by
Richard M. Ebeling
OVER A TWELVE-DAY
PERIOD, from June 25 to
July 6, 1951
, the internationally
renowned Austrian economist Ludwig von Mises delivered a series of
lectures at the Foundation for Economic Education (FEE) at its
headquarters in
Irvington-on-Hudson
,
New York
. Bettina
Bien Greaves, a FEE staff member at that time, took down Mises’s
lectures in shorthand, word for word, and then transcribed them into
a full manuscript. It has remained unpublished until now.
FEE is proud to finally make these lectures available to a new
generation. Mises was almost 70 years old when he spoke the words
that are in this text, but they reveal a vitality of mind that is
youthful in its clarity and vision of the free market and its
critical analysis of freedom’s enemies.
Ludwig von Mises: His
Life and Contributions
During the decades
before Mises gave these lectures at FEE he had established himself
as one of the leading voices of freedom in the Western world.[i]
Ludwig von Mises was born on
September 29, 1881
, in Lemberg, the capital
of the
province
of
Galicia
in the old
Austro-Hungarian Empire (now known as
Lvov
in western
Ukraine
). He
graduated from the
University
of
Vienna
in 1906 with
a doctoral degree in jurisprudence, and a specialization in
economics. After briefly working as a law clerk, he was hired by the
Vienna Chamber of Commerce, Crafts, and Industry in 1909, and within
a few years was promoted to the position of one of the Chamber’s
senior economic analysts.
Mises was soon recognized as one of the most
insightful and penetrating minds in
Austria
. In
1912, he published The
Theory of Money and Credit,
a book that was quickly hailed as a
major work on monetary theory and policy, in which he first
presented what became known as the Austrian Theory of the Business
Cycle. Inflations and depressions were not inherent within a
free-market economy, Mises argued, but were caused by government
mismanagement of the monetary and banking systems.[ii]
His scholarly work was interrupted in 1914, however,
with the coming of the First World War. For the next four years,
Mises served as an officer in the Austrian Army, most of that time
on the eastern front against the Russian Army. He was three times
decorated for bravery under fire. After Lenin and the Bolsheviks
signed a separate peace with Imperial Germany and
Austria-Hungary
in March 1918 that
withdrew
Russia
from
the war, Mises was appointed the officer in charge of currency
control in that part of the
Ukraine
occupied by the Austrian Army under the terms of the peace treaty,
with his headquarters in the port city of
Odessa
on the Black
Sea. During the last several months of the war, before the armistice
of
November 11, 1918
, Mises was stationed in
Vienna
serving as an economic analyst
for the Austrian High Command.
After being mustered out of the army at the end of
1918, he returned to his duties at the Vienna Chamber of Commerce,
with the additional responsibility, until 1920, of being in charge
of a branch of the
League of Nations
’ Reparations Commission overseeing the settlement of prewar debt
obligations.
In the years immediately following the war,
Austria
was
in a state of chaos. The old Austro-Hungarian Empire broke up,
leaving a new, much smaller
Republic
of
Austria
.
Hyperinflation and aggressive trade barriers by neighboring
countries soon reduced much of the Austrian population to
near-starvation conditions. In addition, there were several attempts
to violently establish a revolutionary socialist regime in
Austria
, as
well as border wars with
Czechoslovakia
,
Hungary
, and
Yugoslavia
.
From his position at the Vienna Chamber of Commerce,
Mises fought day and night to ward off the collectivist destruction
of his homeland. He was influential in stopping the full
nationalization of Austrian industry by the government in 1918–1919.
He also played a leading role in bringing the hyperinflation in
Austria
to a
halt in 1922, and then was a guiding voice in reorganizing the
Austrian National Bank under a re-established gold standard under
League of
Nations
supervision. He also forcefully
made the case for drastically lowering the income and business taxes
that were strangling all private-sector activities, and assisted in
bringing to an end the government’s foreign-exchange controls that
were ruining
Austria
’s
trade with the rest of the world.[iii]
Throughout the 1920s and early 1930s, while in his
native
Austria
,
Mises was an uncompromising defender of the ideals of individual
liberty, limited government, and the free market. Besides his work
at the Vienna Chamber of Commerce, he taught a seminar every
semester at the University of Vienna on various aspects of economic
theory and policy, which attracted not only many of the brightest
Austrian students but attendees from the rest of Europe and the
United States as well. He also led a “private seminar” that met
twice a month from October to June in his Chamber offices, from 1920
to 1934, with many of the best Viennese minds in economics,
political science, history, philosophy, and sociology regularly
participating.
Mises also founded the
Austrian Institute for Business Cycle Research in 1926. He served as
acting vice-president, with a young Friedrich A. Hayek appointed as
the Institute’s first director.
