The Book History Conspired to Bury
The Daily Reckoning PRESENTS: Everyone has that one book that “changed your life” – for some it’s Goethe…for others it’s Melville or Brontë…for Lew Rockwell, this book was Ludwig von Mises’ Human Action. Read on…
THE BOOK HISTORY CONSPIRED TO BURY
Everyone interested in ideas has surely had the following experience. You become curious about a certain topic. You start with periodicals, read a bit more deeply become engaged more broadly, and start to buy and check out book after book.
Pretty soon you have a good-sized library developing. You speak the language. You know the players. You apply the ideas to understanding the world. But there are still gaps, and you dig and dig to fill them.
Then one day you run across something completely different: a book that not only incorporates all that you learned so far, but surpasses them all in breadth and depth. You marvel at how much time and energy you might have saved had you run across this earlier. The mind behind the book is so impressive that it makes all the other authors seem like bit players.
What’s more, the author makes available to you something you sought but could never find and didn’t even know existed: a rigorously defended theoretical structure that turns scattered bits of knowledge into a bulletproof edifice of thought.
If the topic in question is economics, the book that puts it all together is Human Action by Ludwig von Mises. What is it like to encounter the book for the first time after years of reading in economics? Imagine yourself in a large mansion that is dark but for the nightlights along the wall. You stumble from switch to switch, feeling your way around. Then someone comes along and throws on a switch that illuminates the whole building, inside and out, including the grounds outside. This is what Human Action does.
It has all the features of the best treatises that came before, such as J.B. Say’s and Frank Fetter’s – a thorough explanation that takes the reader step by step – but goes far beyond them all in providing a massive methodological structure that shows how to go about thinking of economics and its relationship to social and natural science. It offers a theory of theory, a theory itself, applications to the real world, and plenty of historical illustration along the way.
It’s a wonder that the book exists at all, and you can only stand in awe of the mind that created it. But the marvel is even more poignant when you consider the historical context.
Mises had been a famous economist in the early interwar period on the Continent. In 1912, he had written about money and changed the way economists understand the topic.
In 1922, he wrote a book that crushed socialism as a theoretical structure and started a debate that lasted for decades. He had put together a theory of the business cycle that anticipated the cause of the Great Depression and the solution to it.
There had been other books: one on economic reform after World War I, one on liberalism as a political ideology and another on interventionism. There were methodological essays and there was a burgeoning seminar that met regularly.
The big theoretical book had not yet appeared, and not even Mises’s closest associates knew that one was coming. But then tragedy came. Precisely as Mises anticipated, unresolved conflicts left over from the Great War, combined with bad economic policy and a change of ideology, led to the rise of a two competing forms of totalitarianism. Mises was the sworn enemy of both.
Mises had to leave his home. His seminar broke up. Indeed, the whole intellectual firmament that had created the first generation of Misesians was being destroyed. Mises found a position, a sanctuary in Geneva, Switzerland, a country that he knew was most likely to maintain neutrality in the coming war. He left Austria in 1934 and took up residence at the Graduate Institute of International Studies.
He used his time extraordinarily well. Despite all the horrors developing in Europe and around the world, his grand treatise appeared in 1940. It was called Nationalökonomie. It was in German. Think of what you know about history and imagine how well a book on economic science, from a free-market perspective, written in German and published in Geneva, would do if published at the start of one of history’s great calamities. Mises’s book died on the date it was published.
Then Mises left Europe and came to the United States
He had no money. His papers in Austria were confiscated by the German armies; his apartment was ransacked. He was 60 years old and starting over. His spoken English wasn’t great. He had no academic position. But he refused to give in. He forged ahead, and his publishing schedule started anew in the United States, thanks to a friendly editor at Yale University Press and some other disciples in influential positions.
He was asked by Yale to work on a translation of his 1940 work. A daunting task! But he got to work. He not only translated it; he expanded it, strengthening the methodological sections and added inspiring material on the future of economics.
Everyone who has read both Human Action and its German predecessor says that Human Action is even better.
