Human Action: A Treatise on Economics

by Ludwig VonMises

  The pompous statements which people make about things unknowable and beyond the power of the human mind, their cosmologies, world views, religions, mysticisms, metaphysics, and conceptual phantasies differ widely from one another. But the practical essence of their ideologies, i.e., their teachings dealing with the ends to be aimed at in earthly life and with the means for the attainment of these ends, show much uniformity. There are, to be sure, differences and antagonisms both with regard to ends and means. Yet the differences with regard to ends are not irreconcilable; they do not hinder cooperation and amicable arrangements in the sphere of social action. As far as they concern means and ways only they are of a purely technical character and as such open to examination by rational methods. When in the heat of party conflicts one of the factions declares: “Here we cannot go on in our negotiations with you because we are faced with a question touching upon our world view; on this point we must be adamant and must cling rigidly to our principles whatever may result,” one need only scrutinize matters more carefully to realize that such declarations describe the antagonism as more pointed than it really is. In fact, for all parties committed to pursuit of the people’s earthly welfare and thus approving social cooperation, questions of social organization and the conduct of social action are not problems of ultimate principles and of world views, but ideological issues. They are technical problems with regard to which some arrangement is always possible. No party would wittingly prefer social disintegration, anarchy, and a return to primitive barbarism to a solution which must be bought at the price of the sacrifice of some ideological points.

  In party programs these technical issues are, of course, of primary importance. A party is committed to certain means, it recommends certain methods of political action and rejects utterly all other methods and policies as inappropriate. A party is a body which combines all those eager to employ the same means for common action. The principle which differentiates men and integrates parties is the choice of means. Thus for the party as such the means chosen are essential. A party is doomed if the futility of the means recommended becomes obvious. Party chiefs whose prestige and political career are bound up with the party’s program may have ample reasons for withdrawing its principles from unrestricted discussion; they may attribute to them the character of ultimate ends which must not be questioned because they are based on a world view. But for the people as whose mandataries the party chiefs pretend to act, for the voters whom they want to enlist and for whose votes they canvass, things offer another aspect. They have no objection to scrutinizing every point of a party’s program. They look upon such a program only as a recommendation of means for the attainment of their own ends, viz., earthly wellbeing.

  What divides those parties which one calls today world view parties, i.e., parties committed to basic philosophical decisions about ultimate ends, is only seeming disagreement with regard to ultimate ends. Their antagonisms refer either to religious creeds or to problems of international relations or to the problem of ownership of the means of production or to problems of political organization. It can be shown that all these controversies concern means and not ultimate ends.

  Let us begin with the problems of a nation’s political organization. There are supporters of a democratic system of government, of hereditary monarchy, of the rule of a self-styled elite and of Caesarist dictatorship.1 It is true that these programs are often recommended by reference to divine institutions, to the eternal laws of the universe, to the natural order, to the inevitable trend of historical evolution, and to other objects of transcendent knowledge. But such statements are merely incidental adornment. In appealing to the electorate, the parties advance other arguments. They are eager to show that the system they support will succeed better than those advocated by other parties in realizing those ends which the citizens aim at. They specify the beneficial results achieved in the past or in other countries; they disparage the other parties’ programs by relating their failures. They resort both to pure reasoning and to an interpretation of historical experience in order to demonstrate the superiority of their own proposals and the futility of those of their adversaries. Their main argument is always: the political system we support will render you more prosperous and more content.

  In the field of society’s economic organization there are the liberals advocating private ownership of the means of production, the socialists advocating public ownership of the means of production, and the interventionists advocating a third system which, they contend, is as far from socialism as it is from capitalism. In the clash of these parties there is again much talk about basic philosophical issues. People speak of true liberty, equality, social justice, the rights of the individual, community, solidarity, and humanitarianism. But each party is intent upon proving by ratiocination and by referring to historical experience that only the system it recommends will make the citizens prosperous and satisfied. They tell the people that realization of their program will raise the standard of living to a higher level than realization of any other party’s program. They insist upon the expediency of their plans and upon their utility. It is obvious that they do not differ from one another with regard to ends but only as to means. They all pretend to aim at the highest material welfare for the majority of citizens.

  The nationalists stress the point that there is an irreconcilable conflict between the interests of various nations, but that, on the other hand, the rightly understood interests of all the citizens within the nation are harmonious. A nation can prosper only at the expense of other nations; the individual citizen can fare well only if his nation flourishes. The liberals have a different opinion. They believe that the interests of various nations harmonize no less than those of the various groups, classes, and strata of individuals within a nation. They believe that peaceful international cooperation is a more appropriate means than conflict for attainment of the end which they and the nationalists are both aiming at: their own nation’s welfare. They do not, as the nationalists charge, advocate peace and free trade in order to betray their own nation’s interests to those of foreigners. On the contrary, they consider peace and free trade the best means to make their own nation wealthy. What separates the free traders from the nationalists is not ends, but the means recommended for attainment of the ends common to both.

