it to Peter, but making commodities more easily accessible by producing more, better and cheaper. There is nothing in this sequence of events
for the appellation of which the term "war" would seem to be adequate. A governmental system that spends every year billions of dollars of the taxpayers' money to make essential foodstuffs, cotton and many other articles more expensive should certainly have the decency not to boast of an alleged war against poverty.
VI
What distinguishes the mentality of our contemporaries most radically from that of their grandparents is the way they look upon their relation to the government. To the nineteenthcentury liberals state and government appeared as institutions to give to the people the opportunity to live and to work in peace. Everything else, the development of material welfare as well as the cultivation of man's moral, intellectual, and artistic faculties, was the concern of the individuals.
The citizens had to comply with the laws of the country and they had to pay taxes to defray the costs incurred by the government apparatus. In their household accounts the state was an item of expenditure. Today the individual sees in the state the great provider. Together with his fellows organized as a pressure group, he expects material assistance from the authorities. He is convinced that the state's funds are inexhaustible as it can fleece the rich endlessly.
The state which the citizens supported in paying taxes could be democratic. The state from which the citizens are getting subsidies cannot remain democratic. People competing with one another for bounties submit humbly to the candidate for dictatorship bidding the most.
What the masses in their thirst for lucre do not see is that they themselves will have to pay the costs of the "presents" the government gives them. Inflation, the main source of the Santa Claus state's funds, makes their savings wither away. While investors in real estate and common stock profit from the progressive weakening of the monetary unit's purchasing power during an inflation, the investments of the less wealthy strata, predominately consisting in savings deposits, bonds, and insurance policies, melt away. The popularity inflationary measures enjoy among the masses of wage earners, who are victimized by them more than the rest of the nation, shows clearly their inability to see what their genuine interests really are.
[This Article was written in 1951 and is previously unpublishedEd.]
[1] The Eighteenth Brunmaire of Louis Bonaparte [1852], Daniel de Leon, trans.
20. The Role of Doctrines in Human History
I. Thought and Conduct
Earlier historians dealt almost exclusively with the deeds and exploits of kings and warriors. They paid little or no attention to the slowly working changes in social and economic conditions. They did not bother about the modifications of doctrines, creeds, and mentalities. Even such an unparalleled event as the expansion of Christianism was hardly mentioned by the historians of the first two centuries.
About a hundred and score years ago a new approach to history was entered upon. Cultural history studies the development of social, political, and economic institutions, the changes in technique and in methods of production, the alterations in the way of life and the transformation of customs and habits. These studies must needs lead to the discovery of the dominant role played by the ideas guiding human behavior. Everything that men do is the result of the theories, doctrines, creeds, and mentalities governing their minds. Nothing is real and material in human history but mind. The essential problems of historical research are the modifications of the systems of thought which occupy man's spirit. Habits and institutions are the product of mind.
As an animal, man has to adjust himself to the natural conditions of the earth or the part of the earth where he lives. But this adjustment is a work of the brain. The geographical interpretation of history failed to recognize this deciding point. The environment works only through the medium of human mind. On the same soil where the white settlers have developed modern American civilization the Indian aborigines did not succeed even in inventing wheels and carriages. The natural conditions which render skiing a very useful means for travelling were present both in Scandinavia and in the Alps. But the Scandinavians invented the skis, whereas the inhabitants of the Alps did not. For hundreds, nay thousands of years these peasants were closeted during the long winter months in their mountain homes and looked longingly upon the inaccessible villages down in the valleys and upon the unapproachable homesteads of their fellow farmers. But this desire did not activate their inventive spirit. When some forty or fifty years ago townsfolk imported skiing as an outdoor sport into the mountains, the natives sneered at what seemed to them to be a funny toy. Only very late they learned how useful these "toys" could be for them.
Not more conducive than this theory of the natural environment is the theory of the general environment as developed by various nineteenth century sociologists. Every man is influenced by the social and cultural conditions of the milieu in which he has to live and to work. But these institutions and conditions are themselves already the product of the doctrines dominating the conduct of preceding generations. They themselves have to be explained, the appeal to them is not a substitute for an explanation. Taine was right when in dealing with the
history of art he referred to the milieu in which artists and poets achieved their works. But general history has to go further; it has not to acquiesce in considering the conditions of environment as data which cannot be traced further back.
