Natural Law and Ludwig von Mises' Praxeology and Economic Science

Author(s): R. A. Gonce
Source: Southern Economic Journal, Vol. 39, No. 4 (Apr., 1973), pp. 490-507
Published by: Southern Economic Association
Stable URL: http://www.jstor.org/stable/1056701
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 NATURAL LAW AND LUDWIG VON MISES' PRAXEOLOGY
AND ECONOMIC SCIENCE
R. A. GONCE*
GrandValleyState Colleges

INTRODUCTION tem has four outstanding facets. First, he

"Human action is directed by ideologies. has assigned paramount importance to the
Thus society and any concrete order of so- question of method. He has adopted
cial affairs are an outcome of ideologies," "apriorism," supported it by a view of the
Ludwig Edler von Mises believes.' He has philosophical foundations of social science,
and held that it yields truth that is invul-
adopted liberalism. In his opinion, it is an
nerable to challenges from Marxists, posi-
ideology denoting strict laissez-faire.2 But
tivists, and all others. Second, using this
stung by Marxism, dismayed by social re-
method he has developed a theory of choice,
formers, appalled by World War I, and hor-
rified by the first signs of Communism and or "human action," and elaborated it into a
then Naziism, he has come to believe that general theory of sociology (which he has
liberalism is in mortal peril.3 He has, there- renamed "praxeology" 6). Third, he has re-
vised and made original contributions to
fore, devoted himself to a great enterprise.
Austrian economics (which he has renamed
According to F. A. von Hayek, his objective
has been a "reconstruction" of a solid edi- "catallactics"). His economics has highly
fice of thought to preserve liberalism.4 To distinctive features to it. It is no mere par-
achieve his goal Mises has labored in Vi- tial social science, he has argued, but is one
deducible from his general theory of sociol-
enna, Geneva, and finally New York to pro-
duce a vast system of thought. "It is a sys- ogy and is therefore of general
tem in the grand manner not merely of applicability.7 It proves, he has argued,
Marshall or J. B. Clark but of Marx ... ," that a free market economy entails a vir-
Schuller has concluded; to Hayek, it is "a tually flawless market performance. Fourth,
while stating that his economics is Wertfrei,
comprehensive treatment ranging over the
whole economic and social field." 5 His sys- he has also said, in what would seem to be a
* I am gratefulto ProfessorC. M. BSgholtfor contradiction, that it alone can scientifi-
manyconversations. I thankProfessorJ. R. Lind- cally prove liberalism to be the best possi-
grenand a refereeof this journalfor commentson ble public policy.8
earlierdraftsof this essay,ProfessorN. W. Balab- Each of these four facets of his system
kins for encouragementand advice, and Lehigh
Universityfor support.Any errorsare mine alone. has had considerable influence owing to his
Mises [57, 187,648].He defines"ideology"at own efforts, those of the Mises-Kreis, and of
[57,178]. his other early followers.9 The influence
2 Mises [56, 192, 198-201].On the ideologyof
liberalismand its role, see Mises [57,8, 9, 178-96, may be seen in several well-respected eco-
497, 500-501, 619-20, 632, 648, 671, 686, 769, 832, nomic doctrines ;o1in L. C. Robbins' famous
836, 840-43, 861, 864-65, 878-79; 58, 119, 120, 142;
6 Mises [54,
60, 232, 333, 370-71; 62, 122-23, 138]. viii].
8 Mises [59, 24, 52, 514-15; 57, 878]. 7 Mises
[55, 146-48; 57, 3; 60, 206-8].
8 Mises
Hayek [26, 195, 197]. See also the text at note [56,88-89, 198-201; 57, 153-55,878-79].
49. 9The Mises-Kreis included G. von Haberler,
Schuller [78, 419] explains: Mises' economic F. A. von Hayek, and F. Machlup, according to
theories "crown an imposing structure which inte- Machlup [46, viii]. Among the students and
grates... theories of scientific methodology, soci- followers of Mises, Rothbard [73, 380] adds the
ology, politics, religion, and history, as well as a names of S. Budge, G. Halm, O. Morgenstern, W.
program of reform."For Hayek's commentary, see Ropke, and R. Strigl.
10See the enumerationin [43].
Hayek [26,198].
490

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 PRAXEOLOGYAND ECONOMICSCIENCE 491

Essay of 1932;11 in G. Tullock's remark, support liberalism remains unexplored. How

referring to Mises, "that economics can be his system fits together has not been inves-
expanded to deal with many areas outside tigated, although one cost of the synthesis
its traditional scope;" 12 and in the cele- he has effected has been suggested by G.
brated debate Mises set off in the 1920s and Myrdal, who has remarked that Mises'
1930s over the feasibility of market social- work embodies natural law thought; also,
ism. H. H. Liebhafsky has alleged that, while
His system raises a series of problems. Mises denies it, he adopts a "crude natural
What is his method and its foundations to law point of view in a disguised form." 17
which he gives such vital importance? What But the problems can be solved. By pur-
is the nature of his sociology? How is his suing clues left by Myrdal and Liebhafsky,
economics affected by being based on it? it can be discovered that Mises' system em-
How is his economics able to support liber- bodies individualistic, secular natural law
alism? How are these parts of his system philosophy. This one fact enables the series
knitted together, and what costs and bene- of problems raised by his work to be solved.
fits do they yield to microeconomic theory? The solution will unveil Mises' system,
The literature about Mises does not solve but it is of wider consequence as well. It
these problems despite the recent publica- will clarify an important part of the back-
tion of a two volume Festschrift in his ground for current discussions over scope
honor.13 Many have tried to analyze his and method, reveal the reasons for differ-
apriorism, but without considering its philo- ences between some micro and macro econo-
sophical foundations.l4 His sociology (or mists, and show precisely how individualis-
praxeology) has received fleeting attention tic, secular natural law philosophy can seize
and remains enigmatic.15Aspects of his eco- contemporary microeconomics, which "is
nomics have been reviewed, but how its so- firmly based on methodological individual-
ciological base affects it has not been ism," as F. Machlup says,18 and turn it into
investigated.6l How his economics is able to a full-blown counterargument to Marxism.
1Rothbard [70, 385; 72, 319n12]argues that
Robbins'Essay was heavily influencedby Mises' I
ideas. Natural law philosophy abounds in varie-
Tullock [87, 375].
Harper[21]. ties. One among them is the individualistic,
1 Ayres [1], Hutchison[28],Kaufmann[31,225- secular type.19 A thumbnail sketch of it, its
28],Kirzner[32,160-61,177-81],Machlup[45,5-7],
Martin [48], Rothbard[70; 71; 72; 73], Schuller historical influence on economic science-
[77;78]. Mises in particular-will serve as a useful
16 Mises'economicsis "immersed" in a "strange preface.
sociology"and "obscuredby a lush growthof po- Most authorities trace the roots of this
litical and quasi-philosophicalverbiage"[81, 329].
To fathomMises'sociology,somehave resortedto particular variant of natural law thought
investigatingthe history of the neologism'praxe- into the writings of the later Stoics (chiefly
ology,' and others have set forth condensed,un-
critical restatementsof Mises' own characteriza- Epictetus, Seneca, and Marcus Aurelius),
tion of it as an a priorisciencedealingwith man but some especially to Cicero20and some to
andsociety.See Kirzner[32,146ff],Lange[38,189, the Sophists and Heraclitus.21 The later
239-40],Rothbard[72; 74, 63-64,258; 75; 76], and
Spiegel[83,766].In an obiterdictum,Kauder[29, "7Myrdal [63, 121-22, 235n13], Liebhafsky [40,
106]termsMises'praxeologya "philosophical an- 567].
18
thropology." Machlup [44, 143].
'6Sennholz[82] and, though badly scarredby 'Scholars in philosophy of law recognize this
hostility, Seligman [81, 328-42] provide useful type. See Friedrich [15, chap. 5; 16, chaps. 8, 13],
general introductions.Hawtrey [22], Lachmann Gierke [18], Rommen [69, chap. 4], and Stone [84,
[37], and Schuller [77; 78] in conjunctionwith 64-104].
Rothbard[75; 76] are amongthe most helpfulof Watson [90].
the reviewarticles. a Chroust [10, 80-1n5], Rommen [69, 5].

