Monetary Calculation as a Tool of Action
In this very short chapter of Human Action, Mises stresses the tremendous significance of economic calculation. It is not simply a habit of businesspeople, but rather a distinct mode of thinking. It is necessary for modern civilization, and the reason for the usefulness of quantitative science. However, Mises underscores the fact that calculation can only work where there is money and where goods of all orders are owned privately.
Robert Murphy has written a study guide for this chapter, available in HTML and PDF. This chapter follows "The Sphere of Economic Calculation."
Comments (3)
"The system of economic calculation in monetary terms is conditioned by certain social institutions. It can operate only in an institutional setting of the division of labor and private ownership of the means of production in which goods and services of all orders are bought and sold against a generally used medium of exchange, i.e., money."
This is extremely important in understanding capitalism. It is not just free markets. Free markets are nothing but the logical outcome of property. Without the institutions behind it, the free market turns into criminal activity.
Published: June 7, 2008 11:21 AM
"The cool-headed reckoner is the stern chastiser of the ecstatic visionary."
the birth of paleo-libertarianism
Published: June 7, 2008 5:12 PM
So "value" is a deeply personal matter, not measurable. Prices based on property are the only means by which to get a history of individual choices (a rough approximation of wants) and a compass for economic coordination. Ok, that is Mises. This brings many questions, here are a couple.
Are the mathematical types, who use fictions as stand-ins for immeasurable value, who seem to be attempting to mirror reality in their modeling, mostly blind to Mises's (and Pierson's?) insight?
Even if I am to agree with Mises that does not mean that math-models are worthless, right? Is it also right to consider them tools for aiding social science, but not social science itself? Or tools that help in entrepreneurship?
Many of these mathematical econ guys are/were super brilliant and ought to be given a much closer examination, it seems. Is there something Mises was missing concerning value etc.?
Published: June 10, 2008 11:05 AM