We do not intend to deny that human mind is influenced by the conditions under which man lives. In saying that we have to consider human thoughts as the ultimate source of human conduct we do not wish to contend that mind is something indivisible or something final beyond which nothing else exists or anything not subject to the limitations of the material universe. We do not have to deal with metaphysical problems. We simply have to take account of the fact that the present state of knowledge does not enable us to realize how the inner man reacts upon external things. Different men and the same men at different times respond in a different way to the same stimuli. Why did some people bend their knees before the idols whereas other preferred to die rather than to commit an act of idolatry? Why did Henry IV change his faith in order to obtain the rule of France whereas his scion Henry of Chambord refused to abandon the white flag with the fleurdelis for the tricolor, although he knew that he lost thereby the crown of France? There is no other answer possible to such questions than the reference to the ideas controlling human conduct.
The different readings of the very popular Marxian materialistic interpretation of history are fundamentally wrong. Both the state of technology and the productive forces are a product rather of the working of mind than a factor determining the state of mind. One merely moves in a circle when one tries to explain thought by something which itself is a result of human ideas. The obvious truth that man has to adjust himself to the natural conditions of the world in which he lives, does not at all justify the naive and crude materialist metaphysics of Marx. This adjustment is effected by thought. Why did not the Negroes of Africa discover means to fight the germs which menace their lives and health and why did European scholars discover efficient methods to fight these diseases? No materialism can answer such questions satisfactorily.
II. The Social Role of Doctrines
Science cannot provide us with a full explanation of everything. Every branch of knowledge has to stop at some given facts which it hasat least for the present time, maybe foreverto consider as ultimate and beyond which it cannot go. These ultimate facts are simply given to our experience, they cannot be traced back to other facts or forces, they are inexplicable. We call them by names like electricity or life, but we have to confess that we do not know what electricity or life are, whereas we know what water or thunder are.
Individuality is such an ultimate given for history. Every historical investigation reaches earlier or later a point where it cannot explain facts otherwise than by
pointing to individuality.
We are fully aware of the fact that every individual is at any given moment the product of his past. At birth he brings into the world as innate qualities the precipitate of the history of all his ancestors, their fate and their vicissitudes of life. We call it his biological inheritance or his racial characteristics. In his lifetime the individual is steadily influenced by his environment, both by the natural surrounding and by the social milieu. But we cannot explain how all these factors act on his thought. There is always something left which we cannot analyze further. We cannot explain why Descartes became a great philosopher and Al Capone a gangster. Our last word is: individuality. Individum est ineffabile.
In dealing with doctrines, their origin, their development, their logical implications, and their working in society we do not wish to contend that they are ultimate facts. Doctrines have not a life of their own, they are products of human thought. They are a part only of the universe and we may assume that nothing in their history justifies to consider them as exempt from the laws of causality. But we have to realize that we know nothing, simply nothing about the way in which man creates or produces ideas and mentalities. In this sense only are we entitled to call doctrines ultimate facts.
We may assume that there are doctrines whose applications favors man in his struggle for life and that other doctrines are detrimental. There are doctrines building up social cooperation and there are destructive ideas resulting in a disintegration of society. But nothing gives us the right to believe that destructive doctrines must needs lose their prestige because their consequences are pernicious. Reason has a biological function to fulfill; it is man's foremost tool in his adjustment to the natural conditions of life. But it would be a mistake to believe that a living being must always succeed in the struggle for life. There were species of plants and of animals which vanished because they failed in their endeavors to adjust themselves. There were races and nations which died out, there were societies and civilizations which disintegrated. Nature does not prevent man from thinking prejudicial ideas and from constructing hurtful doctrines. The fact that a doctrine has been worked out and that it succeeded in obtaining many supporters is not a proof that it is not destructive. A doctrine may be modern, fashionable, generally accepted and nevertheless detrimental to human society, civilization and survival.
We have to study the history of doctrines because they alone give us the clue to the understanding of social, economic, and political changes.
III. Experience and Social Doctrines
In the field of the natural sciences, especially in physics we have the opportunity
of applying the experimental method. The scientist isolates in the laboratory the various conditions of change and observes their action. Every statement can be verified or refuted by the result of experiments.
