LUDWIG VON MISES ON ECONOMICS, IDEOLOGY, WORLD VIEW AND THE AIM
AND METHOD OF ECONOMICS
March 15, 1998
The purpose of this short note is to describe Ludwig von Mises's distinction between economics, ideology, and world view, as described in his Human Action.(1966) He makes this distinction in order to clarify his view of the goal of economics. This view is exemplified in the following quotes:
It is the task of history to describe the historical conditions which made such a crude doctrine popular.
Economics has another task. It must analyze both Marxian polylogism and the other brands of
polylogism formed after its pattern, and expose their fallacies and contradictions(Mises 1966, p. 75).
It is the task of scientific technology and therapeutics to explode errors in their respective fields. It is
the task of economics to expose erroneous doctrines in the field of social action. But if men do not
follow the advice of science, but cling to fallacious prejudices, these errors are reality and must be
dealt with as such(ibid., p. 93).
The main objective of praxeology and economics is to substitute consistent correct ideologies for the contradictory tenets of popular eclecticism(ibid., p. 185).
According to Mises, economics is a set of logical deductions about"what is" in the sense that the images it constructs must be relevant to the social facts one aims to describe. Ideology goes beyond the study of things as they are. It is "about the ought, i.e., about the ultimate ends which man should aim at in his earthly concerns."(ibid.: 178) Ideology can also be distinguished from the broader concept of a world view, which is
an interpretation of all things, and as a precept for action, an opinion concerning the best means for removing uneasiness as much as possible...Religion, metaphysics, and philosophy aim at providing a world view. They interpret the universe and they advise men how to act."(ibid.: 178)
Ideologies may be of many types. Let us divide them into two classes: (1) asceticism and (2) non-ascetic ideologies. Economics is irrelevant to asceticism. Mises focused on those ideologies that claim to be about the attainment of earthly ends. These "must pay heed to the fact that society is the great means for the attainment of earthly ends."(ibid.: 179, italics added) The term "society," or social cooperation, has a special meaning. It refers to individuals' recognition that they can gain through specialization and the division of labor.(1)
Because the other ideologies are concerned with "earthly ends;" if we want to evaluate them from a logical point of view, we must use economics (ibid.: 182-4). And this means that we must understand why the market economy is conducive to the production of what ordinary people regard as wealth.
Thus, Mises is writing that the economist's task is to evaluate the arguments put forth by what we might call non-ascetic ideologists, i.e., by the ideologists who are concerned with the attainment of earthly ends. For these, "no appeal to any religious or metaphysical dogmas and creeds can invalidate the theorems and theories concerning social cooperation as developed by logically correct praxeological reasoning."(ibid.: 180)
In Mises view, such an aim is in the spirit of the early economists. "In lecturing and writing books, [the early economists] were eager to communicate to their fellow citizens the results of their thinking. They tried to influence public opinion in order to make sound policies prevail in the conduct of civic affairs."(ibid.: 869)
What are these ideologies? In a section of Human Action entitled "World View and Ideology," Mises appears to answer this question by discussing political parties.
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.(ibid., p. 183)
I take this to mean that there are two or three ideologies: liberalism, socialism, and possibly interventionism. This interpretation is consistent with the fact that Mises published books on each of these.(Mises, 1922, 1927, 1940)
An outstanding feature of Mises's view is that, while it is directly concerned with evaluating arguments relating to public policy, it is nevertheless value free. This is because the logic of the arguments in economics is independent of any particular judgment about the effects of a policy.
[The] postulate of Wertfreiheit can easily be satisfied in the field of the aprioristic science -- logic, mathematics, praxeology [of which economics is a branch] -- and in the field of the experimental natural sciences. It is logically not difficult to draw a sharp line between a scientific, unbiased treatment of these disciplines and a treatment distorted by superstition.(ibid., p. 48)
An argument may be logical but irrelevant to the policy proposal that is being evaluated. Although most of Mises's discussion of relevance concerns the task of doing history (e.g., ibid., 57-58), he points out in his section of the "Procedure of Economics" that "the end of science is to know reality." "Therefore, praxeology restricts its inquiries to the study of acting under those conditions and presuppositions which are given in reality."(ibid.: 65) As a result, in the presentation of its results, economics adopts "a form in which aprioristic theory and the interpretation of historical phenomena are intertwined."(ibid.: 66)(2) It follows from this that when one attaches the label "pure theory of choice" to Mises's economics, she ought to mean: "the theory that is implicit in the a priori assumption that human beings act combined with subsidiary assumptions based on the problem in reality with which one aims to deal."(3)
How does the argument that economics is value free square with Mises's strong liberalism in economic affairs? In discussing the procedure of constructing an image of the pure market economy, he writes
It is true that economists have drawn from their investigations the conclusion that the goals which most
people, practically even all people, are intent on attaining by toiling and working and by economic
policy can best be realized where the free market system is not impeded by government decrees. But
this is not a preconceived judgment stemming from an insufficient occupation with the operation of
government interference with business. It is, on the contrary, the result of a careful unbiased scrutiny
of all aspects of intervention.(ibid.: 238)
Thus, the economist's conclusions about the market economy stem not from a normative
judgment but from the study of arguments favoring intervention.