His international stature as a champion of classical
liberalism continued to grow during this period, as well, through a
series of books that challenged the rising tide of socialism and the
interventionist-welfare state. In 1919, Mises published
Nation,
State and Economy,
in which he traced out the causes of the First World War in the
nationalist, imperialist, and socialist ideas of the preceding
decades.[iv]
But it was in a 1920 article on “Economic Calculation in the
Socialist
Commonwealth
”[v]
and his 1922 book on
Socialism: An Economic and
Sociological Analysis
that his reputation as the leading
opponent of collectivism in the twentieth century was firmly
established.[vi]
Mises demonstrated that with the nationalization of the means of
production, and the resulting abolition of money, market
competition, and the price system, socialism would lead to economic
chaos and not to social prosperity. Thus, besides the tyranny that
socialism would create due to the government’s domination over all
aspects of human life, it was also inherently unworkable as an
economic system.
This was followed in 1927 with his defense of all
facets of individual freedom in his book on
Liberalism,
by which he meant
classical liberalism and the market economy. He presented a clear
and persuasive case for individual liberty, private property, free
markets, and limited government.[vii]
Finally, in 1929, Mises published a collection of essays offering a
Critique of Interventionism,
in which he showed
that government piecemeal regulations over prices and production
inevitably lead to distortions and imbalances that threaten the
effective functioning of a free and competitive market society.[viii]
In addition, he penned a series of essays on the philosophy of
science and the nature of man and the social order that appeared in
1933 under the title
Epistemological
Problems of Economics.[ix]
Mises had clearly understood during this time that
Hitler’s National Socialism would lead
Germany
down the road to destruction. In fact, in the mid-1920s, he had
already warned that too many Germans were hoping for the coming of
the tyrant who would rule over and plan their lives.[x]
When the Nazis came to power in
Germany
in
1933, Mises understood that the future of his native
Austria
was
now threatened. As a classical liberal and a Jew, Mises also knew
that a Nazi takeover would probably mean his arrest and death. So,
in 1934 he accepted a position as professor of international
economic relations at the Graduate Institute of International
Studies in
Geneva
,
Switzerland
, a position
that he held until he came to the
United States
in
the summer of 1940.[xi]
It was during those six years in
Switzerland
that
Mises wrote his greatest work, the German-language edition of which
was published in
Geneva
in 1940,[xii]
and which then appeared in 1949 in a revised English language
version as
Human Action: A Treatise on Economics.[xiii]
In a volume of almost 900 pages, Mises summarized the ideas and
reflections of a lifetime on the issues of man, society, and
government; on the nature and workings of the competitive market
process and the impossibilities of socialist central planning and
the interventionist state; and on the central role and importance of
a sound monetary system for all market activities, and the harmful
effects from government’s manipulation of money and credit.
In the summer of 1940, as the German Army was
overrunning France, Mises and his wife, Margit, left neutral
Switzerland
and
made their way through southern
France
and
across
Spain
to
Lisbon
,
Portugal
, from where
they then sailed to the
United States
.
Living in
New York City
, he received
research grants from the Rockefeller Foundation in the early 1940s
that enabled him to do a number of studies on postwar economic and
political reconstruction, as well as write several books.[xiv]
In 1945, he was appointed to a visiting professorship at
New York
University
, a position
that he held until his retirement in 1969 at the age of 87.
During his years in America, Mises continued his
prolific writing career, publishing
Bureaucracy
(1944),[xv]
Omnipotent Government
(1944),[xvi]
Planned
Chaos (1947),[xvii]
Planning
for Freedom (1952),[xviii]
The
Anti-Capitalistic Mentality
(1956),[xix]
Theory
and History (1957),[xx]
The
Ultimate Foundation of Economic Science
(1962),[xxi]
and The
Historical Setting of the Austrian School of Economics
(1969).[xxii]
There also appeared, posthumously, his memoirs,
Notes and
Recollections
(1978),[xxiii]
and
Interventionism: An Economic Analysis
(1998),[xxiv]
both originally written in 1940. And many of his other articles and
essays have been collected in two anthologies.[xxv]
Mises also attracted around him a new generation of
young Americans dedicated to the ideal of liberty and economic
freedom, and who were encouraged and assisted by Mises in their
intellectual activities. He passed away on
October 10, 1973
, at
the age of 92.
Top of Page
Ludwig von Mises and
FEE
There was a long
relationship between Ludwig von Mises and the Foundation for
Economic Education. The late Leonard E. Read, the founder and first
president of FEE, met Mises in the early 1940s. Read told the story
of their meeting in an essay he wrote in honor of Mises’s 90th
birthday:
Professor Ludwig von Mises arrived in
America
during 1940. My acquaintance with him began a year or two later when
he addressed a luncheon meeting of the Los Angeles Chamber of
Commerce of which I was General Manager. That evening he dined at my
home with renowned economists Dr. Benjamin M. Anderson and Professor
Thomas Nixon Carver, and several businessmen such as W. C.
Mullendore, all first-rate thinkers in political economy. What I
would give for a recording of that memorable discussion!
The final question was posed at
midnight
: “Professor Mises, I
agree with you that we are headed for troublous times. Now, let us
suppose you were the dictator of these
United States
.
What would you do?”
Quick as a flash came the reply,
“I would
abdicate!” Here we
have the renunciation side of wisdom: man knowing he should not lord
it over his fellows and rejecting even the thought.
Few among us are wise
enough to know how little we know.