The book was immense: 900 pages. Yale was reluctant to commit to it. Who could believe it would become a publishing sensation? But it did. To read the internal memos among the publisher’s staff – they expressed shock and amazement at the sales – is amusing indeed.
Human Action became the essential thread that wove together the fabric of free-market economics in the postwar period in America. Everyone who made a difference later – Murray Rothbard, Ayn Rand, Henry Hazlitt, Hans Sennholz, and hundreds more – read it and was permanently influenced by it. So large does this book loom that we cannot even imagine how the structure of libertarian ideas would look today without it.
People write often about the postwar emergence of the “conservative movement” (a phrase that I’ve come to loathe). As important as F.A. Hayek, Richard Weaver, Russell Kirk, and all the rest were, it was Mises’s book that saved free-market thought in the United States. But it didn’t stop there. His book became one for the ages.
Even without knowing any of this history, a student can pick up the book today and experience precisely what generations of readers have experienced: that overwhelming sense of intellectual enlightenment, that sense of having found the missing piece that makes the puzzle of the world suddenly come together.
As anyone who knows the book well can report, it stands up to two, three, or even a dozen readings. Each time, you find more in it. Over the years at the Mises Institute, we’ve conducted many reading groups about Human Action. We have taken as little as one week – students are completely exhausted at the end – and as long as a semester. But it is never enough time. The book is not only a complete economics education on its own; it is a supremely fertile ground for extensions, applications, and advancement in every direction.
What is the main contribution of the book? It is the establishment of economics as a science of a special sort: one that investigates the logical implications of the fact of action to elucidate fixed laws of cause and effect. This is important because people tend to make two errors regarding economics.
They believe it is either not a science because it deals with human beings, or it is a science requiring positivist methods that do not account for the irreducibly human ability to choose among economic alternatives. Neither is tenable, but the third option is not generally known: to see the task of economics as discovering, explaining, and applying the economic laws that dictate the limits of the intellectual and political imagination while making full allowance for the reality of individual choice.
I’ll not continue with my explanation here. But I would like to say something about the Scholar’s Edition of Human Action published by the Mises Institute. The idea came to us when we first found some writings from the 1940s in which Mises strongly opposed conscription. The mystery is that Human Action famously defends conscription. Later investigation revealed that it was only the 1963 and 1966 editions in which Mises added his comments on this issue. We looked for other changes between the original edition and those that appeared years later. Much had been left out and much added.
The changes weren’t entirely objectionable, and, in any case, they expressed Mises’s attitudes at the time. But regardless of what you think of later editions, these changes were added in the heat of the political moment, whereas the great merit of the 1949 edition is precisely that he wrote a book for the ages in a time of great political upheaval. His book was light, not heat. Clearly, this original edition needed to be in print, just as anyone would be interested in the first edition of “The Wealth of Nations” or Say’s “Principles.” There is also the issue of citation: the first edition remains the most cited.
So the Scholar’s Edition took the first edition, added a marvelous index that had been published separately in 1954, plus a long introduction explaining the differences among all the editions. We used the best materials available, and spared no expense on the binding.
One final recommendation. If you are reading the book for the first time, and do not yet have the patience for detailed methodological argument, you can begin on page 200, while saving the material you skipped for the end. This is a profitable approach for many people.
for The Daily Reckoning
August 16, 2006
P.S. Mises believed that ideas are our best weapon in the struggle for liberty. In this case, Human Action is our stockpile. It is a towering achievement, a nearly miraculous legacy that this great man left the world. It will continue to be read for many generations, and be widely seen as a great achievement of the 20th century.
To purchase your copy of Human Action, see here:
Today’s thoughts run in several directions at once. We wriggle into them as into a badly made sweater: one arm too long, shoulders too wide, and a hole too small to get our head through. It may not look elegant, but it will be serviceable.
We begin with the short end of the thing:
Thirty-five years ago yesterday, the U.S. government told its foreign creditors to drop dead. It does not dare so say so out loud, but now it is about to say the same thing to the American people…and to foreign holders of U.S. paper, too.
