In Socialism: An Economic and Sociological Analysis, Ludwig von Mises lays out the case against socialism and its varying forms. In focusing on human persons and their wide-ranging motives, Mises’ methodology set him apart in 1922. Nearly a century later, the majority of mainstream economists still fail to appreciate the degree to which their discipline ought to rest on a more sophisticated view of human nature. Even as we might wish him to deploy a more nuanced morality in service of his arguments, Mises nonetheless helps us see the discipline’s ongoing failure to comprehend the complexity of human action and the inspiration for socialist dreams.
Praxeology and Order
Mises asserted praxeology as the foundation of all the social sciences “resting on the fundamental axiom that individual human beings act, that is, on the primordial fact that individuals engage in conscious actions toward chosen goals.” Therefore for Mises, “(A)ll rational action is in the first place individual action. Only the individual thinks . . . .” and “all rational action is economic.” Economics, and indeed all social science, concerns the analysis of individuals’ choices and preferences, distinct from society. Society is primarily a consequence—not a cause—of our individual reality.
At the most basic level, Marxism reverses the order. The Marxist methodology of dialectical materialism purports to show how society grows and responds under highly constrained economic circumstances, and the way that History itself—and capitalism in particular—moves inexorably toward communism. By contrast, Mises argues that society emerges through the sum of all the individual actions of reasoning human beings, each with their own motives, status, and relative power. In viewing the human person in this manner, Mises established his methodology as individualist—that is, he ranked the work of understanding individual behavior as central to good social science, without negating external factors in forming an understanding.
In a sharp distinction from even contemporary “capitalist economics,” Mises does not confine economic action to that which is profit-driven. By daily experience, we know reactions to price signals in purchasing decisions can be guided by non-economic objectives: buying for someone else’s benefit can be considered a market-based decision with a non-economic end goal (one for which profit is not the sole objective). Not-for-profits can procure goods and services for those in need, which require the price system of profits to enable procurement in the first instance; even as profit is not the end goal, it is essential to the means. Decisions for such charitable work are fully in keeping with economics in a Misesean view, because his account of the human person allows for a much richer assessment than the prevalent economic prism of profit maximizer or “homo economicus.”
An Anthropology for Real People
As contemporary scholar Samuel Gregg writes, the fundamental error of Marxism is anthropological. Method and anthropology are inseparable. By employing a methodology that denies the primacy of agency, Marxist thought fundamentally ignores the source of dignity in each human being: “According to Marx, the political faith of the individual depends on the class to which he belongs,” as Mises pointed out. Because thought is determined by class, we have “a remarkably convenient theory which saves the Marxian the trouble of arguing with them (opponents).” Some contemporary arguments, on race, nationalism, and gender issues, for example, demonstrate the old Marxist logic applied in fields well beyond traditional class analysis. Hoping to better understand the realities of power relations, a few classical liberals are seriously engaging relatively recent theories such as intersectionality, offering an alternative to an appropriated Marxist presupposition. By contrast, Mises elevates the constituent element of every group—the individual—proceeding not to negate a host of influences such as racial constructs or nationality, but to understand them from the vantage point of the person.
While Mises rejects natural law or any attempt to assert a moral basis for the preference of his methodology over that of Marx, his method nevertheless works within the bounds of natural law theory. In Socialism, Mises seeks only to make utilitarian arguments for free markets, but his methodology assumes certain facts about the nature of the human person, giving it a normative component that is anthropological in nature. Mises’s adherence to utilitarianism is perhaps based on a narrow view of natural law as “religious:” The Christian tradition of natural law and the existence of an “autonomous rational morality” identified by Aristotle are distinct, even if complementary in ways he does not quite recognize. Praxeology demands that autonomous moral reality and utilitarianism cannot offer that fully developed moral system. In a way, Socialism’s arguments contain the substance for deeper moral justifications, an endeavor Mises does not set out for himself in the book.
The Kingdom of Ends
Mises states “[a]ll economic activity depends on ends,” which “dominate the economy and alone give it meaning.” Socialism seeks coordination by the state bureaucracy as a replacement to social relations in a condition of economic liberty. Free markets rely on freely set prices, providing the measures by which we determine human needs and wants. Without the profit indicator, the means to morally improve the conditions of oneself and one’s family cannot be undertaken to the mutual benefit of others in systems of free exchange.
Mises’ rejection of socialism is not in contrast to an extreme Randian individualism, but to a just system of social cooperation within societies: “For the Marxists talk glibly about expressing the will of society, without giving the slightest hint how ‘society’ can proceed to will and act.” Mises uses the term “social” without reference to socialism on approximately 1,000 occasions in the book, demonstrating his concern with markets as a social institution for mediating just economic cooperation, and clarifying that it does not merely serve as a setting for profit maximization. Mises does not ignore the validity of action by communities through organs created by individuals in freely chosen collectives, working toward their aims as a group—praxeology helps us understand them as both social and economic activity.
What Socialism is Not
With the contemporary disparaging use of the term socialist in current discourse by some on the Right (whom Mises would strongly oppose), it is important to understand his definition: “The essence of socialism is this: All the means of production are in the exclusive control of the organized community. This and this alone is Socialism. All other definitions are misleading.” For Mises, socialism is all-encompassing, to be achieved for the original Marxist as an historical stage in an inevitable process.
Contemporary American socialism displays the defects of Marxism: rejecting the classical liberal position of the market as a social institution and seeking to use the centralized state for primacy over the individual—even while professing a commitment to liberal individualism on specifically-defined social questions of race and gender. The methodological shortcomings are not the domain of the Left, as evidenced by nationalism’s slide toward national socialism. Mises loathed racism—a social disposition all too easily enabled by the socialist presumption that the collective ought to be the master of individual fate.
Mises explains that “socialist policy uses two methods to accomplish its purposes; the first aims directly at converting society to Socialism. The second aims only indirectly at this conversion by destroying the social order which is based on private ownership.” It is the second form that Mises identifies as more insidious, underhanded, and destructive.
A replacement of ownership with control and a variation on the original idea of class conflict are characteristics of the new socialism. Instead of the state ownership of means of production, it seeks to extract wealth by state control. The tools for control are the myriad of regulatory and legislative options held by the monopoly of state power. Mises alludes to the prospect of some of these phenomena in his day on the issue of small property holders in his chapter “Particular Forms of Socialism.” The “peasant and craftsman” can keep what they have and are fitted into “the machinery of the socialist community in such a way that the production and evaluation of their products will be regulated by the economic administration while their property remains nominally theirs.”
Only a staunch moral argument in favor of markets will combat this, as the appeal of socialist rhetoric rests on its ability to persuade society of its ability to deliver greater welfare to all. A “loss of this conviction would signify the end of socialism.” Mises’ central moral claim is that the public welfare cannot be respected without a methodology that respects all as individuals, and that socialism will inevitably destroy the individual.
Mises matters today because his method enables far more than a utilitarian calculation of the whole in building a just society. His praxeology offers a way to understand every person within our society at a deeper level than the “profit-motive,” and you can pick up Socialism to learn about it.
Reprinted from Law & Liberty
This article, Individualism Rightly Understood, was originally published by the American Institute for Economic Research and appears here with permission. Please support their efforts.