Theory and History : An Interpretation of Social and Economic Evolution
Like Hayek, Mises moved beyond economics in his later years to address questions regarding the foundation of all social science. But unlike Hayek's attempts, Mises's writings on these matters have received less attention than they deserve.
"Theory and History" (online in PDF) should be required for any student of 20th century ideas.
Some quotes selected (and headlined) by IBS There are quite a few quotes; nevertheless they are not thought to replace the urgent need to read the whole book. I tried to select only abstract statements below, but the book also contains many examples and explications of historical developments. Critiques say the book is difficult to read; admittely, Mises' style is partially polemique and one has to pay attention whether he is expressing his own thoughts or if he is explaining the thoughts of those he criticizes¹ - but this is only a style issue, which the publisher's lector most probably would have corrected for him - if he had such a person. It took me some time to become accustomed to his writing style, but then I started to love this book. The quotes are thought to serve as key-phrase-reminders:
What determines human action?
"[M]an prefers what makes him happier to what makes him less happy, that he
aims at happiness. Happiness-in the purely formal sense in which ethical
theory applies the term-is the only ultimate end, and all other things and
states of affairs sought are merely means to the realization of the supreme
"The motives that guided the thinker are immaterial to appreciating his
The law of association:
"Ricardo's theory of comparative costs, is safe against all criticism... It is much more than merely a theory dealing with the effects of free trade and protection. It is a proposition about the fundamental principles of human cooperation under the division of labor and specialization and the integration of vocational groups, about the origin and further intensification of social bonds between men, and should as such be called the law of association. It is indispensable for understanding the origin of civilization and the course of history. ...
"What makes every specimen of an animal species a deadly foe of every other specimen is the mere fact of their lifeand-death rivalry in their endeavors to snatch a sufficient amount of food. ...
"Only man has the power to escape to some extent
from the rule of this law by intentional cooperation."
-- p28/29 and 38/39
Marxism sold the liquidation of dissenters under the label of "science":
"Marxism is a revolutionary doctrine. It expressly declares that the design of
the prime mover will be accomplished by civil war. It implies that ultimately
in the battles of these campaigns the just cause, that is, the cause of progress,
must conquer. Then all conflicts concerning judgments of value will
disappear. The liquidation of all dissenters will establish the undisputed
supremacy of the absolute eternal values.
This formula for the solution of conflicts of value judgments is certainly not new. It is a device known and practiced from time immemorial. Kill the infidels! Burn the heretics! What is new is merely the fact that today it is sold to the public under the label of science."
Collectivist have only punishment as incentive:
"A system of production in which the only incentive to work is the fear of punishment cannot last. It was this fact that made slavery disappear as a system of managing production. ...
"They ultimately recommend the use of violence and pitiless annihilation of all
those whom they condemn as heretics. Collectivism is a doctrine of war,
intolerance, and persecution. If any of the collectivist creeds should succeed
in its endeavors, all people but the great dictator would be deprived of their
essential human quality. They would become mere soulless pawns in the
hands of a monster."
When the rule of the majority is tyranny:
"Socialism is praised as the only fair variety of society's economic organization. All socialists, Marxians as well as non-Marxians, advocate socialism as the only system consonant with a scale of arbitrarily established absolute values. These values, they claim, are the only values that are valid for all decent people, foremost among them the workers, the majority in a modern industrial society. They are considered absolute because they are supported by the majority - and the majority is always right. ...
[T]yranny was often, or even regularly, supported by the masses and was
in this sense popular government."
The truth about the free-will:
"[W]e do not know anything about the mental process which produces within a
human being the thoughts that respond to the state of his physical and
This cognition is the grain of truth in the free-will doctrine."
Churches opposed freedom:
"[I]n most of the European and Latin American countries Christian
churches cooperated, at least to some extent, with the forces that opposed
representative government and all institutions making for freedom."
Search for truth:
"In grasping the laws of logic by aprioristic thinking, the mind
acquires correct knowledge of reality. There is no road to truth but that
provided by the study of logic."