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492 B. A. GONCE

Stoics' objective was a practical science of Roman ideas largely set off by a revival of
conduct (praxis).22 They believed right rea- individualism and Epicureanism after the
son was the essence of nature, the governor 14th century.25 In this development, atom-
of the universe, and that it led toward istic individualism, Epicureanism, and un-
well-being, harmony, and even virtue. Pre- aided human reason came to replace God
supposing individualism and a degree of and revelation. Efforts were made to derive
libertarianism despite their flair for predes- natural laws from speculations concerning
tination, they set up their ethics of enlight- the essence of one individual living in a
ened self-interest. The individual's road to state of nature-a distinguishing feature,
virtue in society, they taught, is indicated Rommen notes, "which attained, as in De-
by natural laws grounded in neither ideolo- foe's Robinson Crusoe (1719), such unex-
gies, historically evolved institutions, legis- pected and widespread popularity".26 And
lation, nor any other convention, but in the finally, while natural law was first used to
nature of man. These laws exist independ- justify authoritarianism, it was soon used
ently of man's mind but can be known by "successively against Medieval Church and
human reason, for reason and nature are Empire, eighteenth century despotism, and
the same. They in fact derived these laws the shackles of medieval social, political,
from their ethics, however, and so fused and economic organization.... " 27
ought to be and is. If each man would obey Among those inaugurating this develop-
these natural laws, Epictetus suggested, he ment was Hugo Grotius,28 and among the
would act in the interests of others as well illustrious figures within it was Samuel von
as of himself.23 Thus nature did indeed lead Pufendorf.29 Using a rationalist method
toward harmony. The later Stoics empha- that nonetheless harbored elements of histo-
sized personal conduct, questioned external ricism, Pufendorf sought to develop a
goods, and were not greatly concerned over theory of the "human action" of one ra-
political and economic questions. Cicero ac- tional individual in a state of nature and
cepted their ideas in his last works but less- from it to derive natural laws that would
ened their austerity toward external goods serve to facilitate peaceful social coopera-
and sought to work natural law into the do- tion. The laws were binding in conscience
mains of politics and economics. but lacked external sanctions. In light of
Through Cicero the Stoic natural law human frailty, he proceeded to justify a be-
ideas poured into the jus naturale of Rome nevolent despot who would use positive law
and the writings of the early Christian to enforce the natural laws.
Church Fathers. But the Christian princi- Between 1650 and 1800, other individual-
ples of God, fallen man, the church, and an istic, secular natural law philosophers (in-
organic concept of society set off new inter- cluding Bishop Cumberland, Fichte, Horn,
pretations of natural law. Kant, Leibnitz, Locke, and Spinoza30) pro-
But individualistic, secular natural law "Chroust [10, 81-83], Rommen [69, 10, 11, and
philosophy flourished again between the chaps. 3-4].
6Rommen [69,80].
16th and 18th centuries. Although some see 27 Stone [84, 86].
this as the rise of a radically new form of 8 The turning point away from Scholastic
natural law thought,24 many interpret it as natural law thought was Grotius, Rommen [69,
an efflorescence of ancient Greek and chap. 3] believes.
9 See Krieger [35].
2The following exposition of the later Stoics' 0Gierke [18, 95-137] discusses these figures in
ideas is based on Copleston [12, chaps. 36, 39, 40], his section, "The Natural-Law Theory of Society
Grampp [19, chap. 1], and Hicks [27, chaps. 1-4]. During the Period of Its Ascendancy." Whether
23
Grampp [19, 23]. Locke can be classified in this group is a subject
2 d'Entreves [13, 11, 12, 46, 49-60], Strauss [85, of debate, partly due to his empiricist episte-
182-83]. See the rebuttal in Stone [84, 66n195]. mology.

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 PRAXEOLOGYAND ECONOMICSCIENCE 493