In the field of the sciences of human conduct we cannot recurr to the experimental method and cannot make experiments. Every experience is the experience of a complexity of phenomena. We never enjoy the advantage of observing the working of one factor only, other things being equal. Experience therefore can never verify or refute our statements and theories concerning social problems.
It is an undeniable fact that no nation has reached a somewhat higher stage of civilization without private ownership of the means of production. But nobody is prepared to maintain the statement that experience has proved that private property is a necessary and indispensable requisite of civilization. Social and economic experience does not teach us anything. The facts have to be commented by our theories, they are open to different explanations and conclusions. Every discussion concerning the meaning of historical facts falls back very soon to an examination of a priori theories and scrutinizes them without any reference to experience. These theories have logical precedence, they are anterior to historical experience and we grasp the meaning of this experience only with the aid of them.
These theories and doctrines, whether sound or unsound, whether suitable or detrimental for survival, do not only guide human conduct, they are at the same time the mental tool through the aid of which we perceive their working in history. We cannot observe social facts but in the light in which our theories and doctrines show them. The same complex of events offers different aspects according to the point of view from which the observer sees it.
Some very fashionable opinions have badly misjudged these objectives. Positivism, empiricism, and historicism believed that social facts could be established in the same way in which physics establishes physical facts. (We do not have to scrutinize the bearing of the latest discoveries which let us foresee that also the physicists will have to acknowledge that the result of an observation differs according to the different ways in which the observer approaches it. It seems to be too early to draw conclusions from the contributions of Werner Broglie, Louis Heisenberg, and other contemporary scientists.) They consider facts as something independent from the ideas of the observer and social experience as something logically and temporarily antecedent to theories. They do not realize that the act by which we set off out of the stream of events some happenings and consider them as definite facts is necessarily guided by our theoretical insight or, as some people may prefer to say, by our doctrinal prejudices. Why do we consider the balance of payments of the United States as a fact and why do we
not pay any attention to the balance of payments of the state of Maryland or of the city of Boston or of the borough of Manhattan? Why do we, in dealing with the problems of Germany's currency, consider the state of Germany's balance of payments? Because the investigation of the economist who proceeds in this way is guided by a very definite (and, as I have to remark, erroneous) theory of money.
The statisticians are mistaken when believing that what they study are pure facts only. The statistician tries to discover the correlations existing between different series of figures, when his theoretical reasoning makes him assume that there exists a causal relation between them. In the absence of such theoretical assumptions he does not pay any attention at all to obvious correlations, whereas he is quick in proving that a correlation exists, when his preconceived theory postulates such a correlation. Jevons believed that he had succeeded in demonstrating a correlation between the economic crises and the sun spots. On the other hand no statistician ever paid any attention to the discovery of a correlation between the number of storks and the changes of natality.
In life and reality all things are linked with all other things. History is a continuous flow of events which are entangled into a uniform structure. The delimitation of our mental forces prevents us from grasping them as a whole by one act of perception. We have to analyze them step by step, starting from the isolation of small things and slowly proceeding to the study of more complicated problems. The act by which we separate some changes out of the whole context of the flux of life and consider them as facts is not a function of reality. It is the result of the working of our mind. In the field of the social sciences there are no such things as pure facts. What we conceive as a fact is always the result of the way we look into the world. A superhumanly perfect intellect would see the same things in a different way. We of the twentieth century look at the same things in another way than Plato, Saint Thomas, or Descartes did. Our facts are different from their facts, and the facts of men who will live a hundred years after us will be different again.
A social fact is a piece of reality perceived by human intellect. What constitutes a fact is not only reality but no less the observer's mind.