Marx's misrepresentation of capitalism:
"Incidentally we have to establish the fact that in capitalistic countries the standard of living of the wage earners has improved in an unprecedented and undreamt-of way since the publication of the Communist Manifesto and the first volume of Das Kapital. Marx misrepresented the operation of the capitalist system in every respect.
Marx failed to take into account the fact that the evolution of big
business units does not necessarily involve the concentration of wealth in a few hands."
"Capitalism is essentially mass production to fill the needs of the masses. But
Marx always labored under the deceptive conception that the workers are
toiling for the sole benefit of an upper class of idle parasites. He did not see
that the workers themselves consume by far the greater part of all the
consumers' goods turned out. The millionaires consume an almost negligible
part of what is called the national product."
Did socialists invent nylons?
"In his capacity as buyer, the wage earner is the customer who is "always right." But Marx declares that the bourgeoisie [= commercants = traders] "is incompetent to assure an existence to its slave within his slavery."
"As the workers sink deeper and deeper with the
progress of capitalism, as their misery, oppression, slavery, and degradation
increase, they are driven to revolt, and their rebellion establishes socialism.
The whole chain of this reasoning is exploded by the establishment of the
fact that the progress of capitalism does not pauperize the wage earners
increasingly but on the contrary improves their standard of living. Why
should the masses be inevitably driven to revolt when they get more and
better food, housing and clothing, cars and refrigerators, radio and television
sets, nylon and other synthetic products?"
"But Marxists, anxious to avoid dealing with the economic
problems of a socialist commonwealth, did nothing to demonstrate the
superiority of socialism over capitalism apart from the circular reasoning
that runs: Socialism is bound to come as the next stage of historical evolution."
Did the two fathers of socialism practice what they taught?
"The intellectual fathers of socialism were members of the intelligentsia,
scions of the "bourgeoisie."
Marx himself was the son of a well-to-do lawyer. He attended a German Gymnasium, the school all Marxians and other socialists denounce as the main offshoot of the bourgeois system of education, and his family supported him through all the years of his studies; he did not work his way through the university. He married the daughter of a member of the German nobility; his brother-in-law was Prussian minister of the interior and as such head of the Prussian police. In his household served a maid, Helene Demuth, who never married and who followed the Marx menage in all its shifts of residence, the perfect model of the exploited slavery whose frustration and stunted sex life have been repeatedly depicted in the German "social" novel.
"Friedrich Engels was the son of a wealthy manufacturer and himself a
manufacturer; he refused to marry his mistress Mary because she was
uneducated and of "low" descent; he enjoyed the amusements of the
British gentry such as riding to hounds."
Why giving to each according to his needs will never work:
"Marx told us, society will give to each according to his needs? However, the socialists failed entirely in attempts to prove their case.
"... no system of society's economic organization could
create a state of abundance in which to everybody could
be given according to his needs; that the recurrence of periods of economic depressions is not inherent
in the very operation of an unhampered market economy but, on the contrary, the necessary outcome of government's
interfering with business with the spurious aim of lowering the rate of
interest and making business boom by inflation and credit expansion."
Does the following sound like the expropriation of the expropriators:***
"[the Marxians failed to see, that] ... those who are already wealthy capitalists and
entrepreneurs, are in their capacity as bourgeois not selfishly interested in
the preservation of laissez faire. Under laissez faire their eminent position is
daily threatened anew by the ambitions of impecunious newcomers. Laws
that put obstacles in the way of talented upstarts are detrimental to the
interests of the consumers but they protect those who have already
established their position in business against the competition of intruders. In
making it more difficult for a businessman to reap profit and in taxing away
the greater part of the profits made, they prevent the accumulation of capital
by newcomers and thus remove the inducement that impels old firms toward
the utmost exertion in serving the customers."
Will history come to an end?
"It is possible that in a few years all nations will have adopted the system of
all-round planning and totalitarian regimentation. The number of opponents
is very small, and their direct political influence almost nil. But even a
victory of planning will not mean the end of history. Atrocious wars among
the candidates for the supreme office will break out. Totalitarianism may
wipe out civilization, even the whole of the human race. Then, of course,
history will have come to its end too."
