Mises Money, Method and the Market Process

hopeless state. When Lavoisier replaced the theory of the phlogiston by a more satisfactory theory he met first with a stubborn opposition by the supporters of the older view. But his resistance disappeared very soon and forever the experiments in the laboratory and the application of the new theory in technological practice put an end to it. No similar test could be brought forward in favor of the great economic achievements of Hume, Ricardo, and Menger. They have to undergo the scrutiny of abstract reasoning.

Then there is a second important difference. Within the framework of a capitalist society where there is private property of the means of production a new idea can be put into practice in a limited field with small resources. Thus men like Fulton and Bell could succeed in realizing plans to which the majority of their contemporaries laughed. But social changes have to be brought about by measures which need the support of the majority. A free­trader cannot realize free­trade by the support of a few friends, peace cannot be established by an isolated small group of peace loving people. To make social doctrines work the support of public opinion is needed. Those scores of millions who ride on the railroads and listen to the broadcast without any idea of how railways have to be constructed and operated and how the radio works, have to grasp the incomparably more difficult problems of social cooperation, if society has to operate satisfactorily. Thus the great bulk of the low­browed, the masses who do not like to think and to reflect, the inert people who are slow in grasping new complicated ideas have to decide. Their doctrinal convictions, how crude and naive they may be, fix the course of events. The state of society is not the outcome of those theories which have the support of the small group of advanced spirits, but the result of the doctrines which the masses of laymen consider as sound ones.

It is generally believed that the conflict of social doctrines is due to the clash of group interests. If this theory were right, the cause of human cooperation would be hopeless. If unanimity cannot be reached because the rightly conceived interests of individuals are running counter to each other or because the interests of society are in antagonism to the interests of individuals then no lasting peace and no friendly cooperation between men can ever be attained. Then the present state of civilization which postulates peace cannot be maintained and mankind is doomed. Then the Nazis were right who considered war as the only normal, natural, and desirable shape of human intercourse. Then the Bolsheviks were right who did not argue with their adversaries but exterminated them. Then Western civilization was nothing but a shameless lie and its achievements, as Werner Sombart asserted, the work of the devil.

What we have to realize is that the social problems are the result of the state of social doctrines. What has to be considered is whether a state of social organization can be conceived which could be considered satisfactory from the­

rightly conceived­interests of every individual. If the answer to this question has to be in the negative then we have to see in the conflicts of our day the prelude to the unavoidable disintegration of society. If on the other hand the answer will be affirmative we have to investigate what state of mind has led to conflicts in a world where another result is at least conceivable.

In any case the conflicts are a result of the doctrines. Even those who believe that the conflicts are the unavoidable outcome of a real and necessary antagonism of interests do not deny that these real antagonisms have to be perceived by reason in order to guide the actions of men. Man can only act for his own interest if he knows what his interests are and what has to be done in order to promote them. Both the Marxians and the Nationalists agree that a state of mind could prevail and prevailed, where classes, nations, and individuals are mistaken about their true interests and stick to doctrines which are detrimental to their own welfare. Notwithstanding their repeated assertions that being by some mystical process creates the proper ideas they praise their great men for having discovered them, they acknowledge that some people conceive ideas unsuitable to their being and they believe that propaganda is necessary to imbue people with the doctrines adequate to their being. Thus they, too, admit that the doctrines and not the bare state of things engender the conflicts.

There is another widely spread fallacy according to which men are by innate features or by environment disposed for a particular Weltanschauung or philosophy. Men of different philosophies disagree about everything; their opinions can never harmonize, no conformity can ever be reached. This too, if it were true, would render society and social cooperation impossible. But it is not true. All men, notwithstanding the party lines which divide them, want the same things in this world. They want to protect their own life and the lives of their kin against damage and they want to increase their material well­being. They fight each other not because they wish to attain different aims, but on the contrary, because­striving for the same ends­they assume that the satisfaction which the other fellow may get hinders their own improvement. There were once ascetics who honestly and fully renounced every worldly ambition and were content to live the life of the fish in the water. We have not to dwell upon their case, because these rare saints certainly are not responsible for the struggles for more food and more luxuries. When people disagree about social doctrines they do not disagree about Weltanschauung, they disagree about the methods to get more wealth and more joy. All political parties acting on the stage of history promise to their followers a better life on earth. They justify the sacrifices they exact from their partisans as necessary means for the acquisition of more wealth. They declare these sacrifices as temporary only, as investments which will bear multiple profit. The conflict of doctrines is a discussion about means, not about ultimate ends.

Political conflicts are the result of doctrines which maintain that the only way to

happiness is to inflict harm on other people or to menace them with violence. Peace, on the other hand, can be achieved only by the conviction that peaceful cooperation gives better satisfaction than fighting each other. The Nazis embarked upon the way of conquest because their doctrines taught them that a victorious war is indispensable for their happiness. The people of the fifty American states live peacefully together because their doctrine teaches them that a peaceful cooperation suits better their objectives than warring does. When once, some hundred years ago, a different doctrine got hold upon the minds of Americans bloody civil war resulted.