. . . A rare individual weighs his finite knowledge
on the scale of infinite truth, and his awareness of his limitation
tells him never to lord it over others. Such a person would renounce
any position of authoritarian rulership he might be proffered or, if
accidentally finding himself in such a position, would
abdicate—forthwith! . . .
Professor Mises knows
that he does not or cannot rule; thus, he abdicates from even the
idea of rulership. Knowing what phase of life to renounce is one
side of wisdom.[xxvi]
From FEE’s founding in 1946, Ludwig von Mises served
as a senior adviser, lecturer, writer, and part-time staff member
for the Foundation. It was through Mises’s influence and that of
free-market economist and journalist Henry Hazlitt (one of FEE’s
original trustees) that the Foundation has always had a special “
Austrian
School
”
orientation to its economic analysis of free markets and
collectivism.[xxvii]
It was also through
the assistance of Leonard Read and a few others among Mises’s
friends that funding was arranged to underwrite his teaching
position at NYU, until his retirement in 1969. And following his
departure from NYU, Leonard Read brought Mises onto FEE’s staff for
the remainder of his life.
Mises’s wife, Margit, described his appreciation of FEE and the
opportunity to lecture at the Foundation:
In October 1946, Lu was made a regular member of the
FEE staff, and in later years he promised to give a series of
lectures in
Irvington
every year.
The spiritual and intellectual atmosphere there was completely to
his taste.
* * *
One of the regular
tasks of the Foundation was to arrange seminars for teachers,
journalists and students. Lu enjoyed speaking there. He knew the
participants were carefully questioned about their education and
interests and were eager to hear him. It was interesting to note how
many women attended these seminars.
Before the classes started, Lu regularly made the
rounds. First, he had a little talk with Read; then he went to see
Edmund Opitz, for whom he had a special appreciation; then he
visited with W. Marshall Curtiss and Paul Poirot. Paul usually had
to discuss an article he was about to publish in
The Freeman,
FEE’s monthly
magazine. Finally, Lu went into Bettina Bien’s office. As a rule,
Bettina had a pile of his books ready for him to autograph or
letters to sign, which were typed for him in his office. On his way
down to the lecture hall—all these offices, with the exception of
that of Dr. Opitz, were on the second floor—he had a friendly word
for every one of the employees.
His lectures were calculated for a special
Irvington
audience. He
was able to evaluate his listeners immediately by asking one or the
other question. . . . Though the content of his lectures in
Irvington
was lighter,
his mode of delivery was the same as at
New York
University
. The
interest was great and so was the demand for Lu’s books, which
Leonard Read always kept in print and ready for distribution.[xxviii]
Mises’s last public lecture was delivered at FEE on
March 26, 1971
. As Margit von Mises
explained: “He always loved lecturing in
Irvington
, and he
continued doing so as long as he felt able.”[xxix]
When Mises passed away, Leonard Read delivered a
brief eulogy at the memorial service for him on
October 16, 1973
. He
said, in part:
The proudest tribute
mankind can pay to one it would most honor is to call him Teacher.
The man who releases an idea which helps men understand themselves
and the universe puts mankind forever in his debt. . . . Ludwig von
Mises is truly—and I use this in the present tense—a Teacher. More
than two generations have studied under him and countless thousands
of others have learned from his books. Books and students are the
enduring monuments of a Teacher and these monuments are his. . . .
We have learned more from Ludwig Mises than economics. We have come
to know an exemplar of scholarship, a veritable giant of erudition,
steadfastness, and dedication. Truly one of the great Teachers of
all time! And so, all of us salute you, Ludwig Mises, as you depart
this mortal life and join the immortals.[xxx]
The FEE Lectures of
1951
For those readers who
are already familiar with some of Mises’s works, his 1951 lectures
at FEE will offer them a slightly different style to his analysis.
Here is Mises the teacher. The form of exposition that Bettina Bien
Greaves has captured in her detailed shorthand of his lectures is
more colloquial, and full of many historical examples and
references. The reader is able to feel, at least a bit, what Mises
was like face to face in the classroom, and not simply the Olympian
theorist in his great tomes.
One of Mises’s students who studied with him at
New York
University
once said
that “Every lecture was a mind-stretching experience.” Another
student declared that “I have never known a man as erudite as was
Dr. Mises. He was extraordinarily learned in every field of
knowledge. In discussing economics he would bring in examples from
history to illustrate the points he was making.”[xxxi]
His FEE lectures from 1951 give a taste of this side of Mises as a
scholar-teacher.
For the readers who are relatively unfamiliar with
Mises writings, these lectures offer an excellent starting point.
Indeed, in many ways the lectures present an encapsulated version of
most of the themes that Mises devoted his life to formulating, a
summary of many of the central themes to be found in
Human Action.
He explains the
nature of man as a purposeful actor who gives meaning to his actions
in the context of ends chosen and means selected to achieve his
goals. It is the intentionality of man that makes the human sciences
inherently different from the subject matter of the natural
sciences. This also enables Mises to demonstrate why Karl Marx’s
theory of dialectical materialism and historical determinism is
fundamentally myth and fantasy.