Desirablity in welfare:
"... the essential error of economics consists in its assumption that man is
invariably egoistic and aims exclusively at material well-being.
"Bohm-Bawerk already in his first contribution to the theory of value, and then later again and again, explicitly emphasized that the term "welfare"* as he uses it in the exposition of the theory of value does not refer only to concerns commonly called egoistic but comprehends everything that appears to an individual as desirable and worthy of being desirable**."
Are we producing for use or for profit?
"Once production for use replaces production for profit,
the categories of cost and profit will become meaningless."****
-- p208 [italics are mine]
Learning from history: disastruous effects of Roman's currency debasement:
"Economists, they say,believe that it would have been possible to improve the material conditions of earlier ages if only people had been familiar with the theories of modern economics. Now, there can be no doubt that the conditions of the Roman Empire would have been considerably affected if the emperors had not resorted to currency debasement and had not adapted a policy of price ceilings.
Why Asian did not economically develop:
... "the mass penury in Asia was caused by the fact that the
despotic governments nipped in the bud all endeavors to accumulate capital.
The Asiatics, unlike the Western Europeans, did not develop a legal and
constitutional system which would have provided the opportunity for largescale
capital accumulation. And the public, actuated by the old fallacy that a
businessman's wealth is the cause of other people's poverty, applauded
whenever rulers confiscated the holdings of successful merchants."
"... to some nations the practices of capitalism appear so repulsive that they will
never adopt them. If there are such peoples, they will forever remain poor.
There is but one road that leads toward prosperity and freedom. ...
[It is a] indisputable fact that no people ever raised itself to a somewhat
satisfactory state of welfare and civilization without the institution of private
ownership of the means of production."
Are ruins the necessary fate of our civilization?
"Next to the ruins of marvelous structures the progeny of their builders live in poverty and
ignorance. The cultural achievements of their forefathers, their philosophy,
technology, and often even their language have fallen into oblivion, and the
people have relapsed into barbarism. ... We realize that our civilization too is
vulnerable. ... Bad policies can disintegrate our civilization as
they have destroyed many other civilizations. But neither reason nor
experience warrants the assumption that we cannot avoid choosing bad
policies and thereby wrecking our civilization. ... Within the body
of animals and plants forces are operating that are bound to disintegrate it
eventually. No such forces could be discovered in the "body" of a
civilization which would not be the outcome of its particular ideologies."
Refutation of Oswald Spengler and Arnold J. Toynbee:
"There is no doubt that both Spengler ["Decline of the West"] and Toynbee ["Study of History"]
were prompted by the widespread disparagement of capitalism.
Spengler's motive clearly was to prognosticate the inevitable
breakdown of our civilization. Although unaffected by the chiliastic
prophecies of the Marxians, he was himself a socialist and entirely under the
sway of the socialists' vilification of the market economy. He was judicious
enough to see the disastrous implications of the policies of the German
Marxians. But, lacking any economic knowledge and even full of contempt
for economics, he came to the conclusion that our civilization has to choose
between two evils each of which is bound to destroy it. The doctrines of
both Spengler and Toynbee show clearly the poor results engendered by
neglect of economics in any treatment of human concerns.
True, Western civilization is decadent. But its decadence consists precisely
in the endorsement of the anti-capitalistic creed."
"Mr. Toynbee is inconsistent enough not to deprive us entirely of any hope
for the survival of our civilization. [...] Having taken pains to show
that sixteen civilizations have perished already and nine others are at the
point of death, he expresses a vague optimism concerning the future of the
"Few people have the courage to fight a popular movement openly, and radical nationalism is
today, next to socialism, the most popular ideology. Nobody wants to risk
being branded an enemy of his nation."
Is no business better than big business?
"From the point of view of people who prefer more and better merchandise to a smaller and poorer supply the ideal system would consist in the highest possible concentration of the production of each specialty. ...