duced innovations relative to Pufendorf's vigny and B. G. Niebuhr had inspired his-
ideas. Some affected by Kant, such as toricism in legal theory.41 It had spread into
Fichte, argued that the natural laws could economics, and he wished to contain it. Re-
be discovered by a priori categories in jecting empiricism, he sought to explain all
man's reason.31 The atomistic view of so- social phenomena-including law-in terms
ciety was more uncompromisingly set forth.32 of the self-interest of one isolated, rational
Optimism over human nature grew, and individual. Later, E. R. von Bohm-Bawerk,
Locke and Rousseau propounded their theo- one of his disciples, distinguished between
ries of popular sovereignty. "natural" and "social" law,42 waged war on
But then Hume and Bentham attacked Marxism, and became Mises' maestro.
natural law thought in general. F. K. von To be sure, Mises is an Austrian econo-
Savigny and others in the historical school mist. At Vienna he studied under Bohm-
of philosophy of law joined the assault. Bawerk and his colleague E. P. von Phil-
A large cast of influences surrounded the lipsberg, and among his friends and fellow
growth of economic thought, and indivi- students were J. A. Schumpeter and H. Kel-
dualistic, secular natural law philosophy sen, the positivist legal philosopher.43 In-
was in the cast.33 Some historians tend to spired in one of Bohm-Bawerk's seminars,
overemphasize its role, especially when it Mises began by working out the Austrian
was played by Pufendorf.34 But its role has ideas into the domains of monetary, trade
been shown in the economics of the Mer- cycle, and international economic theory.
cantilists,35 Locke,36Quesnay, and the Phys- But he broke with Menger, Bihm-Bawerk,
iocrats,37 argued over in Smith,38 and al- and F. F. von Wieser over the policy of
luded to in McCulloch and in Bastiat and laissez-faire.44 As Schumpeter has sug-
in the French Optimists.39 But its role did gested, he has perhaps founded his own
not end there. Whatever may be the ante- school.45
cedents of C. Menger's ideas in the history But Mises is more than an Austrian econ-
of economics, they nonetheless bear some of omist. Deeply opposed to the application of
the insignia of this type of natural law phi- positivism in the social sciences, he knows
losophy. The son of a lawyer, the possessor Greek and Greek philosophy and cites Her-
of a Doctor of Laws degree, and erudite in aclitus, Empedocles, Plato, Aristotle, and
philosophy of law,40 Menger believed Sa- Epicurus. He knows natural law philosophy
81See Friedmann[14, 77-81] and Stone [84, and cites Seneca and Cicero. He recounts
86ff]. that the idea of natural law was conceived
'Gierke [18, 95-137]relateshow individualism
was steadily pressed to its logical conclusions, by the Sophists and variously developed by
graduallyannihilatingthe realityof groups. different schools of thought.46 He refers to
mSee in general Bauer [3], Bonar [7, 59ff], the upsurge of nominalism, Epicureanism,
Myrdal [63, chap. 2], Raynaud [68, chap. 5], and individualism
Schumpeter[79,19ff;80,73-142]. during the Enlighten-
4Schumpeter[79,21]. ment. He cites Fichte, Kant, Leibnitz, and
' Bauer[3],Chalk[9].
86Letwin[39,156-81]. But see note30. Spinoza and remarks upon 17th and 18th-
7'Raynaud[68, chap. 4], Schumpeter[80, 138, century rationalistic sociology.47 He notes
228-43], and Taylor [86, 70-87]. But see also that the liberal movement of the 18th and
Meek [50,373-74].
88SeeTaylor [86.87-99]versusBittermann[4], " Menger [53,Book IV, chaps. 2, 3].
Lindgren[41],andViner[88]. Bo6hm-Bawerk[6, 139-99].
89Myrdal[63, 121-22],and Gide and Rist [17, Rothbard [73, 379].
329-54]. See note 126.
0Menger[53]refersto over two dozentreatises 4 Schumpeter [80, 1086].
in philosophy of law. Kauder [29; 30] treats 46 Mises
[57, 174-75; 60, 44-49].
Menger in abstraction from issues in philosophy '7Mises [54, 151, 199; 57, 146, 689; 59, 44, 64,
of law. 311, 423].

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494 R. A. GONCE

19th centuries "drew a great part of its His portrayal of human action comes
strength from the doctrine of natural from the psychology of Epicurus, whom he
law."48 But he knows that strength has cites.55 Like Epicurus,56he assumes atomis-
been eviscerated. tic individualism, teleology, and libertari-
In Mises' opinion, "the general sociologi- anism, and defines man as an egoist who
cal and economic foundations of the liberal seeks a maximum of happiness, i.e., pleas-
doctrine have to be relaid." 49 In his own ure over pain. Man strives for but never
endeavor to relay them, he states that he attains the perfect state of happiness de-
has placed them upon utilitarianism, and he scribed by Epicurus, Mises remarks.57 By
denies using natural law thought.50 pleasure, Epicurus meant the satisfaction of
His denial creates a burden of proof, but wants (which he felt were numberless and
the reality of the argument constituting his which he classified as to whether they were
system overwhelms his denial. The magis- natural and were necessary), and by pain
tral principle in his system is that natural he meant chiefly labor and fear of the gods
laws do exist.51 His system coheres with the and death. Mises asserts that his own con-
tradition of 17th to 18th-century individ- cept of happiness is purely formal. In fact
ualistic, secular natural law philosophy. he interprets it with the specific meanings
he assigns to pleasure and pain, and his cri-
II tique of liberalism versus socialism depends
Like Pufendorf, Mises has responded to on it.58 By pleasure he means the satisfac-
opposition by placing emphasis on the sub- tion of wants for peace, liberty, material
ject of method and its underlying goods59 and services to be consumed imme-
foundations.52 Hayek has characterized the diately and without waiting, and leisure
result: Mises' "penetrating studies of the (for like Epicurus, but unlike Marx, he con-
philosophical foundations of the social sci- siders labor a pain60). Pain means unsatis-
ences and his remarkable historical knowl- fied wants for these things. The impetus to
edge place his work much closer to that of human action is the pain of an unsatisfied
the great eighteenth-century moral philoso- want, Epicurus held; to Mises, the impetus
phers than to the writings of contemporary is a "felt uneasiness." Man's response, Epi-
economists." 53 curus continued, is to seek a maximum of
pleasure over pain by using his reason to
A calculate the immediate and subsequent
The scope of his inquiry is "human ac- pleasures and pains entailed by alternative
tion," which, he believes, "is directed by courses of action. He chooses, then acts.
ideologies." What then are his own funda- With all of this Mises agrees, and he solidly
mental beliefs concerning human action and welds rational choosing and human action.
ethics? His answers come from his accept- Referring to Empedocles, he avers that
ance of Epicureanism.54 "Reason and action are congeneric and ho-
Mises [57, 174-75; 59, 58, 71]. the philosophy that inauguratedthe "spiritual,
49Mises [59, 462]. moral and intellectual emancipationof man-
60Mises [57, 174-75, 719ff; 59, 319, 326-27; 60, kind...."
44-49, 55]. Mises [54, 150-51; 57, 15, 147; 59,399].
6 Mises
[54, 3, 197-200; 57, 761-62; 60, 44-61]. "The
6 Pufendorf was "an occasional philosopher," based on following exposition of Epicureanism is
Bailey [2, part 2], Copleston [12, chap.
Krieger [35, 50, 82] notes. "His method, his theory 37], and Hicks [27, chap. 5].
of knowledge and his metaphysics" he elaborated 57Mises [57, 15].
"under the pressure of opposition" and when "his See note 111.
more mundane concerns required footing...." 9Mises [57, 193,317-18, 884; 60, 269-70].
3Hayek [26, 197]. ?However, see Mises' distinction at [57, 587ff]
4Epicureanism, Mises [57, 147] believes, was between "introversive" and "extroversive" labor.