Instead, he shows the
actual workings of the market process through which economic freedom
provides the incentives and the personal liberty for individuals to
work, save, and invest. He explains how it is the consumer-driven
demand for goods and services that provides the stimulus and profit
opportunities for entrepreneurs to creatively arrange and guide
production in ways that serve the wants and desires of the buying
public.
He also demonstrates
that the market process is dependent upon and would be impossible
without the emergence of a medium of exchange— money—through which
all the myriad of goods and resources can be reduced to a common
denominator in the form of money prices. Economic calculation in the
form of market prices provides the method through which
entrepreneurs are able to estimate potential profits and possible
losses from alternative lines and methods of production. Through
this process, waste and misuse of scarce resources are kept to a
minimum, so that as many of the most highly valued goods and
services desired by consumers may be brought to market.
This also leads Mises
to explain why socialist central planning means the end of all
economic rationality. With the abolition of markets and prices under
socialism, the central planners are clueless about how to
efficiently apply the resources, capital, and labor under their
control. Hence, socialism in practice means planned chaos.
At the same time,
Mises shows why government mismanagement of the monetary and banking
system brings about inflations and depressions. By distorting the
price signals of the marketplace—including interest
rates—government-generated inflations bring about a misdirection of
resources and labor and a malinvestment of capital, which finally
must lead to a depression.
Through these lectures, the reader will see why
Ludwig von Mises was one of the most effective proponents of freedom
and free enterprise in the twentieth century. And why his
contributions will remain as one of the great legacies in the cause
of liberty in the many decades to come.
Top of Page
1ST LECTURE
Economics and Its Opponents
AMONG THE GREAT
BOOKS OF MANKIND are the immortal writings by the Greek philosopher
Plato.
The Republic
and
The Laws,
written 2300 to 2400 years ago, dealt
not only with philosophy, the theory of knowledge, epistemology, but
also with social conditions. The treatment of these problems was
typical of the approach which philosophical and sociological
problems, discussions of state, government, and so on, continued to
receive for more than 2000 years.
Although this approach is familiar to us, a new point
of view toward social philosophy, the sciences, economics, and
praxeology has developed during the last hundred years. Plato had
said that a leader is called on by “
Providence
” or by his
own eminence, to reorganize and to construct the world in the same
way that a builder constructs a building—without bothering with the
wishes of his fellowmen. Plato’s philosophy was that most men are
“tools” and “stones” to be worked with for the construction of a new
social entity by the “superman” in control. The cooperation of the
“subjects” is unimportant for the success of the plan. The only
requirement is that the dictator have the requisite power to force
the people. Plato assigns to himself the specific task of being
adviser to the dictator, the specialist, the “social engineer”
reconstructing the world according to his plan. A comparable
situation today may be seen in the position of the college professor
who goes to
Washington
.
The Platonic pattern
remained the same for almost 2,000 years. All the books of that era
were written from this point of view. Each author was convinced that
men were merely pawns in the hands of the princes, the police, and
so on. Anything could be done, provided the government was strong
enough. Strength was considered the greatest asset of government.
An indication of the success of this thinking may be
realized in reading the adventures of
Télémaque
by Bishop Fénelon [François de
Salignac de la Mothe Fénelon, 1651–1715]. Bishop Fénelon, a
contemporary of Louis XIV, was an eminent and great philosopher, a
critic of government, and tutor to the Duke of Burgoyne, heir to the
French throne.
Télémaque, written for
the young Duke’s education, was used in French schools until
recently. The book tells of world travels. In each country visited,
all that is good is credited to the police; everything of value is
attributed to the government. This is known as the “science of the
police”—or in German
Polizeiwissenschaft.
The eighteenth century
saw a new discovery—the discovery of a different approach to social
problems. The idea developed that there was a regularity in the
sequence of social problems similar to the regularity in the
sequence of natural phenomena. It was learned that legal decrees and
their enforcement alone would not remove an ill. The regular
sequence or concatenation of social phenomena must be studied to
find out what can be done, and what should be done. Although
regularity had been recognized in the field of the natural sciences,
the existence of order and of regular sequences also in the field of
social problems had not been recognized before.
The Utopian conditions
of the natural state, as described by Jean Jacques Rousseau
[1712–1778], are transformed, it was held, by “wicked” men and by
their evil social institutions to produce the destitution and misery
that exists. It was believed that the happiest man—the one living
under the most satisfactory conditions—was the Indian of North
America. North American Indians were idealized in European
literature of that time; they were considered happy because they
were not acquainted with modern civilization.
Then came Thomas
Robert Malthus [1766–1834] with the discovery that nature does not
provide the means of existence for everybody. Malthus pointed out
that there prevails for all humans a scarcity of the requirements of
subsistence. All men are in competition for the means of survival
and for a share of the world’s wealth. The aim of man was to remove
the scarcity and make it possible for a greater number of persons to
survive.
Competition leads to
the division of labor and to the development of cooperation. The
discovery that the division of labor is more productive than
isolated labor was the happy accident that made social cooperation,
social institutions, and civilization possible.