That is what our faith-based global monetary regime has wrought: a massive increase in debts and obligations.
But who will pay it?
We turn to our family hearth for illustration.
“Look, I don’t owe you anything,” was what we heard yesterday at the breakfast table. Jules, back from college, feels he should not be treated like the younger children.
His mother had just given him a long list of chores.
“Well…hold on…we gave you your life,” countered his mother.
“Hey, I didn’t ask you for that; you did it for your own sakes,” Jules replied.
“Well, how about this: we just gave you breakfast. The least you can do is to take the dishes to the kitchen,” his mother said.
“No, you invited me to come here. I really didn’t want to come here for the summer. There’s nothing to do here. You can’t invite me and then force me to work,” Jules noted.
Jules, you will note, is in a weak bargaining position. He does not earn his own way in life. He cannot really say “no” to his parents, without potentially suffering a big drop in his standard of living.
But we rush to add that we have not invited you, dear reader, into our dining room and into our family squabbles to make idle chatter. You probably get enough of that at home. We do it to illuminate our subject: what one generation owes another.
You see, Jules wants to feel independent, a young man…free, white, and over 18. He should be able to do what he pleases, he figures. But he has the U.S. Congress, the Bush administration and the world’s dollar-based monetary system all working against him, hammering out shackles, chains, and leg irons that he and the rest of his generation will have to wear their entire lives. The latest report in the Financial Times claims the shackles weigh in at $79 trillion. If there are 100 million people in Jules’ generation, that works out to $790,000 for every one of them.
We played the part of provocateur, as usual, gladly.
“What do you think of that, Jules?” we needled our young man.
“You’ve got to be kidding. I’m not paying it. And I couldn’t pay it even if I wanted to,” came the reply. “And why should I have to work all my life so some old geyser ”
“Jules…” protested his mother.
“Well, so people of your generation can retire to Florida on their fat, happy derrieres? Besides, it’s all smoke and mirrors,” Jules said.
There is, of course, so much smoke it is like the Great Fire of San Francisco, and a fun house full of mirrors, too – in the fed’s Magic Money Show, which is what makes it so entertaining.
Every public spectacle is amusing in its own way, but all have the same basic theatrical elements: each begins with legerdemain or an outright lie, it progresses into a farce, and ends in disaster. The founding lies of the Fed are as follows: that a bank can create money out of thin air…that experts who can’t tell you whether oil is going up or down tomorrow can nevertheless manage an entire economy…and that a committee of bureaucrats can cobble together a short-term lending rate better than the market itself.
This same Fed has now turned the world economy into a financial circus; accountants juggle the books; deficits soar through the air like trapeze artists; the animals in the trading pits roar; the magicians try to convince the rubes that they can’t believe the evidence of their own eyes. And, the clowns at the Fed pretend that they know what they are doing.
The dollar is now so elastic that people think that the budget can be stretched like Lycra tights on a fat woman, and yet somehow it will snap right back into place. They believe they can spend, spend, spend…and daddy will never take the T-bird away.
In the last nine years, $40 trillion worth of new financial commitments has been added to Social Security and Medicare alone, USA Today tells us.
Who is supposed to make them good?
Jules and his friends?
It is as if a man were to go into a restaurant, order a bottle of champagne, enjoy a nice meal and when the bill comes around, say, “My wife had a son last week…save this for him. Just let the interest build up until he’s ready to begin paying it off.”
“Yeah, right,” says Jules.
More news from our currency counselor…
Chuck Butler, reporting from the world-currency trading desk in St. Louis:
“I would have to think that if CPI (by some great imagination) comes in lower than the .4% rise that is forecast, the dollar will get pummeled… Because, that means that the Fed Heads were ‘SO SMART’ in pausing last week, and would give indication that no further hikes are needed…”
For the rest of this story, and for more insights into the currency markets, see today’s issue of The Daily Pfennig
Back to France for more views, opinions and thoughts…
*** First, a note from Addison, reporting from Cannes:
Today, the sun is out, but a healthy wind whips across the sea. Waves are crashing on the shore. Still, L’Ondine, the restaurant at which we’re dining, is at full capacity, yellow awnings flapping loudly in the wind. Dr. Richebächer knew the owners of the restaurant 40 years ago when they were working as a waitress and kitchen boy in a bistro in Wiesbaden. “Soon, after they came down here [to Cannes] and made a smashing success of beach-side dining.”