An isolated figure or an isolated series of figures do not mean anything. Nor does any other isolated factsuch as: Brutus killed Caesarmean anything. Assembling statements about isolated facts does not deepen our insight and is no substitute for theories and philosophies. But every attempt to combine different facts whether by establishing correlations or by other methodsis the outcome of our theories and doctrines. In the context of different doctrines identical events get a different meaning. The same experience, the same facts are viewed in a quite different way by people who do not agree about the theories. The experience of Russian Bolshevism is not the same for Liberals (in the old sense of the term) and
for Socialists, for free thinkers and for Catholics, for Nazis and for Slav Nationalists, for economists and for the patrons of the screen. The same is true for the American New Deal, for the breakdown of France, for the Treaty of Versailles, and for all other historical facts. Of course, every party is firmly convinced that its own interpretation only is sound and adequate to the facts and that all other opinions are radically wrong and biased by false theories. But the conflict of doctrines cannot be solved by silencing all those who have different ideas. A party which succeeds in making its own opinion the only legal one and achieves to outlaw all other opinions does not alter the characteristic feature of its creed. A doctrine remains a doctrine even when generally accepted and undisputed. It may be erroneous even when no contemporary challenges it.
In order to broaden our knowledge in the field of human conduct we have to study on the one hand the problems of praxeological and economic theory and on the other hand history. But the study of history has to center around the study of the development of ideas and doctrines. The first step to every attempt to investigate social, political, and economic changes has to be the study of the changes of the ideas which guided men to bring about these changes.
IV. Doctrines and Political Problems
The problems the politicians have to deal with are not set by nature and natural conditions, they are set by the state of doctrinal convictions.
For the sixteenth and seventeenth century there existed a religious problem for which no satisfactory solution seemed to be possible. In those days people could not grasp the idea that men of different denomination could peacefully live together in the same country. Torrents of blood were shed, flowering countries were devastated, civilizations were destroyed by wars for the establishment of religious uniformity. Today we do not see any problem at all in this issue. In Great Britain, in the United States, and in many other countries Catholics and Protestants of various dominations cooperate and collaborate without any qualms. The problem has been solved, it disappeared with the change of the doctrines concerning the task of civil government.
On the other hand we have a new problem to deal with, the problem of the coexistence of various linguistic groups in the same territory. It was not a problem a hundred years ago and it is not a menacing problem in America. But it is a terrible menace in Central and Eastern Europe. Americans still find it difficult to recognize that it is a problem at all, because they are not familiar with the doctrines which made it a problem.
It would be inadequate to say that these great political issues which cause conflicts, wars, and revolutions are apparent problems only and make light of
them. They are not less real and genuine than any other problem of human conduct. They are the outcome of the whole structure of ideas and reasonings which guide present day politics. They actually exist in the social environment which is determined by these doctrines. They cannot be solved by a simple recipe. They may fade one day with the evanescence of the whole structure of ideas which have created them.
We have to separate the technological problems from the political ones. The adjustment of man to natural conditions of life is the outcome of his study of nature. The natural sciences may be styled by theologians and metaphysicians as an inadequate means to solve the riddles of the world and to answer the fundamental questions of being. But nobody can deny that they have succeeded in improving the external conditions of human life. That there are living today on the earth's surface many more people than some hundreds or thousands of years ago and that every citizen of a civilized country enjoys much more comfort than the preceding generations did, is a proof of the usefulness of science. Every successful surgical operation contradicts the skepticism of sophisticated grumblers.
But scientific research and its application in the struggle for human life can be effected only in society, i.e., in a world, where men cooperate by division of labor. Social cooperation is a product of reason and mind. It can be considered as a gift of God or as natural phenomenon only as far as we have to realize that the power to think is a natural equipment of man. Man has by making proper use of his faculties created both technology and society. The progress of the natural sciences and of the social sciences, the development of technical skill and of social cooperation are inextricably linked together. Both are an outcome of mind.
We have not to dwell upon the matter that there are problems which the natural sciences cannot solve. As far as the experimental method of the laboratory can work, the natural sciences can attain statements which may be regarded as undisputed facts. Natural science marches forward by trial and error. That the experiments arranged in the laboratory effect the expected results and that the machines run in the way we want them to run provides us with a verification of the body of our physical insight which is beyond any doubt.
But in the field of the social sciences we do not enjoy the advantage of the experimental method. We have to repeat this fact again and again, because its enormous bearing can hardly be overrated and because it is totally neglected by present day epistemology and economics. The theories which build up or disintegrate social cooperation can only be proved or refuted by pure reasoning. They cannot be exposed to the simple examination of the experiment.
This explains fully why the conflict of social doctrines seems to be in such a