If all production is consumed immediately, any
improvement of conditions would be impossible. Improvement is
possible only because some production is saved for use in later
production—that is only if capital is accumulated.
Savings are
important!
In the eyes of all
reformers such as Plato, the “body politic” could not operate
without interference from the top. Intervention by the “king,” by
government, and by the police was necessary to obtain action and
results. Remember that this was also the theory of Fénelon; he
described the streets, factories, and all progress as being due to
the police.
In the eighteenth
century, it was discovered that even in the absence of the
police—even if no one gives orders—people naturally act in such a
way that the fruits of production finally appear. Adam Smith
[1723–1790] cited the shoemaker. The shoemaker doesn’t make shoes
from an altruistic motive; the shoemaker provides us with shoes
because of his own selfish interest. Shoemakers produce shoes
because they want the products of others which they can get in
exchange for shoes. Every man, in serving himself, of necessity
serves the interest of others. The “king” doesn’t have to issue
orders. Action is brought about, therefore, by the autonomous
actions of people in the market.
The eighteenth
century’s discoveries with respect to social problems were closely
connected with, and inseparable from, the political changes brought
about during that period—the substitution of representative for
autocratic government, free trade for protection, the tendency
toward international peace instead of aggressiveness, the abolition
of serfdom and slavery, and so on. The new political philosophy also
led to substituting liberty for monarchism and absolutism. And it
brought about changes in industrial life and social life which
altered the fact of the world in a very short time. This
transformation is customarily called the Industrial Revolution. And
this “revolution” resulted in changes in the whole structure of the
world, populations multiplied, the average length of life expectancy
increased, and standards of living rose.
With specific reference to the population, it is four
times greater today [1951] than it was more than 250 years ago. If
Asia
and
Africa
are eliminated, the growth
is even more startling.
Great Britain
,
Germany
, and
Italy
,
three countries that were completely settled and where every bit of
land was already in use by 1800, found room to support 107 million
more people by 1925. (This seems all the more remarkable when
compared with the
United States
—many times the area of these three countries—which increased its
population by only 109 million in that same period.) At the same
time, the standard of living was raised everywhere as a result of
the Industrial Revolution by the introduction of mass production.
Of course, there are still unsatisfactory conditions;
there are still situations that can be improved. To this, the new
philosophy responds:
There is only one way to improve
the standard of living of the population—increase
capital accumulation as against the increase in population. Increase
the amount of capital invested per capita.
Although this new
doctrine of economic theory was true, it was unpopular for many
reasons with certain groups—monarchs, despots, and nobles—because it
endangered their vested interests. In the nineteenth and twentieth
centuries, these opponents of this eighteenth-century philosophy
developed a number of objections, epistemological objections which
attacked the basic foundation of the new philosophy and raised many
very serious and important problems. Their attack was more or less a
philosophical attack, directed at the epistemological foundations of
the new science. Almost all their criticism was motivated by
political bias; it was not brought forth by searchers for the truth.
However, this does not alter the fact that we should study seriously
the objections to the various truths of the eighteenth century—sound
philosophy and economics— without reference to the motives of those
who bring them forth. Some were well founded.
During the last hundred years, opposition to sound
economics has arisen. This is a very serious matter. The objections
raised have been used as arguments against the whole bourgeois
civilization. These objections cannot be simply called “ridiculous”
and dismissed. They must be studied and critically analyzed. As far
as the political problem is concerned, some people who supported
sound economics did so in order to justify, or to defend, the
bourgeois civilization. But these defenders didn’t know the whole
story. They limited their fighting to a very small territory,
similar to the situation today in
Korea
where one army is forbidden to attack the strongholds of the other
army.[xxxii]
In the intellectual struggle, the same situation exists; the
defenders are fighting without attacking the real foundation of
their adversaries. We must not be content to deal with the external
paraphernalia of a doctrine; we must attack the basic philosophical
problem.
The distinction
between “left” and “right” in politics is absolutely worthless. This
distinction has been inadequate from the very beginning and has
brought about a lot of misunderstanding. Even objections to the
basic philosophy are classified from that point of view.
Auguste Comte
[1798–1857] was one of the most influential philosophers of the
nineteenth century, and probably one of the most influential men of
the last hundred years. In my own private opinion, he was a lunatic
as well. Although the ideas he expounded were not even his own, we
must deal with his writings because he was influential and
especially because he was hostile to the Christian church. He
invented his own church, with its own holidays. He advocated “real
freedom,” more freedom, he said, than was offered by the
bourgeoisie. According to his books, he had no use for metaphysics,
for freedom of science, for freedom of the press, or for freedom of
thought. All these were very important in the past because they gave
him the opportunity to write his books, but in the future there
would be no need for such freedom because his books had already been
written. So the police must repress these freedoms.
This opposition to
freedom, the Marxian attitude, is typical of those on the “left” or
“progressive” side. People are surprised to learn that the so-called
“liberals” are not in favor of freedom. Georg Wilhelm Friedrich
Hegel [1770–1831], the famous German philosopher, gave rise to two
schools—the “left” Hegelians and the “right” Hegelians. Karl Marx
[1818–1883] was the most important of the “left” Hegelians. The
Nazis came from the “right” Hegelians.
