РефератыИностранный языкFrFree Market Defense Essay Research Paper Ludwigvon

Free Market Defense Essay Research Paper Ludwigvon

Free Market Defense Essay, Research Paper


Ludwig


von Mises: Defender of the Free Market


Ludwig von Misis thoughts on human behavior, socialism, and money and credit


have had a major impact on economic thought. He championed true free markets and


is seen as a defender of liberty. Former President of the United States Ronald


Reagan said ?Ludwig von Mises was one of the greatest economic thinkers in the


history of Western Civilization. Through his seminal works, he rekindled the


flames of liberty. As a wise and kindly mentor, he encourages all who sought to


understand the meaning of freedom. We owe him an incalculable debt?(Mises


Institute). The remainder of this paper will outline the life of Ludwig von


Mises. This will be accomplished by describing the social, political, technical,


and economic environment that influenced his ideas. A description of his major


ideas in economic thought will be presented. Next, the people and ideas that


influenced his approach to economics will be addressed. Finally, the paper will


conclude with an assessment of Ludwig von Mises contributions to economic


thought. Overview of the Life of Ludwig von Mises Ludwig von Misis was born on


September 29, 1881 in Lemberg, Austria. He attended a private elementary school,


the public Akademishe Gymnasium in Vienna from1892 to 1900. In 1900 Mises


entered the University of Vienna. On February 20,1906 he received a Dr. Jur


degree, a Doctor of both Canon and Roman Laws, from the University of Vienna.


When Mises attended the University, it had no separate economics department; the


only way to study economics was through law (Mises Institute). From 1907 to 1914


Mises was employed as an advisor to the Austrian Chamber of Commerce. His first


major thesis, the Theory of Money and Credit was published in 1912. In 1913


Mises was awarded the position of Privatdozent (unsalaried lecturer) at the


University of Vienna (Mises Institute). Mises? academic pursuits were


interrupted from 1914 to 1918 due to World War I. After World War I Mises


returned to the University of Vienna and his position at the Austrian Chamber of


Commerce. His next major thesis, Socialism, came in 1922. In 1934 Mises accepted


a position as Professor of International Economic Relations at the Graduate


Institute of International Studies, in Geneva, Switzerland. Even though he bad


left Vienna to accept this position in Switzerland, Mises did work for the


Austrian Chamber of Commerce on a part-time basis until Hitler’s annexation of


Austria in March 1938 (Mises Institute). On July 6, 1938 Ludwig von Mises


married Margit Sereny in Geneva. Ludwig von Mises immigrated to the United


States in 1940 arriving in New York on August 2. In the United States Mises


taught as a Visiting Professor at the University of New York from 1945 to 1969.


He also traveled to Central and South America giving lectures from 1942 to 1959.


In 1949 Mises published his crowning achievement Human Action. This treatise


summarized his thoughts on economics. Through out the rest of his life Mises


received several distinguished awards. On October 10, 1973 Ludwig von Mises


passed away at St. Vincent Hospital in New York City. Factors Influencing Ludwig


von Mises Ideas The major influence on Ludwig von Mises ideas was the Austrian


school of economic thought. The political and economic events that influenced


Mises included two world wars and an extended worldwide depression. In the


political turmoil after World War I, the main theoretician of the now socialist


Austrian government was Marxist Otto Bauer. Mises had befriended Bauer during


his school years and the two often discussed economics and politics. Mises


explained economics to him night after night, eventually convincing him to back


away from Bolshevik-style policies (Mises Institute). His actions kept Austria


from following to the hyperinflation that the Germans experienced. The


prevailing political climate during this time was Socialism. Mises strongly


opposed Socialism and its prevalence inspired him to write his next great work


Socialism. The Great depression brought about the rise of Keynesian Economics.


Mainstream economics embraced Keynesian economics and as a result Mises theory


of money and credit was pushed into the background as the cause for business


cycles. Political activity in Europe, specifically Hitler?s aggression, drove


Mises from his homeland and then Europe just before World War II. Mises


continued to lecture widely in the United States, Europe and Latin America. He


served as economic advisor to the Foundation for Economic Education (FEE) from


its founding in 1946 until his death. He was appointed a Visiting Professor at


New York University Graduate School of Business Administration in 1945 and


served there until 1969 (FEE). In his life time Mises witnessed the completion


of the industrial revolution in the western world as well as the pervasion of


government intervention into the free market through fiscal policy, based on


Keynesian Economics, and through the institutionalization of central banking.


