Written in 2009
Having read today chunks of his 2 books
against interventionism and against
socialism (Gemeinwirtschaft) my general impression is that von
Mises is basically an advocate of capitalism come hell or high water (essence
of capitalism according to von Mises is
private property, not free competition), and uses every possible argument in
favor of the capitalist system, in a
fairly opportunistic way, sometimes contradicting himself. He has no unified
theory of why capitalism is good.
On the other hand von Mises admits
that certain government interventions would be good if they could be carried
out. But they can't!.
However his proof of why they can't is not very convincing. And in any case
that leaves a door open for state intervention merely by saying that it's a new
kind of intervention that really
is effective. And that can be said about many government
interventions nowadays! So von Mises was basing his argument on the assumption
that nobody had ever proved government intervention was effective. Now 80 years
later things have changed.
Accordingly much of von Mises’s
arguments are simply “We don't know enough about how economies really work to
design effective economic policies.” 80 years later this argument is a dead
duck.
But isn’t von Mises’s argument
that government measures are ineffective
predicated on the assumption that competitive free market forces counteract
them? If so, then ineffectiveness of government policy assertion is only
correct when the capitalist system really is competitive!
It's amusing to compare the academic
rigour with which von Mises counters critics of monopoly and of
concentration
with his sloppiness when
marshalling evidence in favor of his own statements!. “First you have got to
prove this, then you have got to prove that, you have got to distinguish
between concentration of wealth and concentration of firms!” etc. His own
assertions don't seem to be backed up by any such heavy-duty empirical evidence
or theoretical reasoning. For example: expansive nature of government intervention
that market forces assure quick adjustments, etc. Kinda quick on the trigger,
old Ludwig.
Consequently he cannot be taken seriously as a
theorist. He is merely an ideologist, albeit a fairly competent one.
On the other hand I was amazed to
find that von Mises wrote his thesis on a subject of economic history! And
diachronic at that! (history of serfdom’s final stages in Galitzia). Must
read! This seems to contradict my thesis of the ahistoricity of the
Austrian School. [I later found out that Mises started out as a
disciple of the German Historical School.]
Conclusion: Von Mises’s critique of
socialism is multiple. Some of his claims I found convincing from my historical
standpoint (2009) (Kornai seems to have
proved von Mises's thesis of impossibility of rational price determination without a
market). On the other hand many of his objections to socialism & Co. are
merely challenges, they claim nothing, merely deny cogency of other side’s
arguments:
1) Demands
that the other side prove their case with scientific rigor,
2) Claims
that empirical evidence is lacking, inconclusive, etc.
Von Mises’ assertion that every
government intervention is fatuous seems to be based only on price controls and
suchlike. Nowadays government intervention takes other forms, like channeling
finance to certain sectors of the economy, as in Japan. Most likely thanks in
large part to von Mises’ critique, price controls have a bad reputation today
(except for minimum wage levels). Accordingly nowadays critique of government
intervention must be much more diverse, complex, etc. Von Mises simply does not
cover the subject any more. He's old hat. Try Kornai instead. Planners have
learned from von Mises’ critique! We’re at a new stage of the game.
Historical setting of von Mises. Germany in the 1920s & 30s was extremely radicalized
between R and L. In that atmosphere of class struggle, it was inevitable that
von Mises focus his arguments on whatever would be politically effective in the
specific situation. That would tend to make him opportunistic, talk out of both
sides of his mouth.
When he says that no specific
argument has been made against monopolies a such, I think he's ignoring the
classical argument against monopolies,
namely excess profit for monopolist and a reduction in consumers’ welfare. That
seems to me to be a pretty good general argument!
Check what von Mises says about
Bismarck (if anything).
Does he anywhere go into the
conditions of a free market to exist & why a free market is good? He seems
to assume that in a lot of places. But I have not found any actual support for
this argument yet.
The issue central to my research
of R-wing economists is what grounds they adduce for free enterprise’s
superiority. More specifically whether they claim the advantages set forth by
Adam Smith & followers, namely that capitalism is good because it (1) means
a free market for goods and services; and because (2) free markets are capable
of optimizing social welfare (Pareto-optima), but (3) only if they fulfill
certain criteria that are logically required for the market to strive toward a
Pareto optimum. (These criteria being no externalities, free competition, no
increasing returns, perfect information, no public goods, etc.).
The crucial link is between 2
& 3. To what extent does the desirability of a market system depend on the
fulfillment or otherwise of the criteria under (3)?
Intuitively & from experience,
I find that the more right-wing an economist is, the fewer demands he places in
order to class capitalism as beneficial, and vice versa. This would seem to imply that it is a leftish
position to allege any market imperfection. Although there's no obvious reason
for it, R-wing economists seldom go into issues of whether market conditions
fulfill or not the technical requirements to be considered Pareto-optimizing.