The problem is to study basic philosophy. One good
question is why have the Marxists been to a certain extent familiar
with the great philosophical struggle, while the defenders of
freedom were not? The failure of the defenders of freedom to
recognize the basic philosophical issue explains why they have not
been successful. We must first understand the basis for the
disagreement; if we do, then the answers will come. We will now
proceed to the objections that have been raised to the eighteenth
century philosophy of freedom.
Top of Page
2ND LECTURE
Pseudo-Science and Historical Understanding
IN
THE ENGLISH LANGUAGE, the word “science” is usually applied only to
the natural sciences. There is no doubt that there are fundamental
differences between the natural sciences and the science of human
action, sometimes called social science or history. Among these
fundamental differences is the way in which knowledge is acquired.
In the natural sciences knowledge comes from experiment; a fact is
something experimentally established. Natural scientists, in
contrast to students of human action, are in a position of being
able to control changes. They can isolate the various factors
involved, as in a laboratory experiment, and observe changes when
one factor is changed. The theory of a natural science must conform
to these experiments—they must never contradict such an established
fact. Should they contradict such a fact, a new explanation must be
sought. In the field of human action, we are never in a position of
being able to control experiments. We can never talk of facts in the
field of social sciences in the same sense in which we refer to
facts in the natural sciences. Experience in the field of human
action is complicated, produced by the cooperation of various
factors, all effecting change.
In the field of nature
we have no knowledge of final causes. We do not know the ends for
which some “power” is striving. Some persons have attempted to
explain the universe as if it had been intended for the use of man.
But questions can then be raised: What is the value to man of flies,
for instance, or of germs? In the natural sciences we know nothing
but experience. We are familiar with certain phenomena and on the
basis of experiments a science of mechanics has been developed. But
we do not know what electricity is. We don’t know why things happen
the way they do; we don’t ask. And if we do ask, we don’t receive an
answer. To say we know the answer implies that we have ideas of
“God.” To assert that we can find the reason implies that we have
certain “God-like” characteristics.
There is always a point beyond which the human mind
can go—a realm into which inquiry brings no more information.
Through the years this frontier has been pushed farther and farther
back. Natural forces have been traced back beyond what was formerly
considered “ultimate” human knowledge. But human knowledge must
always stop at some
“ultimate given.” The French physiologist Claude Bernard [1813–1878]
said in his book on experimental science that life itself is
something “ultimately given”; biology can only establish the fact
that there is such a phenomenon as life, but it can say nothing more
about it. The situation is different in the field of history or of
human action. There we can trace our knowledge back to something
behind the action; we can trace it back to the motive. Human actions
imply that men are aiming at definite goals. The “ultimate given” in
the field of human action is the point at which an individual or a
group of individuals, inspired by definite judgments of value and by
definite ideas as to the procedures to be applied to attain a chosen
end, acted. This “ultimate given” is
individuality.
Being human we know
something about human evaluations, doctrines, and theories
concerning the methods used to reach these ends. We know there is
some purpose behind the various moves of individuals. We know there
is conscious action on the part of each person. We know there is a
sense, a reason. We can establish that there are definite judgments
of value, definite ends aimed at, and definite means applied in the
attempt to gain these ends. For example a stranger, dropped suddenly
into a primitive tribe, although ignorant of the language, can
nevertheless interpret the actions of the people about him to some
extent, the ends toward which they are working, and the means used
to attain the ends. Through logic he interprets their running around
building fires and putting objects in kettles as preparing food for
dinner.
Dealing with judgments of value and methods is not
peculiar to the science of human action. The logic of the scientist,
the brainwork, is no different from the logic practiced by everybody
in his daily life. The tools are the same. The aim is not peculiar
to social scientists. Even a child crying and screaming has a motive
and is acting to get something he wants. Businessmen also act to get
things they want. They understand the science of human action and in
dealing with their fellowmen they act on that understanding every
day, especially in planning for the future. This epistemological
interpretation of the experience of understanding is not the
invention of a new method. It is only the discovery of knowledge
everybody has been using since time began. Economist Philip H.
Wicksteed [1844–1927], who published
The Common Sense of Political
Economy, chose for his
motto a quotation from Goethe:
Ein jeder lebt’s, nicht vielen
ist’s bekannt. (“We
are all doing it; very few of us understand what we are doing.”)
According to the French philosopher Henri Bergson
[1859–1941], understanding,
l’intelligence sympathique,
is the basis of the
historical sciences. The historian collects his materials to assist
his interpretation just as a policeman seeks the facts to enable him
to reach a decision in court. The historian, the judge, the
entrepreneur, all begin work when they have collected as much
information as possible.
Auguste Comte, who
contributed nothing to the development of the natural sciences,
described what he believed to be the task of all sciences: he said
that to be able to forecast and to act it was necessary to know. The
natural sciences give us definite methods for accomplishing this.
With the aid of the various branches of physics, chemistry, and so
on, mechanics are able to design buildings and machines and to
forecast the results of their operations. If a bridge collapses, it
will be recognized that an error was made. In human action, no such
definite error may be recognized, and this Comte considered a
failing.