Thus the main subject of historical research has to be the study of social, economic, and political doctrines. What people do when making laws and constitutions, when organizing political parties and armies, when signing or breaking treaties, when living peacefully or kindling wars or revolutions, is the application of these doctrines. We are born into a world shaped by doctrines and we are living in an environment which continually changes by the operation of changing doctrines. Every man's fate is determined by the working of these doctrines. We sow, but the result of our toil and trouble depends not only on the acts of God; not less important for our harvesting is the conduct of other people and this conduct is guided by doctrines.

V. The Expedience of Doctrines

It is not the task of a scientific inquiry to judge the various doctrines from the point of view of pre­conceived convictions or of personal preferences. We have not the right to measure other people's ideas by the standard of our morals. We have to eliminate from our reasoning the consideration of ultimate ends and values. It is not the duty of science to tell people what they should try to attain as their chief good.

There is only one standard which we have to apply when dealing with doctrines. We have to ask whether their practical application will succeed in attaining those ends which people wish to attain. We have to examine the fitness of doctrines from the point of view of those who apply them in order to reach some certain goals. We have to inquire whether they are suitable for the purpose which they have to serve.

We do not believe that there are men who take the old principle fiat justitia pereat mundus in its literal meaning. What they really want to say is: fiat justita ne pereat mundus. They do not wish to destroy society by justice, but on the contrary they want to protect it against destruction. But if there were people who consider it as the ultimate end of their endeavors to destroy civilization in order to reduce mankind to the status of Neanderthal man, then we could not help applying to their doctrines the standard of their ultimate end. We could add: we and the large

majority of our fellowmen do not share this madness, we do not long for destruction but for advancement of civilization and we are prepared to defend civilization against the assaults of its adversaries.

There is still a second point of view from which to judge a doctrine. We can ask whether it is logically coherent or self­contradictory. But this estimate is secondary only and has to be subordinated to the above mentioned standard of expediency. A contradictory doctrine is wrong only because its application will not achieve the ends sought.

It would be a mistake to call this method of judging doctrines pragmatist. We are not concerned with the question of truth. We have to consider doctrines, i.e., recipes for action and for these no other standard can be applied than that of whether these recipes work or do not work.

It would not be more correct to style our point of view an utilitarian one. Utilitarianism has rejected all standards of a heteronomous moral law, which has to be accepted and obeyed regardless of the consequences arising therefrom. For the utilitarian point of view a deed is a crime because its results are detrimental to society and not because some people believe that they hear in their soul a mystical voice which calls it a crime. We do not talk about problems of ethics.

The only point which we have to emphasize is that people who do not apply the appropriate means will not attain the ends they wish to attain.

VI. Esoteric Doctrines and Popular Beliefs

Any attempts to study human conduct and historical changes has to make ample allowance for the fact of intellectual inequality of men. Between the philosophers and scholars who contrive new ideas and build up elaborate systems of thought and the narrow­minded dullards whose poor intellect cannot grasp but the simplest things there are many gradual transitions. We do not know what causes these differences in intellectual abilities; we have simply to acknowledge their existence. It is not permitted to dispose of them by explaining them as brought about by differences in environment, personal experience, and education. There can be no doubt that at the root of them lies innate heterogeneity of individuals.

Only a small elite has the ability to absorb more refined chains of thought. Most people are simply helpless when faced with the more subtle problems of implication or valid inference. They cannot grasp but the primary propositions of reckoning; the avenue to mathematics is blocked to them. It is useless to try to make them familiar with thorny problems and with the theories thought out for their solution. They simplify and mend in a clumsy way what they hear or read. They garble and misrepresent propositions and conclusions. They transform every

theory and doctrine in order to adapt it to their level of intelligence.

Catholicism had a different meaning for Cardinal Newman and for the hosts of the credulous. The Darwinian theory of evolution is something else than its popular version that man is a scion of apes. Freudian psychoanalysis is not identical with pansexualism, its version for the millions. The same dualism can be stated with all social, economic, and political doctrines. All doctrines are taught and accepted at least in two different, nay, conflicting varieties. An unbridgeable gulf separates the esoteric teaching from the exoteric one.