Mises and Welfare Economics
Mises's discussion of welfare economics is limited to a definition of welfare based on a kind of unanimity principle. He discusses an interpretation of welfare that assumes it would probably be accepted " by the immense majority of nonascetic people."(ibid.: 833) He goes on to argue that to the extent that we are able to add content to this idea, its meaning evaporates because of our (i.e., the universal) recognition that the goal of removing "uneasiness as far as possible" can best be achieved through "the social division of labor."(ibid.) In short, if we define welfare economics in terms of individual utility, we are immediately forced to the position that market cooperation is widely recognized as the best means of achieving "welfare." That this reasoning is not followed by so-called welfare economists suggests that they mainly use the term welfare as a smokescreen. The idea of welfare "can be invoked for the justification of every variety of social organization."(ibid.: 834)
There is another reason to avoid welfare economics based on the idea that welfare itself suggests a compromise on the issue of value freedom. Economics, as a logic of choice, is intended to evaluate the arguments of ideologists. It does not search for institutional arrangements to recommend. If it did, it would jeopardize its claim of being value free. The best way to avoid compromising value freedom in the realm of relevance is to choose to study only those problems that one judges to be relevant to evaluating others' arguments.
Although it may appear differently to the uninitiated reader of Human Action, for the most part, Mises stuck to a policy of evaluating the arguments of others rather than presenting specific arguments himself. In general, he discussed problems suggested by non-ascetic ideologists that were either evident in the literature or that might be thought of in order to try to support a particular intervention in the market economy. To enable his book to have the greatest effect along these lines, he could have organized it in a different way. After presenting the theory of the pure market economy and the theory of money and credit, he could have systematically dealt with a series of specific arguments. He could have begun each subsequent section with a specific argument, evaluating it on the basis of logic and relevance. Although there are some chapters in which he takes this approach,(4) he is not sufficiently systematic for the approach to stand out.
Kirzner basically confirms this interpretation, although he does not provide text references. He writes:
For Mises, professional approval by an economist of a specific policy proposal merely means that the economist believes the policy will enhance the fulfillment of the purposes of those interested in the economist's professional opinion...[W]hen one examines Mises's many statements about economic policy...one invariably discovers that his conclusions do not at all reflect his own personal valuations. They reflect only his opinions concerning the degree of success with which others are pursuing their ends...[O]ne may on occasion find language superficially implying that a certain policy is simply wrong or bad. But a careful reading of Mises will support the interpretation we are placing here on his policy pronouncements.(Kirzner 1976: 81-2)
Kirzner also reflects Mises's view when he writes that
in many cases the economist discovers policy conclusions that are applicable to situations in which a wide variety of quite different purposes may be involved...In publishing such a general policy conclusion the economist can hardly be accused of seeking personally out of his own sense of moral worth to promote any specific purposes that may in fact turn out to be served by free exchange.(ibid.: 84)
Notes
1. See Joseph Salerno 1990: 28.
2. This procedure at some length in Gunning 1991: 109-118.
3. Also see Kirzner 1994 on Wertfreiheit in Mises's work.
4. This occurs in part six on the hampered market economy. In his chapter on confiscation and redistribution, for example, he begins by describing the argument favoring these. The same is true in his chapters on syndicalism and corporativism and on welfare. In the other chapters, however, the reader must be patient before being confronted with the specific arguments.
References
Gunning, J. Patrick (1991). "Praxeology, Economics, and Ethical Philosophy." In Ebeling, Richard M., ed., Austrian Economics: Perspectives on the Past and Prospects for the Future. Hillsdale, MI: Hillsdale College Press.
Kirzner, Israel. (1994) "Value-Freedom." In Peter J. Boettke (ed). The Elgar Companion to Austrian Economics. Brookfield, Vermont: Edward Elgar Publishing Company.
Salerno, Joseph T. (1990). "Mises as Social Rationalist." Review of Austrian Economics. 4:
26-54.
von Mises, Ludwig (1981 [1922]). Socialism, An Economic and Sociological Analysis. 3rd
revised edition. Indianapolis: Liberty Classics.
von Mises, Ludwig (1978 [1927]). Liberalism. Kansas City: Sheed, Andrews and McMeel.
von Mises, Ludwig (1988 [1940]). Interventionism: An Economic Analysis. Irvington-on-Hudson, New York: Foundation for Economic Education. Translated by Thomas Francis McManus and Heinrich Bund. Edited by Bettina Bien Greaves.
von Mises, Ludwig.(1966) Human Action: A Treatise on Economics. Chicago: Henry Regnery Company.
Copyright (c) 2001 by James Patrick Gunning
Gunning’s Address
J. Patrick Gunning
Professor of Economics/ College of Business
Feng Chia University
100 Wenhwa Rd, Taichung
Taiwan, R.O.C.
Please send feedback
Email: gunning@fcu.edu.tw