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 PRAXEOLOGY AND ECONOMIC SCIENCE 495

mogeneous, two aspects of the same phe- anism.65 Now man must seek the greatest
nomenon." 61 happiness of the greatest number, or justice.
Mises accepts Epicurean ethics. They But, he continues, no conflict exists between
give his terms "liberalism" and "rugged in- the obligation to seek one's own greatest
dividualism" their full meaning. Epicurus happiness and the obligation to seek the
predicated his ethics on his psychology. greatest happiness of the greatest number.
Mises believes that ethics must be grounded Like Epictetus, Bishop Cumberland, Locke,
in the "nature of man," not in intuition.62 and Bastiat, among others, he postulates
Epicurus advocated egoistic hedonism: each that nature harmonizes the two interests.
man should seek his own maximum happi- "There is no contrast between moral duty
ness by rationality and by abandoning all and selfish interests," he concludes.66 Sum-
unnatural and unnecessary wants as illu- ming up, while he professes utilitarianism,
sions inviting a futile quest. He envisioned he reverts to egoistic hedonism by using the
society as a means to private happiness. He natural harmony doctrine.
advocated liberty, social relations based on
mutual utility, and avoidance of involve- B
ment in marriage and politics. Mises ac- His objective is a science of human ac-
cepts these principles but makes several tion. He turns to the question, by what
modifications. He injects elitism and oppo- method can it be developed? To be able to
sition to equalitarianism. He does not clas- answer this he constructs a theory of
sify wants, questions self-abnegation, and knowledge as a groundwork. In doing so he
sanctions the pursuit of all wants even deviates from Epicurean sensualism and in
though it may end in disillusionment.63 effect burnishes the argument of the Stoics
Having given more worth to external goods, and 16th to 18th-century individualistic,
he deals more extensively with economic re- secular natural law philosophers: since
lations by elaborating the meaning of ego- human reason and nature are the same, the
ism in society. There must be liberty. He unaided human reason can know nature. He
defines liberty as being completely separate begins his theory of knowledge by distin-
from the possession of power over means, guishing between the realms of the external
and so gives it the purely negative meaning world, "res extensa", and of man, "res
of absence of coercion.64 The indispensable cogitans."67 For the latter he assumes a
corrective of liberty is "strict" responsibil- dualism-a postulate made by all natural
ity of each man for himself. There must be law philosophers-and so makes the fateful
no liability without fault. Social relations distinction between existence (empirical
must be voluntary and based on quid pro phenomena, which are a flux of historical
quo. His ideal of justice is accordingly cen- "accidents") and essences (a "substratum"
tered on commutative justice. of unchanging entities and causal
But to these egoistic principles he adds relations).68 But how can the reason attain
those of universalistic hedonism or utilitari- 66Mises [57,833-34;60,51-61,346].
MMises[59,397-98].
61Mises[62,42].See esp.Mises[57,39]. e7Mises [62, 125].See also Mises [54, 130; 57,
62Mises
[59, 401-2]. 18;60, 1].
Mises[57,881-82]. 8Mises [62, 1]. "Natural Law always starts
4The opposingview, taken by J. Dewey and with the presumptionof an 'ontologicaldual-
J. R. Commons,amongothers,is that liberty and ism'...." Empiricaldata are not the only existing
powercannotbe separated,for happiness,the ob- reality for the naturallaw philosopher."On the
jective of liberty, is largely but not wholly ac- contrary...he assertsan even more real and ob-
quiredby externalgoods, which in turn involve
power (or controlover means,or private owner- jective existence-more real and objective on
ship).Thisviewis attackedby Misesandespecially account of its universalityand pure rationality
by Hayek[23,17]. ..." and which is known a priori. Chroust [10, 73].

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496 R. A. GONCE

knowledge?And what is scientific knowl- of human action is by "apriorism"or what

edge? The reason can on the one hand ob- he also calls "the method of imaginary
tain sensoryimpressionsfrom existenceand constructions."73 It has two equally impor-
develop knowledge.But it is uncertainand tant traits. First, one must rely not on em-
relative to time and place, he holds, and so pirical data,74but on one's knowledgeob-
he identifies it with history, not science. tained by intercommunicationand on the a
On the other hand, due to "intercom- priori powers in one's reason. Second, one
munication,"69 the reason of the investi- must use "methodologicalindividualism."
gator has direct access to the reason of He traces its history back to the 17th and
other men, and, since reason and action 73See Mises [54, 1-145; 57, 1-91; 62]. On "the
are "two aspects of the same phenomena," method of imaginary constructions," see Mises
to the human action of other men.70More- [57, 236-37]. His rationalist theory of knowledge
underlies and helps to interpret his "apriorism."
over, the reason of all men has a structure His responses to other positions clarify his own
of a priori forms and of logical powers. view. He attacks the positivism of the Wiener
Mises identifies this structure with the Kreis, and also historicism. He controverts the
Siidwestdeutsche Schule 308; 62, 48-50]. He
structure of essences.7 Consequently, the opposes Max Weber on [60, the formation of ideal
investigator can relay upon the a priori types [54]. He is aware of the phenomenology of
powers of his reason to "enucleate" es- E. Husserl and A. Schiitz and believes that "Max
Weber's epistemology has been continued and re-
sences, form a priori axioms, and by "logi- vised by Alfred Schiitz"; and he cites Schiitz in
cal unfolding"obtain theorems concerning one passage to support his own doctrine of the in-
the essenceof the reason,and, therefore,the tersubjective validity of logic; Mises [54, 23n27,
humanaction of othermen. Knowledgethus 125n27, 127n67; 57, 24n8, 100n3]. But he never
suggests the use of epoche and the identification
attained is "apodictic"and has spatiotem- and description of the essence of experience as it
poral generality,he believes, and he identi- is intuitively apprehended; and he attacks Vier-
fies it with science,not history. kandt's ideas on phenomenological insight, direct
personal experience, and intuition; Mises [54, 52-
58].
C 74But there is a paradoxical element, for Mises
allows experience a foot in the door. It can give
From these principles Mises infers that knowledge of some conditions that cannot be
the empiricist method and mathematical known a priori, he notes, and adds that "aprioristic
techniques are inappropriatein the social theory and the interpretation of historical phe-
sciences.7 They cannot be used to observe nomena are intertwined," and that his science
involves "two epistemologically different meth-
the crucial data, which are subjective and ods..." [54, 12-17, 23-31, 113; 57, 65-66]. But he
nonmeasurable.They can only come to slams the door on experience in four ways. He
grips with existence,a flux of historical ac- has never described this second method and has
cidents reflectingman's freedom and com- always categorically rejected empiricism. He has
sought to convert to an a priori status some em-
plexity. They can yield only history, not pirical assumptions first made by earlier econo-
science. mists, such as those concerning diminishing mar-
The appropriateway to attain a science ginal utility and physical productivity [54, 154-55].
(Hutchison [28, 59-60] comments on this conver-
9J. S. Mill, N. W. Senior, and J. E. Cairnes sion
by Mises.) Mises argues that the introduction
used the doctrine of "intercommunication," as of which are admittedly known by
does Mises. Wieser [91, 4] carried it to its highest assumptions
it is "a fountain-head so inexhaustible in its experience (such as the disutility of labor, greater
pitch: productivity due to division of labor, indirect ex-
riches,so dependablein its purity I"
70 Mises [57, 39].
change, the use of the gold standard) "in no way"
1 Mises [57, 35, 85-86; 62, 42, 64]. alters his science's aprioristic character [54, 12-17,
72Since existence (empirical data) is a flux of 23-31, 113; 57, 65-66]. (Mises has not, Schuller [78]
"nonrepeatable"historical accidents, there are no points out, clarified which, if any further, of his
regularities, and so mathematical techniques are assumptions spring from experience rather than
useless and yield only history. Mises [54, 116-18, reason.) Finally, Mises emphasizes that his science
160; 57, 55-56, 118,350-57; 62, 55-57]. is groundedin reason, not experience.