They always assume that everything’s just dandy in that department.
Types of market imperfection:
- Monopoly (Cambridge School, 1930s) countered by
contestable markets theory
- Asymmetrical information (Akerlof, Stiglitz &
Co., 1990s)
- Herd behavior
- Too many speculators (that is too many traders are
not basing their decisions on fundamentals but either (1) on what they
think will happen to the stock in a short while; or else on (2) what they
think other traders are going to
do).
- Public goods
- Externalities
- Increasing returns to scale
- Non-convexities
- Is the economic decision one that may legitimately be
undertaken by a single consumer? If it’s a collective decision, asking the
individual opinions of the participants in the decision making BEFORE they have even begun to
discuss the question is extremely misleading (see Perelman).
Their unwillingness to compromise
with social democrats is ideologically undergirded by their alleged belief in
the absolutely incompatible nature of free market & planning. I think that
Hayek’s wishy-washiness about government social welfare policy shows that the incompatibility doctrine
is a crucial political
dogma which they reaffirm once and again. In other words they don't
really believe in the incompatibility. It's just a cover story to justify a
hard line. In practice they’re willing to make small concessions.
The vigor with which von Mises
stresses the incompatibility doctrine is almost zombie-like. It's not a
scientific conclusion. It's obviously a political dogma. It reflects a certain
strategy of the part of a segment of the bourgeoisie (financial bourgeoisie?
Who knows?)
What link is there between Hayek
& co and financial capital?
According to Duménil & Levy, Hayek’s ideas represent
the ideology of the financial capitalists, not the manufacturing capitalists.
Was that also true in their time? What were the political activities of Hayek
& co? Is financial capital less likely to desire cooperating with the state than industrial capital? If so, why? Austrian
School’s stress on the entrepreneur does not seem very finance-friendly. The
concept of entrepreneur can be seen much more clearly in a manufacturer than a banker. This is clearly not
pro-finance capital.
Strangely enough it seems that it
was Arrow who created (1954) the model that animates finance capital, namely
homogenizing all assets in a "portfolio”. (check)
Austrian School’s ideas do not
seem to have been in any way specifically related to finance capital. Read von
Mises’s article about Austro-Hungarian financial system. Perhaps the only true
link between Austrian School & finance capital is the intransigence toward
government intervention (assuming that laissez-faire is intrinsically finance-oriented,
see above).
Perhaps state-manufacturing
capital link is the protective tariff proposed by F List, import-substituting
industrialization.
Certain observations of von Mises
show that he had a highly developed feel for history. Quite the opposite of
Hayek. See quote of his I framed in notes on Die Gemeinwirtschaft
2009-05-29. That being so, why did he devote his attention exclusively
thereafter to methodological
individualism? (Did he?)
Von Mises talks a lot about
theoretical work needed to explain phenomena. Nowhere does he mention empirical
work. Nonetheless he obviously values empirical work, since he lays so much
stress on statistics. I suppose “empirical” didn't have the cachet it has nowadays.
Die Gemeinwirtschaft, von Mises’s
compendium of anti-socialist thought, obviously is a collection of separate
brief (journalistic?) writings on various subjects, which he then joined
together in a single work. However the fissures and gaps show through. He
didn't give it a thorough theoretical elaboration & unification. All the
better for me. Thus the various strains of thought will be easier to
distinguish.
I won’t reproach von Mises very
harshly with opportunism & contradicting himself, since Die Gemeinwirtschaft arose in a period
of intense class struggle and von Mises necessarily had to address very diverse
practical issues. Nonetheless some internal contradictions do show.
Taking the list of market
imperfections,
Plot position of each theorist.
Types of market imperfection:
|
|
Discoverer
|
von Mises
|
Hayek
|
Milton Friedman
|
|
Monopoly countered by contestable markets theory
|
Cambridge School
|
|
|
|
|
Asymmetrical information
|
Akerlof, Stiglitz
|
|
|
|
|
Herd behavior
|
|
|
|
|
|
Too many speculators
|
|
|
|
|
|
Public goods
|
Musgrave?
|
|
|
|
|
Externalities
|
Pigou
|
|
|
|
|
Increasing returns to scale
|
|
|
|
|
|
Non-convexities
|
|
|
|
|
|
Is the economic decision one
that may legitimately be undertaken by a single consumer? If it’s a
collective decision, asking the individual opinions of the participants in
the decision making BEFORE they have
even begun too discuss the question is extremely misleading.
|
Perelman
|
|
|
|
In which chronological order
were market imperfections discovered?
How is managerial revolution (Burnham, Gardiner & Means) related to
market imperfections?
Market imperfection scorecard for any economist.
