Ludwig von Mises – A Primer

Not enough people know the name of Ludwig von Mises (1881-1973). I hope my new Primer for the IEA will help change that.

Mises brought new life and insights into the Austrian School of economics, and cultivated many of the leading Austrians today. He developed and systematised the Austrian view that, to understand economics, we must trace it back to the actions and motives of individuals as they make choices. The “aggregates” of the mainstream economists are merely statistical totals. But one total does not affect another: what actually drives things is the specific actions of the individuals who face the specific choices. Different people react differently to events – and the same person may react differently to the same choice at different times. Statistical formulae tell us nothing. To understand economics, we have to understand human values.

Mises applied this insight to a particularly important economic phenomenon, namely money. It is not some lifeless medium of exchange, nor even some objective measure of value, he insisted. It is an economic good like any other – the more of it that people value what it does for them (facilitating exchange), the more they demand (to keep in their wallets or bank accounts), and so the more its price (what we call its purchasing power) rises. Again, the behaviour of money is not mechanical but depends entirely on how individuals value it.

From there, Mises (along with Hayek) explained that booms and busts, like the crash we have just suffered, stem from governments and banks creating too much money and too cheap credit. That makes people feel wealthier and they spend more freely. Encouraged by this and by low interest rates, entrepreneurs invest more in new plant and equipment. But when the money and credit boom subsides, reality reasserts itself, and those investments are exposed as over-optimistic malinvestments that cannot be sustained. Factories are closed, plant scrapped, and workers fired. Only strict limits on the creation of money – such as a gold standard – can prevent such monetary booms and their inevitable, real, human consequences.

Mises also exposed the fact that socialism had no rational way of working out what to invest in, making malinvestment inherent in its system. Under socialism, the means of production are collectively owned, so never bought and sold. There is therefore no way to price them. We cannot know which of the millions of possible production processes are the cheapest – and effort and resources are wasted. The market economy, by contrast, places producers under daily pressure to deliver the highest-valued outputs for the cheapest feasible mix of inputs.

Mises had a wide and lasting influence that persists today. His most illustrious student, F. A. Hayek, went on to win the Nobel Prize in Economics. But he influenced an entire generation of free-market economists and liberal social thinkers. There are institutes named after him in America and Europe. His books are used in colleges across the world. A thinker, plainly, worth knowing more about.

Ludwig von Mises – A Primer can be purchased and downloaded here. See also Bureaucracy by Ludwig von Mises.

11 thoughts on “Ludwig von Mises – A Primer”

  1. Posted 21/04/2010 at 09:50 | Permalink

    The first book on economics that I ever read was ‘Human Action’. The first 200 pages I found hard going; but the next 680 pages more than repaid the effort. Congratulations, Eamonn, on producing a Primer on its author, Ludwig von Mises. He is not the only person whose work has not been sufficiently appreciated in his own lifetime.

  2. Posted 21/04/2010 at 11:40 | Permalink

    […] Economic Affairs, a free-market think-tank based in London, has just published a short book titled Ludwig von Mises — A Primer. the author is Eamonn […]

  3. Posted 21/04/2010 at 12:07 | Permalink

    Thank you very much (I E A)for you great publishings
    Best Regards

  4. Posted 21/04/2010 at 14:50 | Permalink

    Excellent news. Looking forward to getting it.

  5. Posted 21/04/2010 at 14:56 | Permalink

    Who else were you thinking of, David? I think Ted Heath probably thought that was the case about himself.

  6. Posted 21/04/2010 at 16:16 | Permalink

    Jeffrey Tucker of the Ludwig von Mises Institute has published a review of the book:

  7. Posted 21/04/2010 at 16:32 | Permalink

    Another wonderful publication from IEA — congratulations to the Institute and Dr Butler both!

  8. Posted 22/04/2010 at 06:05 | Permalink

    […] Economic Affairs, a free-market think-tank based in London, has just published a short book titled Ludwig von Mises — A Primer. The author is Eamonn […]

  9. Posted 22/04/2010 at 09:52 | Permalink

    […] IEA Blog » Blog Archive » Ludwig von Mises – A Primer […]

  10. Posted 22/04/2010 at 12:37 | Permalink

    If people don’t already use it, I would strongly recomend the American based Ludwig von Mises Institute. There’s a huge volumme of online books there by Austrian Economists such as Mises, Hayek, Garrison, Rothbard. There are also videos and audio files of such thinkers outlining so many things – e.g., Austrian Business Cycle theory. All free.

  11. Posted 10/05/2010 at 08:01 | Permalink

    […] IEA Blog » Blog Archive » Ludwig von Mises – A Primer […]

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