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 PRAXEOLOGYAND ECONOMICSCIENCE 497

18th centuries.75 It is a procedure Grotius ence is indeed a priori and does refer to
and Pufendorf helped make famous. One essences, yet it refers to empirical phenom-
must begin, Mises explains, with one isolated ena and can be applied, which is a task for
individual called "Robinson Crusoe" who in historians.80 Third, the applied science can
a rational and self-reliant manner seeks to indeed yield empirical powers of explana-
maximize his private happiness. Then one tion and prediction, although severely qual-
must proceed to account for all social phe- ified ones, yet the empiricist method of ver-
nomena in terms of Crusoe's self-interest. ification cannot be used to test them, for
Consequently one must proceed to the level empirical data can neither confirm nor dis-
of social phenomena by rules of aggrega- confirm the science.81
tion,76 and then step by step restore various His method of verification is congruent
complications and so build toward the real- and rationalistic. If the reason finds upon
ity of a modern economy. The opposite to reviewing that the axioms are self-evident
Mises' method is to adopt empiricism and and the theorems have been impeccably de-
begin with observable aggregates. He be- duced, then the science is verified. To those
lieves this procedure, used by Keynes and who still cannot believe, his final response is
others, evidences devotion to collectivism, is rationalistic: like Grotius and Pufendorf, he
scientifically fruitless,77 and forebodes charges them with depraved reason.
frightening political consequences. The role of his method, it will soon be-
His method is rationalist. On his own come evident, is that it arms him with the
principles it yields a science composed of warrant to begin with Epicurean principles,
necessary and certain propositions dealing unrestrictedly work out a deductive system
with essences rather than esistence or em- based upon them, and assert that it is irre-
pirical phenomena. From the standpoint of futable truth.
positivism, which he opposes, two questions
arise. Is not his science made up of tautolo-
gies? Is it not impossible for its propositions Mises constructs his sociology by using
to be augmentative or ampliative in mean- this method. Many of his doctrines resem-
ing? And how can the abyss between es- ble scattered remarks by Bohm-Bawerk,
sence and existence be bridged over-how
can his science be applied to empirical phe- Menger, Ricardo, and Smith on man, so-
nomena? His replies to these queries have ciety, and the political order. But of far
involved him in a series of paradoxes.78 greater noteworthiness is the fact that his
doctrines are deduced from the philosophi-
First, his science is indeed necessary and
cal foundations he has laid, are systemati-
certain, yet the charge that it is tautologi-
cal is of no consequence.79 Second, the sci- cally elaborated, and are nearly on all fours
with the ideas of 17th to 18th-century indi-
75Mises [54, 153]. Hayek [25, chap. 1] contains
a brief for methodological individualism. vidualistic, secular natural law philoso-
76Hayek [24, 36-43] alludes to this with his phers. Passing in review, his doctrines relat-
term, "the compositive method." to man, society, social order, natural
" Buchanan is no disciple of Mises, but his view ing
on this parallels Mises': the "central principles"of law, and the state will reveal this.
economics present a theory of "human behavior"- 0Mises [57, 38-39, 85-86; 62, 11-21]. Mises'
of choosing-and "because it has divorced itself
from the central proposition relating to human view that applyingthe scienceis a task for his-
behavior, modem macroeconomic theory is really toriansis broughtout by Rothbard[75, 182; 76,
no theory at all" [8, 169-71]. 944].
' The scienceyields qualifiedempiricalpowers
8 The paradoxes are noted by Hutchison [28,
26-27, 76n5], Kaufmann [31, 225-28], and Martin of prediction[57, 117-18; 60, 5; 62, 64-67]. But
[48]. empiricaldata can neverconfirmor disconfirmthe
7 Mises [57, 38; 62, 5, 17, 44, 64]. science[55,27-30;57,31-32,51; 59,582-83].

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498 R. A. GONCE

A time preference, saving, and a natural

Exactly like Pufendorf, Mises seeks to (which he has renamed "originary") inter-
discover the nature of man by considering est rate. It makes man consider materials
the "imaginary construction" of one iso- affected by it as scarce goods, or property,
lated individual in a state of nature,82 to and assert private ownership over them.84
work out a theory of "human action" based Second, most materials are raw. This com-
upon it, and to use this as the base for his pels man to look upon them as means to his
entire system.83 ends; to transform means into ends; to suf-
Mises takes this isolated individual, fer the pains of developing technological
whom he calls "Robinson Crusoe," and knowledge, laboring, and enduring a period
of waiting during a period of production.
pours into him the entirety of his own Epi-
curean principles of psychology and ethics. Third, Mises adds the technological postu-
Crusoe thus becomes the paragon of Mises' late of imperfect substitutability and infers
ethics. Crusoe seeks to maximize his own diminishing marginal returns in consump-
tion and production.
private happiness or self-interest. By force
of circumstances he enjoys perfect or natu- His finished theory of human action
ral liberty, is responsible only for himself, emerges from this. Given Crusoe's objective
and must be self-reliant. He has perfect and perfect knowledge by him of marginal
knowledge, calculates with perfect rational- functions, he will calculate using the equi-
ity, chooses, and acts upon his rational marginal principle of maximization and
choices. choose. The economy of Robinson Crusoe is
Mises expands this fundamental theory the outcome.
of human action by adding three postulates
B
describing the material environment. These
plus the corollaries they lead to were devel- Mises explains the formation, nature, ef-
oped by the older Austrians and still earlier fect on man, and evolution of society in
economists. They give Mises' theory of terms of his principle that "egoism is the
human action its "economic" coloration. basic law of society." 85 The results amount
First, nature is niggardly. Most materials to an alternative to Marx. How to explain
and time are limited relative to man's natu- the formation of society is a puzzle at first
ral wants. Thus, natural scarcity appears. glance. Men are self-interested, and he
It forces man to economize, to choose this, points out that when they come together the
forgo that, and suffer opportunity costs. It outcome is increased natural scarcity, "nat-
forces him to evaluate alternatives for a ural conflict of interests," and natural
given time period and between time periods. enmity.86 However, in light of the "facts of
For the latter case Mises deduces positive nature" that resources and human skills are
82
To grasp the true nature of man "we must unequally distributed, man will calculate
imagine man as dropped from somewhere into this that division of labor will increase
world and left entirely to his own resources" [65, productivity.87 Postulating that exchange is
154]. Krieger [35, 89-91] shows that Pufendorf
vacillated between viewing this isolated man as always mutually beneficial,88Mises believes
an empirical concept and a fiction. Mises [57, 165, men realize that division of labor and ex-
205, 243] emphasizes that this isolated man is an 84
Menger [52, 97] gives the classic statement of
"imaginary construction." this doctrine, which Pound [64, 114ff] discusses as
83See Pufendorf [66, Book I, chap. 1, "On Hu- a natural law argument.
man Action"; 67, Book I, def. 1]. Of Pufendorf 6 Mises [59, 402]. See also [59, 297, 432].
Friedrich [16, 115] states: "The systematic basis 86Mises [57, 673].
of his system is his doctrine of action (actiones)." 87Mises [59, 292; 57, 157-58].
Krieger [35, 82] makes the same point. On Mises' 8 Implicit statements of this principle are at
view, see [57, 64, 67; 62, 41]. Mises [57, 160, 674; 60, 40].