Auguste Comte
considered history to be non-scientific and consequently valueless.
In his mind, there was a certain hierarchy of the various sciences.
According to him, scientific study began with the simplest science
and progressed to the more complicated; the most complicated science
was still to be developed. Comte said history was the raw material
out of which this complicated study was to develop. This new study
was to be a science of laws, equivalent to the laws of mechanics
developed by scientists. He called this new science “sociology.” His
new word “sociology,” has had enormous success; people in all parts
of the world now study and write about sociology.
Comte knew very well
that a general science of human action had been developed during the
previous hundred years—the science of economics, political economy.
But Comte didn’t like its conclusions; he wasn’t in a position to
refute them, nor to refute the basic laws from which they were
derived. So he ignored them. This hostility or ignorance was also
displayed by the sociologists who followed Comte.
Comte had in mind the development of scientific laws.
He blamed history for dealing only with individual instances, with
events that happened in a definite period of history and in a
specific geographical environment. History did not deal with things
done by men in general, Comte said, but with things done by
individuals. But sociologists have not done what Comte said they
should; they have not developed general knowledge. What they have
done is just what Comte considered worthless, they have dealt with
individual events and not with generalities. For instance, a
sociological report was published on “Leisure in
Westchester
.” Sociologists have also studied
juvenile delinquency, methods of punishment, forms of property, and
so on. They have written an enormous amount of material about the
customs of primitive people. True, this literature does not deal
with kings or wars; it deals principally with the “common man.” But
still it doesn’t deal with scientific laws; it deals with historical
facts, with historical investigations of what happened at one spot
at a certain time. Such sociological studies are valuable, however,
precisely because
they deal with
historical investigations, investigations of various aspects of
human everyday life often neglected by other historians. Comte’s
program is self-contradictory
because no general laws can be
determined from the study of history.
Observations of history are always
complex phenomena, interconnected in such a way that it is
impossible to assign to specific causes, with unquestioned accuracy,
a certain part of the final result. Therefore, the method of the
historian has nothing in common with the methods of the natural
scientist.
The program of Auguste
Comte to develop scientific laws from history has never been
realized. So-called “sociology” is either history or psychology. By
psychology I do not mean the natural sciences of perception. I mean
the literary psychology described by the philosopher George
Santayana [1863–1952] as the science of the understanding of
historical facts, human evaluations dealing with human strivings.
Max Weber [1864–1920] called himself a sociologist,
but he was a great historian. His book
Gesammelte Aufsätze zur
Religionssoziologie
(Sociology of the Great Religions) deals in the first part, “The
Protestant Ethic and the Spirit of Capitalism,” with the origin of
capitalism. He attributed the development of capitalism to Calvinism
and he wrote very interestingly about it. But whether his theory can
be logically supported is another question.
One essay on “the
town”—which has not been translated into English[xxxiii]—aimed
at treating the city or town as such, at trying to give ideas about
the town in general. He was very explicit in one regard, however,
namely in maintaining that this approach was more valuable than
dealing with the history of one town at a specific time. As a matter
of fact, the situation may be the very opposite; it may be that the
more general historical information is, the less material of value
it contains.
With respect to the
future, we must form certain opinions about the understanding of
future events. The statesman, the entrepreneur, and, to a certain
extent, everyone is in the same position. Each of us must deal with
uncertain future conditions that cannot be anticipated. The
statesman, the politician, the entrepreneur, and so on, are, so to
speak, “historians of the future.”
There exist in nature
constant quantitative relationships—specific weights, and so on,
which may be established in the laboratory. Thus we are in a
position to measure and assign quantities of magnitudes to various
physical objects. With the advance of the natural sciences, their
study has become more and more quantitative—viz., the development of
quantitative from qualitative chemistry. As Comte said, “Science is
measurement.”
In the field of human
action, however, especially in the field of economics, there are no
such constant relationships between magnitudes. Opinions to the
contrary have been maintained, however, and even today many people
fail to see that accurate quantitative explanations in the field of
economics are impossible. In the field of human action, we can make
explanations only with specific reference to individual cases.
Take the French
Revolution, for instance. Historians search for explanations of the
factors which brought it about. Many factors cooperated. They assign
values to each factor—the financial situation, the queen, her
influence on the weak king, and so on. All may be suggested as
contributing. Through the use of mental tools, historians attempt to
understand the several factors and to assign to each a definite
relevance. But how much each of the various factors influenced the
outcome cannot be answered precisely.
In the natural
sciences, the establishment of experimental facts does not depend on
the judgment of individuals. Nor on the idiosyncrasies, or
individuality, of the specific scientist. A judgment in the field of
human action is colored by the personality of the man doing the
understanding and offering the explanation. I do not speak of biased
persons, nor of those who are politically partial, nor of persons
who attempt to falsify facts. I refer only to those who are
personally sincere. I do not refer to differences due to
developments in other sciences that affect historical facts. I do
not refer to changes in knowledge which affect historical
interpretations. Nor am I concerned with differences influencing men
due to scientific, philosophical, or theological points of view. I
am dealing only with how two historians, who agree in every other
regard, may nevertheless have different opinions, for instance, as
to the relevance of the factors which brought about the French
Revolution. The same unanimity will not be attained in the field of
human action as there will be, for instance, with respect to the
atomic weight of a certain metal. And with regard to the
understanding of the future operations of an entrepreneur or a
politician, only later events will prove whether certain
prognostications based on their evaluations were, or were not,
correct.