  Dissension with regard to religious creeds cannot be settled by rational methods. Religious conflicts are essentially implacable and irreconcilable. Yet as soon as a religious community enters the field of political action and tries to deal with problems of social organization, it is bound to take into account earthly concerns, however this may conflict with its dogmas and articles of faith. No religion in its exoteric activities ever ventured to tell people frankly: The realization of our plans for social organization will make you poor and impair your earthly wellbeing. Those consistently committed to a life of poverty withdrew from the political scene and fled into anchoritic seclusion. But churches and religious communities which have aimed at making converts and at influencing political and social activities of their followers have espoused the principles of secular conduct. In dealing with questions of man’s earthly pilgrimage they hardly differ from any other political party. In canvassing, they emphasize the material advantages which they have in store for their brothers in faith more than bliss in the beyond.

  Only a world view whose supporters renounce any earthly activity whatever could neglect to pay heed to the rational considerations which show that social cooperation is the great means for the attainment of all human ends. Because man is a social animal that can thrive only within society, all ideologies are forced to acknowledge the preeminent importance of social cooperation. They must aim at the most satisfactory organization of society and must approve of man’s concern for an improvement of his material wellbeing. Thus they all place themselves upon a common ground. They are separated from one another not by world views and transcendent issues not subject to reasonable discussion, but by problems of means and ways. Such
ideological antagonisms are open to a thorough scrutiny by the scientific methods of praxeology and economics.

  The Fight Against Error

  A critical examination of the philosophical systems constructed by mankind’s great thinkers has very often revealed fissures and flaws in the impressive structure of those seemingly consistent and coherent bodies of comprehensive thought. Even the genius in drafting a world view sometimes fails to avoid contradictions and fallacious syllogisms.

  The ideologies accepted by public opinion are still more infected by the shortcomings of the human mind. They are mostly an eclectic juxtaposition of ideas utterly incompatible with one another. They cannot stand a logical examination of their content. Their inconsistencies are irreparable and defy any attempt to combine their various parts into a system of ideas compatible with one another.

  Some authors try to justify the contradictions of generally accepted ideologies by pointing out the alleged advantages of a compromise, however unsatisfactory from the logical point of view, for the smooth functioning of interhuman relations. They refer to the popular fallacy that life and reality are “not logical”; they contend that a contradictory system may prove its expediency or even its truth by working satisfactorily while a logically consistent system would result in disaster. There is no need to refute anew such popular errors. Logical thinking and real life are not two separate orbits. Logic is for man the only means to master the problems of reality. What is contradictory in theory, is no less contradictory in reality. No ideological inconsistency can provide a satisfactory, i.e., working, solution for the problems offered by the facts of the world. The only effect of contradictory ideologies is to conceal the real problems and thus to prevent people from finding in time an appropriate policy for solving them. Inconsistent ideologies may sometimes postpone the emergence of a manifest conflict. But they certainly aggravate the evils which they mask and render a final solution more difficult. They multiply the agonies, they intensify the hatreds, and make peaceful settlement impossible. It is a serious blunder to consider ideological contradictions harmless or even beneficial.

  The main objective of praxeology and economics is to substitute consistent correct ideologies for the contradictory tenets of popular eclecticism. There is no other means of preventing social distintegration and of safeguarding the steady improvement of human conditions than those provided by reason. Men must try to think through all the problems involved up to the point beyond which a human mind cannot proceed farther. They must never acquiesce in any solutions conveyed by older generations, they must always question anew every theory and every theorem, they must never relax in their endeavors to brush away fallacies and to find the best possible cognition. They must fight error by unmasking spurious doctrines and by expounding truth.

  The problems involved are purely intellectual and must be dealt with as such. It is disastrous to shift them to the moral sphere and to dispose of supporters of opposite ideologies by calling them villains. It is vain to insist that what we are aiming at is good and what our adversaries want is bad. The question to be solved is precisely what is to be considered as good and what as bad. The rigid dogmatism peculiar to religious groups and to Marxism results only in irreconcilable conflict. It condemns beforehand all dissenters as evildoers, it calls into question their good faith, it asks them to surrender unconditionally. No social cooperation is possible where such an attitude prevails.

  No better is the propensity, very popular nowadays, to brand supporters of other ideologies as lunatics. Psychiatrists are vague in drawing a line between sanity and insanity. It would be preposterous for laymen to interfere with this fundamental issue of psychiatry. However, it is clear that if the mere fact that a man shares erroneous views and acts according to his errors qualifies him as mentally disabled, it would be very hard to discover an individual to which the epithet sane or normal could be attributed. Then we are bound to call the past generations lunatic because their ideas about the problems of the natural sciences and concomitantly their techniques differed from ours. Coming generations will call us lunatics for the same reason. Man is liable to error. If to err were the characteristic feature of mental disability, then everybody should be called mentally disabled.