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 PRAXEOLOGYAND ECONOMICSCIENCE 499

change will reduce natural scarcity; this private ownership has a "catallactic" rather
"removes the natural conflict of interests" than "legal" meaning that denotes a "natu-
and "makes friendly relations between ral having" in abstraction from all person-
human beings possible...." 89 Hence, even to-person relations.95 This view reduces pri-
though man is not a social creature and has vate ownership from an allocation of jural
no innate urge toward association, he can relations (or, loosely, "property rights") to
become sociable out of self-interest. Al- physical custody and leads to the concept
though sophisticated by the division of of private contract as physical barter or ex-
labor argument, this explanation parallels change. Mises believes exchange will occur
the one Pufendorf originated: man is not on the basis of quid pro quo.
social but capable of becoming sociable out On the effect of society on man, he and
of self-interest, and this explains the origin Smith agree: it causes man to pursue his
of society.90 self-interest by catering to others' wants.
Mises' account of the nature of society On the evolution of society, it is produced
parallels the atomistic concept of society by self-interest showing itself in greater and
built up by 18th-century individualistic, greater division of labor.
secular natural law philosophers.91 Society
is purely a collection of Robinson Crusoes, C
or natural persons; ficta persona such as Mises explains the social order as an un-
private corporations have no "perseity;" planned outcome of self-interests venting
and social classes have no true reality.92 themselves through exchange agreements.
Since division of labor and exchange reduce He agrees with Pufendorf and Locke in
natural scarcity and eliminate conflict of this.
interests, "the Marxian idea of a conflict of D
interests is untenable...."93 Since classes
and conflicts are fictions, class conflicts do Now society's natural laws must be dis-
not exist. In this harmonious society, these covered. Mises' discussion is that of an or-
natural individuals enjoy private owner- thodox individualistic, secular natural law
ship of property, an outgrowth of self-inter- philosopher. Certain "praxeological" or
est and natural scarcity. Mises places no "fundamental laws of social cooperation"
limits on individual appropriation and the facilitate peaceful social cooperation, he be-
inequality it may produce. Locke stands as lieves, and in his work these are grounded
a precedent for this.94 According to Mises, in his portrayal (which is reflective of his
89Mises[57, 673; 59, 294-95].But for greater ethics) of the nature of man and society
productivity due to division of labor, friendly and are plainly of a moral character.96 He
relationsand societywouldbe impossible[60,234]. fuses ought to be and is by stating that
0Pufendorf [66, 19, 103]. Friedrich [16, 112]
these laws are "primary ontological
showsthis to be original,and distinguishesit from
the viewsof Grotiusand Hobbes.For Mises'posi- facts." 97
tion, the same as Pufendorf's,see [57,144,673; 60, The natural laws of earlier philosophers
38-39,56,234-35]. were extremely general. So are his. They
91See notes 30 and 32.
dictate that man must pursue his "rightly
2Groupsand collectiveshave no "ontological
entity" or "perseity,"and social classes do not understood, i.e., long-run self-interest."98
really exist [59,339; 60, 190-91;62, 78-83].Com- 9 Mises [57, 682-84; 59, 37ff]. Bohm-Bawerk [6,
parewithnote32. 25-138], an essay Mises cites [59, 37n], gives the
Mises[59,351]. rationale for this view.
"Locke placed naturallaw limitationson in- Mises [56, 17, 33-34; 62, 105].
dividual appropriation,but felt that when men 9 Mises [57, 761]. These are plainly moral, as
agreed to use money, they agreed to transcend indicated in note 96.
theselimitations[47,197-220]. 8 Mises [56, 5; 57, 176, 674n6,750-51].

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500 R. A. GONCE

Mises' ethics explain the meaning of this. tius and Pufendorf initiated this latter ar-
Man must pursue his own happiness, be ra- gument, and it establishes "an important
tional about it, and have liberty. The bridge between the natural lawyers and the
corrective of liberty must be strict responsi- 19th century utilitarians." 104
bility of each man for himself. Conse- But no outwardly operating sanctions en-
quently, if burdened by costs, man must not force them. This fact, plus recognition of de
follow his short-run self-interest, seek a facto human frailty, led natural law philos-
"scapegoat", organize, and demand protec- ophers to develop theories of the state. In
tion.99 Instead, he must absorb them, redou- Mises' opinion, many-perhaps most-men
ble his efforts, or move or shift to a new do not understand or lack the "moral
specialty. Such strict responsibility can be strength" to obey the natural laws, and so,
enforced by "fully realized" laws of private "to cope with human imperfection," a state
ownership. On these principles Mises at- must be created.105
tacks solidarism and other social theories of
responsibility and the legal assistance and E
protection they justify. Individualistic, secular natural law phi-
The fundamental laws also indicate that
losophers devised a variety of explanations
man must seek the greatest happiness of the for the state's origin, constitution, and func-
greatest number, but no conflict exists be- tion. It was originated, many argued, by a
tween private and public happiness, he social contract prompted by insecurity.
adds, for nature harmonizes the two.100Pre- Their accounts of the constitutional form of
cedents for this natural harmony doctrine the state evolved from an authoritarian to a
have been traced to Epictetus, Bishop Cum- liberal stage, however.106Mises is silent on
berland, and Locke.101Hume and Smith al- the origin and constitution of the state, but
luded to it but counterbalanced it with har- he does subscribe to democracy.
mony created by moral sentiments and the The function of the state is largely set-
state. But Mises, like Bastiat, removes all tled by considering the relation between
qualifications. If men will obey the funda- natural and positive law. Natural law is
mental laws prescribing their rightly under-
higher or ideal law and serves as a norm for
stood self-interest, the greatest happiness of
the greatest number will ensue.102He con- positive law, but it lacks outwardly operat-
ing sanctions and is dependent on positive
cludes: the earlier belief that a conflict of
law, many natural law philosophers agreed,
interests exists "sprang from ignorance of
and so positive law must be used to "acti-
the natural laws of social life." 103
vate" natural law. But then disagreements
A pair of inwardly operating sanctions
enforces these natural laws. They flow from opened among them. Some argued that nat-
ural laws are general and vague, and posi-
nature, are rational, and thus are compell- tive law must make them specific. Others,
ing in man's reason. Moreover, utilitarian
considerations reinforce them, for obedience 104 Stone [84, 67-68, 73-74]. On the linkages be-
tween natural law and utilitarianism, see also [63,
will result in the greatest happiness of the
23ff].
greatest number. According to Stone, Gro- 106Mises [57, 70, 148-49]. According to Pufen-
dorf [66, 125], in most men there is depravity and
M9
Mises [56, 17, 55]. a lack of appreciation of the natural laws' utility,
0Mises [57, 833-34; 60, 30, 32]. and so a state must use positive law to enforce the
10 Grampp [19, 23], Myrdal [63, 45], Viner [88, natural laws.
59]. "6a
"Grotius and Hobbes stood at one end of the
102 Mises
[60, 236; 62, 105]. process; Locke, Montesquieu, and Rousseau at the
108Mises [59, 329]. Mises here refers to the teach- other,"Krieger [35, 266] feels, and he names Pufen-
ing of "Classical Political Economy," but this is dorf as the "outstanding mediator" between the
plainly his own as well. two stages.

