Wednesday, November 18, 2009

A Visit From von Mises

The following is a selection from Ludwig von Mises' Human Action. Here he describes the true relationships between speculators, capitalists, entrepreneur, and landowner. Conventional wisdom would say that all of these categories are at odds with an economy that functions properly (ie, speculators caused the downfall of the market in 2007-present). Ludwig von Mises says otherwise:

"The economic categories we are concerned with refer to purely integrated functions, the ideal types refer to historical events. Living and acting man by necessity combines various functions. He is never merely a consumer. He is in addition either an entrepreneur, landowner, capitalist, or worker, or a person supported by the intake earned by such people. Moreover, the functions of the entrepreneur, the landowner, the capitalist, and the worker are very often combined by the same person."

"Entrepreneur means acting man in regard to the changes occurring in the data of the market. Capitalist and landowner mean acting man in regard to the changes in value and price which, even with all the market data remaining equal, are brought about by the mere passing of time as a consequence of the different valuation of present goods and of future goods. Worker means man in regard to the employment of the factor of production human labor. Thus every function is nicely integrated: the entrepreneur earns profit or suffers loss; the owners of means of production (capital goods or land) earn originary interest; the workers earn wages."


  1. This reminds me of Hazlitt:

    "Each one of us, in brief, has a multiple economic personality. Each one of us is producer, taxpayer, consumer. The policies he advocates depend upon the particular aspect under which he thinks of himself at the moment. For he is sometimes Dr. Jekyll and sometimes Mr. Hyde. As a producer he wants inflation (thinking chiefly of his own services or product); as a consumer he wants price ceilings (thinking chiefly of what he has to pay for the products of others). As a consumer he may advocate or acquiesce in subsidies; as a taxpayer he will resent paying them. Each person is likely to think that he can so manage the political forces that he can benefit from a rise for his own product (while his raw material costs are legally held down) and at the same time benefit as a consumer from price control. But the overwhelming majority will be deceiving themselves. For not only must there be at least as much loss as gain from this political manipulation of prices; there must be a great deal more loss than gain, because price-fixing discourages and disrupts employment and production."

  2. So Mises is saying we are all equal in the eyes of the market, power is evenly distributed, thus economic "justice" is blind. So much for the politician having any intellectual merit in the use of corporate,class, and labor warfare to gain political power. But alas, there is the irony of greed for wealth vs. greed for power.