As the study of doctrines is not a goal for itself, it has to pay no less attention to the popular doctrines than to the doctrines of the philosophical authors and their books. Of course, the popular doctrines are derived from the logically elaborated and refined theories of the scholars and scientists. They are secondary, not primary. But as the application of social doctrines necessitates their endorsement by public opinion and as public opinion mostly turns towards the popular version of a doctrine, the study of the latter is no less important than that of the perfect conception. For history a popular slogan may sometimes vouchsafe more information than the ideas formulated by scholars. There are popular and generally accepted beliefs which are so contradictory and manifestly indefensible that no serious thinker ever dared to represent them systematically. But if such a belief provokes action it is for historical research no less important than any other doctrine applied in practice. History has not to limit its endeavors either to sound doctrines or to doctrines neatly expounded in scholarly writings; it has to study all doctrines which determine human action.

[This Article was probably written in either 1949 or 1950 and is previsouly unpublished until this volume­Ed.]

21. The Idea of Liberty is Western

I. The history of civilization is the record of a ceaseless struggle for liberty.

Social cooperation under the division of labor is the ultimate and sole source of man's success in his struggle for survival and his endeavors to improve as much as possible the material conditions of his well­being. But as human nature is, society cannot exist if there is no provision for preventing unruly people from actions incompatible with community life. In order to preserve peaceful cooperation, one must be ready to resort to violent suppression of those disturbing the peace. Society cannot do without a social apparatus of coercion and compulsion, i.e., without state and government. Then a further problem emerges: to restrain the men who are in charge of the governmental functions lest they abuse their power and convert all other people into virtual slaves. The aim of all struggles for liberty is to keep in bounds the armed defenders of peace, the governors and their constables. Freedom always means: freedom from arbitrary action on the part of the police power.

The idea of liberty is and has always been peculiar to the West. What separates East and West is first of all the fact that the peoples of the East never conceived the idea of liberty. The imperishable glory of the ancient Greeks was that they were the first to grasp the meaning and significance of institutions warranting liberty. Recent historical research has traced back to Oriental sources the origin of some of the scientific achievements previously credited to the Hellenes. But nobody has ever contested that the idea of liberty was created in the cities of ancient Greece. The writings of Greek philosophers and historians transmitted it to the Romans and later to modern Europe and America. It became the essential concern of all Western plans for the establishment of the good society. It begot the laissez­faire philosophy to which mankind owes all the unprecedented achievements of the age of capitalism.

The meaning of all modern political and judicial institutions is to safeguard the individuals' freedom against encroachments on the part of the government. Representative government and the rule of law, the independence of courts and tribunals from interference on the part of administrative agencies, habeas corpus, judicial examination and redress of acts of the administration, freedom of speech and the press, separation of state and church, and many other institutions aimed at one end only: to restrain the discretion of the officeholders and to render the individuals free from their arbitrariness.

The age of capitalism has abolished all vestiges of slavery and serfdom. It has put an end to cruel punishments and has reduced the penalty for crimes to the minimum indispensable for discouraging offenders. It has done away with torture and other objectionable methods of dealing with suspects and lawbreakers. It has repealed all privileges and promulgated equality of all men under the law. It has transformed the subjects of tyranny into free citizens.

The material improvements were the fruit of these reforms and innovations in the conduct of government affairs. As all privileges disappeared and everybody was granted the right to challenge the vested interests of all other people, a free hand was given to those who had the ingenuity to develop all the new industries which today render the material conditions of people more satisfactory. Population figures multiplied and yet the increased population could enjoy a better life than their ancestors.

Also in the countries of Western civilization there have always been advocates of tyranny­the absolute arbitrary rule of an autocrat or an aristocracy on the one hand and the subjection of all other people on the other hand. But in the Age of Enlightment the voices of these opponents became thinner and thinner. The cause of liberty prevailed. In the first part of the nineteenth century the victorious advance of the principle of freedom seemed to be irresistible. The most eminent philosophers and historians got the conviction that historical evolution tends toward the establishment of institutions warranting freedom and that no intrigues and machinations on the part of the champions could stop the trend toward liberalism.

II

In dealing with the preponderance of the liberal social philosophy there is a disposition to overlook the power of an important factor that worked in favor of the idea of liberty, viz., the eminent role assigned to the literature of ancient Greece in the education of the elite. There were among the Greek authors also champions of government omnipotence, such as Plato. But the essential tenor of Greek ideology was the pursuit of liberty. Judged by the standards of modern liberal and democratic institutions, the Greek city­states must be called oligarchies. The liberty which the Greek statesmen, philosophers and historians glorified as the most precious good of man was a privilege reserved to a minority. In denying it to metics and slaves they virtually advocated the despotic rule of an hereditary caste of oligarchs. Yet it would be a grave error to dismiss their hymns to liberty as mendacious. They were no less sincere in their praise and quest of freedom than were, two thousand years later, the slaveholders George Washington and Thomas Jefferson. It was the political literature of the ancient Greeks that begot the ideas of the Monarchomachs, the philosophy of the Whigs, the doctrines of Althusius, Grotius, and John Locke, and the ideology of the fathers of modern constitutions and bills of rights. It was the classical studies, the essential feature of a liberal education, that kept awake the spirit of freedom in England of the Stuarts and George III, in France of the Bourbons, and in Italy, subject to the despotism of a galaxy of princes.