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 PRAXEOLOGYAND ECONOMICSCIENCE 501

notably Pufendorf, believed "The law of poured into its fundamental terms and the
nature alone is not directly sufficient to pre-social and political infrastructure it takes
serve the social life of man," and so positive as a parameter,10 and it becomes inspired
law must supplement it.107 Still others be- by a determination to corroborate the natu-
lieved positive law must make natural law ral harmony doctrine.
applicable to a given time and place. Mises' Precisely how does this foundation in-
view is one of stark simplicity relative to spire this determination, and how does
these earlier ideas. The function of the state Mises carry it out? First, within the foun-
is to use positive law to enforce natural law. dation are his ethics, and they set up his
If it does, it is a "neutral" or "night-watch- welfare criterion, which is "justice," i.e., the
man" state.108If it does more, it is an inter- greatest "happiness" of the greatest num-
ference. ber, i.e., the satisfaction of the wants he
A conflict rages within Mises' treatment imputes to man. Second, they prompt him
of the state. Sovereignty lies in the natural to create a whitewashed economic theory
laws, yet in the face of the fact that most that proves, given a set of individuals seek-
men do not understand or lack the moral ing to maximize their own happiness in ac-
strength to obey them, he nonetheless fa- cordance with the natural laws, the un-
vors popular sovereignty. He has made planned outcome of self-interests will be the
peace with himself in two ways. He at first market; the prices the market will create
trusted in the reason of the masses and in will be unplanned outcomes of self-inter-
education. Since World War II he has ests; and the unplanned outcome of self-in-
hurled contumely on the masses and demo- terests calculating in terms of such prices,
cratic welfare legislation. choosing, and engaging in competitive pri-
Wittingly or unwittingly, Mises' sociol- vate exchange will be a certain market per-
ogy, which he has renamed praxeology, is in formance. Third, this market performance,
fact a relatively crude individualistic, secu- when evaluated by his welfare criterion,
lar natural law philosophy. It can be seen proves to satisfy the natural wants he has
from one angle as a riposte to Marxism.109 imputed to man,ll or to yield the greatest
On this foundation he constructs his eco- happiness of the greatest number. And so,
nomic science. fourth, he is able to conclude that natural
harmony is corroborated. A foray into his
IV economic theory and his welfare economics
Mises building his economic science on will reveal the details of this.
such footings explains the distinctive fea- A
tures of his economics. Grounded in such
His economic theory is characterized by
philosophical foundations, it opposes the its
use of empiricism and mathematical tech- scope, method, and body of substantive
T1To illustrate, as Hayek [25, 111] says of re-
niques in economic research. Rooted in pure ceived microeconomics, (a pa-
private
individualism and libertarianism, its ex- rameter) apparently means idealownership but unspecified
planatory power over institutions is con- laws that will make the market work at its best.
stricted. Because it rests upon egoistic he- 111Mises' work illustrates the venture Knight
[34, 41] describes and attacks, "whichsets out from
donism fused to an uncompromising natural the assumption that human wants are objective...
harmony doctrine, moral meanings are and that the satisfaction of such wants is the...
criterion of value, and which proceeds ... to re-
107Pufendorf[67, 273]. Gierke [18, esp. 106] and duce ethics to a sort of glorified economics." Mises
Krieger[35,117-32]analyzePufendorfon the state. defines man's wants, identifies their satisfaction
108Mises[56,37-38]. with happiness, and uses them as his welfare cri-
109Meek [49,218]has recentlycalledpraxeology terion. These facts refute his claim, which Kauder
an end-productof a violently anti-Marxiantrend [29, 133] repeats, that his conception of happiness
in subjectivist economics. is purely formal.

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502 B. A. GONCE

doctrines. Its scope embraces the subset of or framework to be left behind, he step by
"human action" that involves monetary step restores the complications he removed
calculation.112Its method is the same as be- at first. He restores the triumvirate of in-
fore, but now supplemented by the static ventors, savers, and entrepreneurs and shows
mechanics analogy as an expedient. Its sub- that they are responsible for wholly benefi-
stantive doctrines come largely from the cial consequences. The entrepreneurs set in
works of Bohm-Bawerk, Menger, and ear- motion a "market process." 119 They seek
lier economists, but Mises argues that in his discrepancies in the "price structure," inno-
formulation they are deducible from his vate, and make temporary pure profits
sociology.113Because his sociology is a nat- which they spend in a bold and daring way,
ural law philosophy, he is able to begin by thus encouraging the public acceptance of
conceiving of a natural (which he had re- pioneering new goods and services. But in-
named a "pure" or "unhampered" 114) econ- novation is widespread, and, a la Schumpe-
omy. It is a network of exchange relations. ter, competition is perennially invigorated.
He analogizes it to a mechanism as a first Savings flow promptly into ever present in-
approximation. To analyze it, he first strips vestment opportunities. The system consti-
all complications, notably international tutes a "cornucopia" of new and better con-
trade, credit, banks, money,115 and the sumer goods and services. Next he adds
triumvirate of inventors, savers, and entre- money. Following leads set down by Men-
preneurs. To develop the simplest case ger, and which he developed in Bohm-
of exchange, he uses the Crusoe theories Bawerk's seminar, and later set forth in his
of demand and supply and allows no The Theory of Money and Credit (1912),
social forces to modify them. He as- he begins to make his original contribu-
sumes that the market structure in prod- tions. He introduces natural (which he has
uct and factor markets is one of perfect renamed "commodity") money and ex-
competition, dismisses imperfect competi- plains its exchange value in terms of its
tion as a creature of state interference, does value relative to its original value by his
not consider market imperfections, disre- "regression theorem." He demonstrates that
gards the problem of transaction costs, and money is largely a "veil." Adding other
proposes that externalities occur only when forms of money, banks, and credit,120 he
the state creates "loopholes" in the private shows they contain no seeds of instability.
ownership laws.16 He then shows how nat- He next presents his trade cycle theory. As-
ural (which he has renamed "final" 117) sembling the Wicksellian idea of a possible
prices and a static equilibrium (which he disparity between the natural and market
has renamed an "evenly rotating" 118) econ- rates of interest, and his own revised but
omy come about. Using this as an expedient essentially Bohm-Bawerkian theories of
Mises [59, 111-27].Since economicsis a part capital, investment, and the period of pro-
of a completelygeneraltheory of human action duction, he shows that the free market
(praxeology),it becomesapplicableto otherfields mechanism will automatically adjust prices
lying beyondthe traditionallyconceivedscope of to preclude serious trade cycles.l21 Finally
economics.
1 Mises[57,7, 10]. he restores the international dimension and
4 Mises
[57, 237-38]. shows how international division of labor,
115 While he defineseconomicsas humanaction
119Kirzner [33] and Lachmann [36] consider this
involving monetarycalculation,his first step is
of
the study exchange in from
abstraction money. aspect of Mises' economics.
It is an "imaginary construction"
[57,202]. 20Hawtrey [22] points out the difficulties Mises
16Mises[57,657-58]. encounters when he uses his methodological in-
11 Mises [57, 245]. dividualism to explain the nature and value of
uI Mises [57, 248]. Seligman [81, 332-33] dis- modern forms of money and credit.
cussesthis point. 11 For a critique, see Hawtrey [22].

