Mises mentions some faults people find with economics. Some say it is not “scientific”, in that there are no laboratory experiments, no differential equations [in the true, that is, Austrian, version of economics]. Mises says the book was written precisely to reply to such a claim. But for now he says that those who are bothered by it suffer from Maslow’s disease. If all you have is a hammer, everything starts looking like a nail.
He then mentions another fault people find, namely that economics is a total flop if measured by results. The world is just as miserable a place as it was before the discovery of economics. In fact, this is true of all the social sciences, they claim. All the social sciences put together, they say,
….have not stamped out misery and starvation, economic crises and unemployment, war and tyranny. They are sterile and have contributed nothing to the promotion of happiness and human welfare. Contrast this with the mighty achievements of the hard sciences, and economics looks pathetic.
Devil’s Advocate: Pretty strong case, Ludwig. What has economics done for me lately? Nothing.
Mises: All the mighty achievements of the hard sciences would never have happened if not for economics.
Mises: …the tremendous progress of technological methods of production and the resulting increase in wealth and welfare were feasible only through the pursuit of those liberal policies which were the practical application of the teachings of economics. It was the ideas of the classical economists that removed the checks imposed by age-old laws, customs, and prejudices upon technological improvement and freed the genius of reformers and innovators from the straitjackets of the guilds, government tutelage, and social pressure of various kinds.
It was they that reduced the prestige of conquerors and expropriators and demonstrated the social benefits derived from business activity. None of the great modern inventions would have been put to use if the mentality of the pre-capitalistic era had not been thoroughly demolished by the economists.What is commonly called the “industrial revolution” was an offspring of the ideological revolution brought about by the doctrines of the economists.
The economists exploded the old tenets: that it is unfair and unjust to outdo a competitor by producing better and cheaper goods; that it is iniquitous to deviate from the traditional methods of production; that machines are an evil because they bring about unemployment; that it is one of the tasks of civil government to prevent efficient businessmen from getting rich and to protect the less efficient against the competition of the more efficient; that to restrict the freedom of entrepreneurs by government compulsion or by coercion on the part of other social powers is an appropriate means to promote a nation’s well-being. British political economy and French Physiocracy were the pacemakers of modern capitalism. It is they that made possible the progress of the natural sciences that has heaped benefits upon the masses.
DA: Funny how all the old tenets you mention are alive and well and preached by all govts today.
1. that it is unfair and unjust to outdo a competitor by producing better and cheaper goods They made that illegal, calling it having a monopoly.
2. that it is iniquitous to deviate from the traditional methods of production. It’s the unions, who are supported by the govts, who fight changes tooth and nail.
3. that machines are an evil because they bring about unemployment. Obama himself used this excuse to explain why there is high unemployment.
4.that it is one of the tasks of civil government to prevent efficient businessmen from getting rich and to protect the less efficient against the competition of the more efficient Piketty’s book in a nutshell.
5. that to restrict the freedom of entrepreneurs by government compulsion or by coercion on the part of other social powers is an appropriate means to promote a nation’s well-being. This is a biggy. All the laws restricting the freedom of entrepreneurs are always touted as being for the benefit of the nation.
Mises: Yep, all those blunders the old time economists spent so much time refuting have made a huge comeback, which is why we are in such a mess. And of course there is a huge cover up going on, as nobody teaches that the reason we are so much richer than, say, Merrie Englande of 1400, is because the economists destroyed those myths. And trust Marx to make a right mess of things, again:
What is wrong with our age is precisely the widespread ignorance of the role which these policies of economic freedom played in the technical evolution of the last two hundred years. People fell prey to the fallacy that the improvement of the methods of production was contemporaneous with the policy of laissez faire only by accident. Deluded by Marxian myths, they consider modern industrialism an outcome of the operation of mysterious “productive forces” that do not depend in any way on ideological factors. Classical economics, they believe, was not a factor in the rise of capitalism, but rather its product, its “ideological superstructure,” i.e., a doctrine designed to defend the unfair claims of the capitalist exploiters. Hence the abolition of capitalism and the substitution of socialist totalitarianism for a market economy and free enterprise would not impair the further progress of technology. It would, on the contrary, promote technological improvement by removing the obstacles which the selfish interests of the capitalists place in its way.
DA: Talk about turning things topsy turvy!
Mises: Coming back to the claim that economics has not ended war, or stamped out starvation and tyranny, we see now that’s because everyone with any power despises and belittles economics:
The characteristic feature of this age of destructive wars and social disintegration is the revolt against economics. Thomas Carlyle branded economics a “dismal science,” and Karl Marx stigmatized the economists as “the sycophants of the bourgeoisie.” Quacks—praising their patent medicines and short cuts to the earthly paradise—take pleasure in scorning economics as “orthodox” and “reactionary.” Demagogues pride themselves on what they call their victories over economics. The “practical” man boasts of his contempt for economics and his ignorance of the teachings of “armchair” economists. The economic policies of the last decades have been the outcome of a mentality that scoffs at any variety of sound economic theory and glorifies the spurious doctrines of its detractors. What is called “orthodox” economics is in most countries barred from the universities and is virtually unknown to the leading statesmen, politicians, and writers. The blame for the unsatisfactory state of economic affairs can certainly not be placed upon a science which both rulers and masses despise and ignore.
DA: Because if people understood basic economics, they would realize that war means only one thing for them personally: Death at the worst and increased poverty at best. And if they allowed the free market to flourish, we would all get richer and richer.
Mises: As we will show in this book. The truth is, our whole civilization is imperiled because people have turned their back on Austrian Economics:
It must be emphasized that the destiny of modern civilization as developed by the white peoples in the last two hundred years is inseparably linked with the fate of economic science. This civilization was able to spring into existence because the peoples were dominated by ideas which were the application of the teachings of economics to the problems of economic policy. It will and must perish if the nations continue to pursue the course which they entered upon under the spell of doctrines rejecting economic thinking.
DA: You know that saying anything good about white people is bad form nowadays. How about if we touch this up a bit to “modern civilization as developed by ethnic diversity, with women especially taking the lead whenever they were not oppressed into dust by the ruling white racist imperialist male dominated elitist capitalist power structure.”
Mises: You want me to say black men can’t jump?
DA: If you say it about white men, it’s fine. But if you say it about black men, you’re a racist. That’s the way it is nowadays.
DA: You know, Professor, the Ayn Rand crowd really got on your case because you said Economics should not make value judgements.
Mises: It is true that economics is a theoretical science and as such abstains from any judgment of value. It is not its task to tell people what ends they should aim at. It is a science of the means to be applied for the attainment of ends chosen, not, to be sure, a science of the choosing of ends. Ultimate decisions, the valuations and the choosing of ends, are beyond the scope of any science. Science never tells a man how he should act; it merely shows how a man must act if he wants to attain definite ends.
DA: Makes sense to me.
Smiling Dave: Devil, it’s funny how you always agree with Mises, but never give me a moment’s rest.
DA: Sane sicut lux se ipsam et tenebras manifestat, sic Veritas norma sui et falsi est. [Indeed, just as light defines itself and darkness, so truth sets the standard for itself and falsity.]
The other parts of this epic attempt can be found here: https://smilingdavesblog.wordpress.com/2014/07/26/human-action-smiling-dave-style-toc/