  Neither can the fact that a man is at variance with the opinions held by the majority of his contemporaries qualify him as a lunatic. Were Copernicus, Galileo and Lavoisier insane? It is the regular course of history that a man conceives new ideas, contrary to those of other people. Some of these ideas are later embodied in the system of knowledge accepted by public opinion as true. Is it permissible to apply the epithet “sane” only to boors who never had ideas of their own and to deny it to all innovators?

  The procedure of some contemporary psychiatrists is really outrageous. They are utterly ignorant of the theories of praxeology and economics. Their familiarity with present-day ideologies is superficial and uncritical. Yet they blithely call the supporters of some ideologies paranoid persons.

  There are men who are commonly stigmatized as monetary cranks. The monetary crank suggests a method for making everybody prosperous by monetary measures. His plans are illusory. However, they are the consistent application of a monetary ideology entirely approved by contemporary public opinion and espoused by the policies of almost all governments. The objections raised against these ideological errors by the economists are not taken into account by the governments, political parties, and the press.

  It is generally believed by those unfamiliar with economic theory that credit expansion and an increase in the quantity of money in circulation are efficacious means for lowering the rate of interest permanently below the height it would attain on a nonmanipulated capital and loan market. This theory is utterly illusory.2 But it guides the monetary and credit policy of almost every contemporary government. Now, on the basis of this vicious ideology, no valid objection can be raised against the plans advanced by Pierre Joseph Proudhon, Ernest Solvay, Clifford Hugh Douglas and a host of other would-be reformers. They are only more consistent than other people are. They want to reduce the rate of interest to zero and thus to abolish altogether the scarcity of “capital.” He who wants to refute them must attack the theories underlying the monetary and credit policies of the great nations.

  The psychiatrist may object that what characterizes a man as a lunatic is precisely the fact that he lacks moderation and goes to extremes. While normal man is judicious enough to restrain himself, the paranoid person goes beyond all bounds. This is quite an unsatisfactory rejoinder. All the arguments advanced in favor of the thesis that the rate of interest can be reduced by credit expansion from 5 or 4 per cent to 3 or 2 per cent are equally valid for a reduction to zero. The “monetary cranks” are certainly right from the point of view of the monetary fallacies approved by popular opinion.

  There are psychiatrists who call the Germans who espoused the principles of Nazism lunatics and want to cure them by therapeutic procedures. Here again we are faced with the same problem. The doctrines of Nazism are vicious, but they do not essentially disagree with the ideologies of socialism and nationalism as approved by other peoples’ public opinion. What characterized the Nazis was only the consistent application of these ideologies to the special conditions of Germany. Like all other contemporary nations the Nazis desired government control of business and economic self-sufficiency, i.e., autarky, for their own nation. The distinctive mark of their policy was that they refused to acquiesce in the disadvantages which the acceptance of the same system by other nations would impose upon them. They were not prepared to be forever “imprisoned,” as they said, within a comparatively overpopulated area in which physical conditions render the productivity of labor lower than in other countries. They believed that their nation’s great population figures, the strategically propitious geographic situation of their country, and the inborn vigor and gallantry of their armed forces provided them with a good chance to remedy by aggression the evils they deplored.

  No
w, whoever accepts the ideology of nationalism and socialism as true and as the standard of his own nation’s policy, is not in a position to refute the conclusions drawn from them by the Nazis. The only way for a refutation of Nazism left for foreign nations which have espoused these two principles is to defeat the Nazis in war. And as long as the ideology of socialism and nationalism is supreme in the world’s public opinion, the Germans or other peoples will try again to succeed by aggression and conquest, should the opportunity ever be offered to them. There is no hope of eradicating the aggression mentality if one does not explode entirely the ideological fallacies from which it stems. This is not a task for psychiatrists, but for economists.3

  What is wrong with the Germans is certainly not that they do not comply with the teachings of the Gospels. No nation ever did. With the exception of the small and uninfluential groups of the Friends practically all Christian churches and sects blessed the arms of warriors. The most ruthless among the older German conquerors were the Teutonic Knights who fought in the name of the Cross. The source of present-day German aggressiveness is the very fact that the Germans have discarded liberal philosophy and substituted the ideology of nationalism and socialism for the liberal principles of free trade and peace. If mankind does not return to the ideas today disparaged as “orthodox,” “Manchester philosophy,” and “laissez faire,” the only method to prevent a new aggression is to render the Germans innocuous by depriving them of the means of waging war.

  Man has only one tool to fight error: reason.

  3. Might

  Society is a product of human action. Human action is directed by ideologies. Thus society and any concrete order of social affairs are an outcome of ideologies; ideologies are not, as Marxism asserts, a product of a certain state of social affairs. To be sure, human thoughts and ideas are not the achievement of isolated individuals. Thinking too succeeds only through the cooperation of the thinkers. No individual would make headway in his reasoning if he were under the necessity of starting from the beginning. A man can advance in thinking only because his efforts are aided by those of older generations who have formed the tools of thinking, the concepts and terminologies, and have raised the problems.