Of course, when conversing with Dr. Richebächer, it doesn’t take long to return to the principal thoughts occupying his mind:
“The level of economic insight and discussion in America is at an unbelievable low… even from the Universities. They have replaced critical analysis with surveys. The Consumer Sentiment Survey published by the University of Michigan is a prime example. When it is published…it moves the market.”
If you read the American press, or watch the financial news channels, you won’t see any discussion of weakness in the economy…the pile up of debt…the impact of hedonics; income “imputations”; “modeling” of employment statistics…or the wealth effect of rising asset prices (including houses) on growing GDP…
“Ja, American complacency will come to an end…”
Historically though, that kind of complacency doesn’t end well – doesn’t it have to be beaten out of a people? Isn’t the crisis usually a political one…concurrent with a lot of violence?
“Not since Hitler, have I seen such complacency and superiority in one society
“I regard the American’s as the Nazis of our time. Ex: The way Israel laid waste to Lebanon and the ‘terrorists’ fight back with bows and arrows. This blitzkrieg mentality was the mentality of the Nazis…
“I regard Americans as a primitive people…only in a primitive society are such things possible.”
At the end of lunch, Dr. Richebächer laid a book on the table: Hayek’s “Money and Interest” with an inscription on the inside, written in German by Hayek himself, made out to Herr Richebächer, signed 1979.
Historical anecdote: The Good Doctor left home when he was 19. He was at dinner with his father, brother and British girlfriend when a German U-boat sank a British ship in a British harbor. This was before the true hostilities began. His father and brother cheered. But Dr. Richebächer was incensed. He pulled the tablecloth out from under the plates, grabbed his girlfriend’s hand and left the house. He never returned to live at his home again…
But, he’s quick to mention that he always had respect for his parents. “I didn’t agree with his opinions,” he says of his father, “but I always respected the man…and the institution of family.”
*** And back to Bill…
“I joined the SKI team,” said a friend in London. “I’m Spending the Kids’ Inheritance.”
Americans now import $1.82 worth of goods and services from overseas for every dollar’s worth they export. What happens to the 82 cents? It has to come from somewhere. “Don’t worry,” say economists, “it comes back to the United States in the form of capital.”
But what is this “capital?” It is bonds and stocks, real estate, and even the nation’s infrastructure. When foreigners invest the “capital” they make from selling things to Americans, what they are really doing is taking over the wealth of the country. They are lending money, buying companies, or taking ownership of valuable property.
In every case, instead of paying interest to themselves or paying dividends to themselves, Jules and his friends will be making payments to foreigners. If we package our roads and tunnels, for example, and sell them to foreign investors – whose pockets have been stuffed with dollars by trade deficits – the next generation will pay the consequences every time they drive over a bridge.
It is all the same to God, of course. He doesn’t care who owns U.S. bridges, businesses and Treasury obligations. But it might matter to Jules and his friends. Their parents are spending their inheritance. The older generation is giving up ownership of future profits and revenues in exchange for cheap goods and services today.
Every generation wants to get something for nothing, especially if they can get it now. Every generation would like an opportunity to spend the next generation’s money. But rarely do these opportunities present themselves. We guess that it is only because of the supple post-1971 financial system that it has been possible at all.
So, enjoy the plastic cup-holder that came all the way from China…in your automobile that was made in Yokohama. Go to your doctor and get some more drugs, courtesy of the U.S. government. And don’t forget to refinance your house with one of those nifty Neg-Am mortgages; as time goes by the principle just gets bigger and bigger. The older you get, the more you owe. But what do you care? Your kids will have plenty of time to pay it off!