Ludwig von Misis: Money and Credit, Socialism, and Human Action During his


lifetime of teaching and writing Mises wrote 25 books and more than 250


scholarly articles (Mises Institute). Percy Greaves gives a list of Mises more


prominent books in Mises Made Easier, they include: Human Action (1st edition,


Yale, 1949; 2nd revised edition, Yale, 1963; 3rd revised). edition, Regnery,


1966 Bureaucracy (Yale, 1944; Arlington House, 1969). Omnipotent Government


(Yale, 1944; Arlington House, 1969). Socialism (Yale, 1951; Jonathan Cape,


1969). The Theory of Money and Credit (Yale, 1953; Foundation for Economic


Education, 1971). The Anti-Capitalistic Mentality (Van Nostrand, 1956;


Libertarian Press, 1972). Theory and History (Yale, 1957; Arlington House,


1969). Epistemological Problems of Economics (Van Nostrand, 1960). The Free and


Prosperous Commonwealth (Van Nostrand, 1962). Planning for Freedom (2nd edition,


Libertarian Press, 1962). The Ultimate Foundation of Economic Science (Van


Nostrand, 1962.) The Historical Setting of the Austrian School of Economics


(Arlington House, 1969). According to Allen Dalton, Professor of Economics at


Boise State University, Mises major contributions to economic thought appear in


his three books The Theory of Money and Credit, Socialism, and Human Action. In


his first major work The Theory of Money, Mises argued that just as the price of


any commodity is determined by supply and demand, so is the purchasing power of


money, its "price" (Mises Institute). Money, according to Mises, is


not a measurement of prices: it is a medium whose exchange ratio varies in the


same way, although as a rule not with the same speed and to the same extent, in


which the mutual exchange ratios of the vendible commodities and services vary (Koether).