No less a man than Bismarck, among the nineteenth­century statesmen the

foremost foe of liberty, bears witness to the fact that even in the Prussia of Frederick William III the Gymnasium was a stronghold of republicanism. [1] The passionate endeavors to eliminate the classical studies from the curriculum of the liberal education and thus virtually to destroy its very character were one of the major manifestations of the revival of the servile ideology.

It is a fact that a hundred years ago only a few people anticipated the overpowering momentum which the antiliberal ideas were destined to acquire in a very short time. The ideal of liberty seemed to be so firmly rooted that everybody thought that no reactionary movement could ever succeed in eradicating it. It is true, it would have been a hopeless venture to attack freedom openly and to advocate unfeignedly a return to subjection and bondage. But antiliberalism got hold of people's minds camouflaged as superliberalism, as the fulfillment and consummation of the very ideas of freedom and liberty. It came disguised as socialism, communism, and planning.

No intelligent man could fail to recognize that what the socialists, communists, and planners were aiming at was the most radical abolition of the individual's freedom and the establishment of government omnipotence. Yet the immense majority of the socialist intellectuals were convinced that in fighting for socialism they were fighting for freedom. They called themselves left­wingers and democrats, and nowadays they are even claiming for themselves the epithet liberals.

These intellectuals and the masses who followed their lead were in their subconsciousness fully aware of the fact that their failure to attain the far­flung goals which their ambition impelled them to aim at was due to deficiencies of their own. They were either not bright enough or not industrious enough. But they were eager not to avow their inferiority both to themselves and to their fellow men and to search for a scapegoat. They consoled themselves and tried to convince other people that the cause of their failure was not their own inferiority but the injustice of society's economic organization. Under capitalism, they declared, self­realization is only possible for the few. "Liberty in a laissez­faire society is attainable only by those who have the wealth or opportunity to purchase it." [2] Hence, they concluded, the state must interfere in order to realize "social justice." What they really meant is, in order to give to the frustrated mediocrity "according to his needs."

III

As long as the problems of socialism were merely a matter of debates people who lack clear judgment and understanding could fall prey to the illusion that freedom could be preserved even under a socialist regime. Such self­deceit can no longer be nurtured since the Soviet experience has shown to everybody what conditions

are in a socialist commonwealth. Today the apologists of socialism are forced to distort facts and to misrepresent the manifest meaning of words when they want to make people believe in the compatibility of socialism and freedom.

The late Professor Laski­a self­styled noncommunist or even anticommunist­told us that "no doubt in Soviet Russia a Communist has a full sense of liberty; no doubt also he has a keen sense that liberty is denied him in Fascist Italy." [3] The truth is that a Russian is free to obey all the orders issued by the great dictator. But as soon as he deviates a hundredth of an inch from the correct way of thinking as laid down by the authorities, he is mercilessly liquidated. All those politicians, office­holders, authors, musicians, and scientists who were "purged" were­to be sure­not anticommunists. They were, on the contrary, fanatical communists, party members in good standing, whom the supreme authorities, in due recognition of their loyalty to the Soviet creed, had promoted to high positions. The only offense they had committed was that they were not quick enough in adjusting their ideas, policies, books or compositions to the latest changes in the ideas and tastes of Stalin. It is difficult to believe that these people had "a full sense of liberty" if one does not attach to the word liberty a sense which is precisely the contrary of the sense which all people always used to attach to it.

Fascist Italy was certainly a country in which there was no liberty. It had adopted the notorious Soviet pattern of the "one party principle" and accordingly suppressed all dissenting views. Yet there was still a conspicuous difference between the Bolshevik and the Fascist application of this principle. For instance, there lived in Fascist Italy a former member of the parliamentary group of communist deputies, who remained loyal unto death to his communist tenets, Professor Antonio Graziadei. He regularly received the pension which he was entitled to claim as professor emeritus, and he was free to write and to publish, with the most eminent Italian publishing firms, books which were orthodox Marxian. His lack of liberty was certainly less rigid than that of the Russian communists who, as Professor Laski chose to say, "no doubt" have "a full sense of liberty."

Professor Laski took pleasure in repeating the truism that liberty in practice always means liberty within law. He went on saying that the law always aims at "the conference of security upon a way of life which is deemed satisfactory by those who dominate the machinery of state." [4] This is a correct description of the laws of a free country if it means that the law aims at protecting society against conspiracies intent upon kindling civil war and upon overthrowing the government by violence. But it is a serious misstatement when Professor Laski adds that in a capitalistic society "an effort on the part of the poor to alter in a radical way the property rights of the rich at once throws the whole scheme of liberties into jeopardy." [5]