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 PRAXEOLOGYAND ECONOMICSCIENCE 503

competitive exchange, and finance under natural law philosophy and on the founda-
the gold standard will bring prosperity and tions on which it in turn rests. This fact
"perpetual peace." explains its distinctive features, the fore-
most of which is its corroboration of the
B natural harmony doctrine.
Using his welfare criterion, he evaluates v
this economic performance and finds it to
be perfect. Consumers' wants for goods and His basing his economic science on such a
services are not stimulated by either the foundation explains why his economics
competitive system or advertising;l22 they alone is able to justify liberalism and con-
are satisfied. They establish a "consumer demn interventionism and socialism. Being
sovereignty," a "consumer democracy" that the culmination of a natural law philoso-
commands the composition and quality of phy, his economics embodies values and is
output, and, in the form of time preference, able to execute the great role of natural law
the growth rate. The matter of one dollar- philosophies, which is to serve as a standard
one vote he deems an inconsequentiality. of justice by which to evaluate deliberate
Perfect efficiency marks producers' efforts human schemes of social control.
to satisfy consumers' wants owing to relent- Liberalism in his own view means strict
less competitive pressures and the incentive laissez-faire, or a neutral state enforcing
system created by private ownership laws. but not interfering with the natural laws.
Man's want for liberty is perfectly satisfied, His economic science predicts the policy's
a conclusion that rests on his purely nega- logical results. It moreover evaluates them
tive meaning of "liberty" and his economics and finds them to constitute perfect justice.
which calls to mind Bastiat's by showing Neither Menger, nor BShm-Bawerk, nor
that in the natural economy the holders of Wieser advocated such a policy.126
private ownership of property are abso- Turning to interventionism, the state ig-
lutely powerless "mandataries" of the con- nores the natural laws. The results Mises
sumer sovereignty.l23 Full employment op- predicts bespeak of the maxim, Ex natura
portunities always exist. The work may be jus, ordo, et leges; ex homine arbitrium,
uninteresting for many, but labor is by na- regimen, et coercitio. The politica outwork-
ture painful, and the solution lies in more ings of interventionist positive laws are the
and better consumption.124Perfect commu- progressive displacement of the market as
tative justice tends to occur, chiefly because an automatic governor by an uninformed,
he wipes out imperfect competition and dis- corrupt, and unresponsive bureaucracy, the
misses inequalities stemming from such un- growth of coercion and infringements on
natural, societal factors as education and liberty, and the ruination of equal protec-
inheritance. By this route he arrives at his tion under law owing to class legislation
and arbitrary administration of justice, es-
grand conclusion: the market economy's
"whole functioning and operation is the pecially by administrative commissions.
The economic consequences of superimpos-
consummation of this principle," notably,
that it "in the long-run best serves the sel- ing interventionist positive laws on the nat-
fish concerns of all individuals." 125 Menger [51, Reprint No. 19, 92-93] repudiated
Manchesterism as a personal belief and as a basis
Mises' economic science is based on his for his economic theory. Bohm-Bawerk [5, 232-33]
commented on "a previous chaotic slackness, an
3 Mises [59, 445-46].
unlimited speculation, and an economic crisis,"and
3Mises [56, v, 11, 67; 57, 312-13, 681-84; 58, noted the rise of monopolies, cartels, and the need
137; 59, 21, 41-42]. for legislation. On Wieser's change toward inter-
14 Mises [59, 305]. ventionism after World War I, see the well-docu-
Mises [57, 845]. mented account in Commons [11, 677-78].

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504 B. A. GONCE

ural exchange mechanism are disastrous. VI

Whether it is conflict of interests, market The parts of Mises' system fit together
power, bureaucracy within firms, ineffi- elegantly. From Epicurean foundations he
ciency, malallocation of resources, inflation,
proceeds by a method warranted by a ra-
serious trade cycles, unemployment, stagna-
tionalist theory of knowledge to build an
tion, international conflict of interests, im- individualistic, secular natural law philoso-
perialism, or war, in every case interven-
phy. Upon it he works out his version of
tionism is the cause. Upon evaluation, these Austrian economics. He uses it to justify
results constitute serious injustice. If the liberalism and condemn its rivals.
state persists in such a policy, it will be led To those who unquestioningly trust in the
to enlarge the breadth of its controls, and
program of positive social science, Mises'
the inexorable long-run outcome will be so-
synthesis brings with it a heavy cost. It
cialism. allies economics with an unempirical tem-
His prediction of the effects of the posi-
per that clears the way for an extremist
tive laws of socialism set off the celebrated individualism and libertarianism and an
controversy of the 1920s and 1930s.127In 0.
ideology that places a moral interpretation
R. Lange's opinion, it ironically led to the on economic science's parameters and elec-
development of the theory of market social- trifies an intransigent determination to
ism. Mises finds that the positive laws of make economics corroborate natural har-
social ownership will pervert the incentive
mony. To those who doubt the pragmatic
system the natural laws set up and produce value of positivism in the social sciences,
malingering, inefficiency, and unwillingness and who unquestioningly accept Mises' eth-
to engage in risky innovation. The state
ics and his definition of liberty, it brings
will hold most nonhuman means of produc-
tion and not allow them to be freely traded; great benefits. It transforms economics from
hence there will not be a complete set of a partial social science into a part of a
markets to generate a complete set of grand synthesis of distinguished lineage
prices. He assumes that only the free mar- that breathes meaning and vitality into its
ket can create competitive prices and that otherwise bloodless parameters and enables
only competitive prices qualify as rational economics to rise and challenge Marxism
prices. Hence the state can create only irra- and all other ideologies that would restrict
tional prices. The balance of his prediction liberty in the name of social welfare. But to
may follow, provided that the hideous po- all parties, and even to socialists, Mises has
litical conditions he saw developing first in made a contribution of depth and breadth
Russia and then in Germany in the 1920s and provocativeness.
and 1930s are assumed. The loss of consu-
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