Mises showed that prices can increase faster or slower than the money supply,


the amount and speed of price increases depending on people’s desire to hold


cash. He also argued that because prices increase only relative to one another,


monetary inflation has the effect of redistributing wealth, from savers and


earners to banks and government and its connected interest groups that receive


the counterfeit money first (Mises Institute). Mises student, Murray Rothbard


summarized Mises ideas concerning the effects of fractional reserve banking and


central banking in his article The Case Against the Fed by stating that

p>

counterfeiting (credit expansion) is inflationary, redistributive, distorts the


economic system, and amounts to stealthy and insidious robbery and expropriation


of all legitimate property owners in society (Rothbard). The business cycles of


booms and busts that monetary inflation causes are even more damaging to


society. When government inflates, it lowers the interest rate below the proper


market level, which is dependent on saving. The artificially low interest rate


misleads businesses into making uneconomic speculative investments and creates


an inflationary boom. When the credit expansion slows or stops, investment


errors are revealed bankruptcies and unemployment result. Central banks like the


Federal Reserve will ultimately create the business cycle. Mises argued that


because money originated as a market commodity, not by government edict or


social contract, it should be returned to the market. Banking should be treated


as any other industry in a market economy, and be subject to competition. The


currency should be tied to gold, its originating commodity, through free


convertibility (Rothbard). Mises book Socialism predicted the downfall of


communism and warned against socialist institutions in government. He states


that socialism could not function in an industrial economy because there would


be no market for the factors of production and therefore no price system to


calculate profit and loss (Rothbard). Therefore planning in a planned economy is


impossible due to the lack of economic calculation. The result of planned


economies is no economy at all but rather a system of ?groping in the


dark?(Koether). Just as important, he showed that mixed economics cannot


function efficiently either. Through taxes, regulation, and spending, government


distorts the price system and the allocation of resources to their most highly


valued uses (Rothbard). Evidence of this pitfall is all around us and is


manifest in the downfall of Russia and China?s moves toward capitalist


economics. Human Action is Ludwig von Mises masterwork. Murray Rothbard


summarized the importance of Human Action in his essay The Essential Ludwig von


Mises with the following statements; ?Human Action is IT; it is economics


whole, developed from sound praxeological axioms, based squarely on analysis of


acting man, the purposive individual as he acts in the real world. It is


economics developed as a deductive discipline, spinning out of logical


implications of the existence of human action. To the present writer, who had


the privilege of reading the book on publication, it was an achievement that


changed the course of his life and ideas. For here was a system of economic


thought that some of us had dreamed of and never thought could be attained: an


economic science, whole and rational, an economics that should have been but


never was. An economics provided by Human Action? (Rothbard). The 900 page


treatise on economics covers topics such as accounting, advertising, banking,


business cycles, bureaucracy, capital, capitalism, charity, competition, debt,


devaluation, economics, education, entreprenuership, equality, exchange rates,


gold standard, government, history, human action, ideology, individualism,


inflation, interest, intervention in markets by government, foreign and domestic


investment, labor unions, laissez faire, land reform, markets, mathematics,


money, monopoly, morality, mortality, praxeology, prices, profits and loss,


public opinion, reason, religion, science, sex, socialism, society, speculation,


statistics, tariffs, taxes, theory, time, underdeveloped nations, unemployment,


value, wages and war (Koether). The most important ideas derived from Human


Action change the very method used to evaluate economics. Mises argues that


economics can not be viewed in specialized terms but rather must be viewed as a


whole system. This method is referred to as praxeology. Mises also argued


against the rising use of mathematics in economics. He states that ?the


fundamental deficiency implied in every quantitative approach to economic


problems consists in the neglect of the fact that there are no constant


relations between what are called economic dimensions. There is neither


constancy nor continuity in the valuations and in the formation of exchange


ratios between various commodities? (Koether). In fact Mises referred to


mathematics in economics as ?worthless mental gymnastics? because they can


not and do not apply to real economic problems. It does not help to think of


prices of production as the intersect of two curves, but it does help to realize


that price is derived through human action (Koether). Many other ideas are put


forth in Human Action but these two are the most prevalent of those that have


not already been discussed. The People and Ideas that Influenced Ludwig von


Mises. The basis for all of Mises writings came from the founder of the Austrian


School of economics, Carl Menger. Menger?s complete theory of marginal utility


and its subjective reasoning that relied on theory. Mises stated that Menger?s


views ?made an economist? out of him because of its methodology, which


stated that economics is the science of individual choice (Mises Institute).


Eugen von Boehm-Bawerk, a student of Menger, taught a young Mises from 1904 to


1914 at the University of Vienna. His views on intervention of the government


and how it reacted to economic law greatly influenced Mises thesis on socialism.


Boehm-Bawerk?s theory on interest and capital and its time preference basis


formed the logic needed to argue the viability of socialism (Spiegel). Mises


thoughts on the business cycle were derived from Ricardian models, Boehm-Bawerk?s


theory on capital and the factors of production, and Knut Wicksell?s ideas


regarding production and the effects the difference between real and nominal


interest rates has on it. Max Weber influenced Mises concerning economics as a


social science, but Menger was probably the major influence here as well.


Assessment of Ludwig von Mises Contributions to Economics The completeness of


Human Action is the most impressive contribution that Ludwig von Mises gave to


economics. The marriage of micro and macroeconomics was accomplished through


Mises theory on money and credit. This was the first time that this had been


accomplished. His argument presented in Socialism has been historically


vindicated and supported by empirical facts. Mises undying views on laissez


faire has been his sticking point with mainstream economics (Spiegel). The


failure of the gold standard and the prevailing existence of central banks are


testaments to this. The biggest triumph of Mises is the methodology used to


study economics. He solidified Menger?s theoretical approach to economic


problems.


Foundation for Economic Education ?Ludwig von Mises? [On-Line] Available


Internet www.fee.org/about/misesbio.html Greaves, Percy L. ?Mises Made


Easier,? 1974, Free Market Press Koether, George ?The Wisdom of Ludwig von


Mises? 1981, The Freeman Ludwig von Mises Institute ?Who is Ludwig von Mises?


[On-Line] Available Internet www.mises.org/mises.asp Ludwig von Mises Institute


?What is Austrian Economics? [On-Line] Available Internet www.mises.org/austian.asp


Ludwig von Mises Institute ?Why Austrian Economics Matters? [On-Line]


Available Internet www.mises.org/why_ae.asp Ludwig von Mises Institute ?An


American Classical Liberalism? [On-Line] Available Internet www.mises.org/classical.asp

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