There are two functions involved in understanding: to
establish the values, the judgments of people, their aims, their
goals; and to establish the methods which they use to attain their
ends. The relevance of the various factors and the way in which they
influence results can only be matters of value judgments. In a
discussion of the Crusades, for instance, it would appear that the
principal causes were religious. But there were other causes. For
example,
Venice
profited by
establishing her commercial supremacy. It is the historian’s task to
decide the relevance of the various factors involved in a course of
events.
The historical school
of economics wanted to apply to economics the same general rules
that Comte aimed at in sociology. There were people who recommended
substituting something else for history—a science of laws derived
from experience in the same way physics acquires knowledge in the
laboratory. It was also held that the historical method was the only
method for dealing with problems in the field of human action.
In the late eighteenth century, some reformers wanted
to revise the existing system of laws. They pointed to the lack of
success and shortcomings of the existing system. They wanted
government to substitute new codes for old laws. They recommended
reforms in conformity with “natural law.” The idea developed that
laws cannot be written, that they originate in the nature of
individuals. This theory was personified by
Britain
’s
Edmund Burke [1729–1797], who took the side of the colonies and who
later became a radical opponent of the French Revolution. In
Germany
, the
Prussian jurist Friedrich Karl von Savigny [1779–1861] was the
advocate of this mode of thinking. With reference to the soul of the
people, this group of reactionaries agreed with the
school
of
Burke
. This program
was executed to some extent, and sometimes very well, in many
European countries—
Prussia
,
France
,
Austria
,
and finally in 1900 in the German Reich. In time opposition
developed to this desire to write new laws. Yet these groups were
the forerunners of the present-day world.
The school of the
historical method says that if you want to study a problem, you must
study its history. There are no general laws. Historical
investigation is the study of the problem as it exists. One must
first know the facts. To study free trade or protection, you can
only study the history of its development. This is the opposite
approach from that advocated by Comte.
All this is not to
disparage history. To say that history is not theory, nor theory
history, disparages neither history nor theory. It is only necessary
to point out the difference. If a historian studies a problem he
discovers that there are certain trends in history that prevailed in
the past. But nothing can be said as to the future.
Men are individuals
and, therefore, unpredictable. Mathematical laws of probability tell
us nothing about any specific case. Nor does mass psychology tell us
anything but that crowds are made up of individuals. They are not
homogeneous masses. As a result of the study of masses of people and
crowds it has been learned that a small change can bring about
important and far-reaching results. For example, if someone yells
“Fire!” in a crowded hall, the results are different from what they
would have been in a small group. Also in a crowd, the prestige of
the police and the threat of the penal code and of the penal courts
are less powerful. But if we can’t deal with individuals, we can’t
deal with masses.
If a historian establishes that a trend existed, it
doesn’t mean that the trend is good or bad. The establishment of a
trend and its evaluation are two different things. Some historians
have said that what is in agreement with the trends of evolution is
“good,” even moral. But the fact that there is an evolutionary trend
today in the
United States
toward more
divorces than formerly, or the fact that there is a trend toward
increased literacy, for instance, doesn’t make either trend “good,”
just because it is evolutionary.
Top of Page
3RD LECTURE
Acting Man and Economics
PEOPLE GENERALLY BELIEVE that economics is of interest only to
businessmen, bankers, and the like and that there is a separate
economics for every group, segment of society, or country. As
economics is the latest science to have been developed, it is no
wonder that there are many erroneous ideas about the meaning and
content of this branch of knowledge.
It would take hours to
point out how common misunderstandings developed, which writers were
responsible, and how political conditions contributed. It is more
important to enumerate the misunderstandings and discuss the
consequences of their acceptance by the public.
This first
misunderstanding is the belief that economics does not deal with the
way men really live and act, but with a specter created by
economics, a phantom that has no counterpart in real life. The
criticism is made that real man is different from the specter of the
“economic man.”
Once this first
misunderstanding is removed, a second misunderstanding arises—the
belief that economics supposes that people are driven by one
ambition and intention only—to improve their material conditions and
their own well-being. Critics of this belief say that not all men
are egoistic.
A third
misunderstanding is that economics assumes all men to be reasonable,
rational, and guided by reason only, while in fact, the critics
maintain, people may be guided by “irrational” forces.
These three misunderstandings are based on entirely
false assumptions. Economics does not suppose that economic man is
different from what man is in everyday life.
The only
supposition of economics is that there are conditions in the world
with regard to which man is not neutral, and that he wants to change
the situation by purposeful action.
So far as man is neutral, indifferent,
content, he takes no action, he does not act. But when a man
distinguishes between states of various affairs and sees an
opportunity to improve conditions from his point of view, he acts.