"If the United States had gone as far as Austria did in its fight against big business, the average American would not be much better off than the average Austrian. ...
"What fun shoemaking was in the days of Hans Sachs and the Meistersinger! No need to analyze critically such romantic dreams. But how many people went barefoot in those days? ...
"If the present American methods of taxing incomes and estates had been adopted fifty years ago, most of those new things which no American would like to do without today would not have been developed at all or, if they had, would have been inaccessible to the greater part of the nation. ...
"It is certainly possible to stop the further progress of capitalism or even to
return to conditions in which small business and more primitive methods of
production prevail. A police apparatus organized after the pattern of the
Soviet constabulary can achieve many things. The question is only whether
the nations that have built modern civilization will be ready to pay the price."
The selfish individual:
... the collectivist doctrines look upon the individual merely as a
refractory rebel. This sinful wretch has the impudence to give preference to
his petty selfish interests as against the sublime interests of the great god
"For what Marx aimed at was to abolish any sphere of the individual's
initiative action by transferring the control of all economic activities to the
social apparatus of compulsion and repression which is commonly called
state or government. The hoax did not fail to beguile lots of people. Even
today there are still dupes who think that there is a difference between state
socialism and other types of socialism. ... The collectivist philosophy denies that there are such things as individuals
and actions of individuals."
Whom does the term market economy serve?
"The champions of the social sciences invented and popularized the terminology
that characterizes the market economy [...] and reserve the term "plan" for the design
of an agency which, supported by or identical with the government's police power,
prevents all citizens from realizing their own plans and designs."
The Realm (Reich) of Ideas:
"Thoughts and ideas are not phantoms. They are real things. Although intangible and immaterial, they are factors in bringing about changes in the realm of tangible and material things. ... About its birth we know only that it was engendered by an individual. We cannot trace its history further back. ...
"[Natural sciences] can deal only with objects that affect or modify sensuous intuition. But ideas and thoughts do not directly affect sensation. What characterizes them is meaning - and for the cognition of meaning the methods of the natural sciences are inappropriate. ...
"One does not serve the interests of a man who wants a new coat by giving him a pair of shoes ... It is ideas that are responsible for the fact that the interests of people are disparate.***** ...
"The genuine history of mankind is the history of ideas. It is ideas that distinguish man from all other beings. Ideas engender social institutions, political changes, technological methods of production, and all that is called economic conditions.
"All that can be said about ideas is that they came to pass.
"Nothing demonstrates more emphatically the temporal limitations on human planning than the venerable ruins scattered about the surface of the earth. Ideas live longer than walls and other material artifacts. We still enjoy the masterpieces of the poetry and philosophy of ancient India and Greece. But they do not mean for us what they meant to their authors. We may wonder whether Plato and Aristotle would have approved of the use later ages have made of their thoughts. ...
"Thus ideas are the main theme of the study of history. Ideas are not an invariable stock that existed from the very beginning of things and that does not change. Every idea originated at a definite point of time and space in the head of an individual. ... The genesis of every new idea is an innovation; it adds something new and unheard of before to the course of world affairs. ... The essence of civilization is ideas. ...
"Ideas must not be classified without regard to the soundness of their content. ...
"No mass phenomenon can be adequately treated without analyzing the ideas implied. And no new ideas spring from the mythical mind of the masses.
"[Individualism] maintains that ideas, the good
ones as well as the bad, originate in the mind of an individual man. Only a
few men are endowed with the capacity to conceive new ideas. But as
political ideas can work only if they are accepted by society, it rests with the
crowd of those who themselves are unable to develop new ways of thinking
to approve or disapprove the innovations of the pioneers. .... One may lament
the fact that the fate of mankind is determined by the
certainly not infallible minds of men. But such regret cannot change reality.
In fact, the eminence of man is to be seen in his power to choose between good and evil.
The rule of the mass is as worse as dictatorship:
"The dangers inherent in the masses' incompetence are not eliminated by transferring the authority to make ultimate decisions to the dictatorship of one or a few men, however excellent. It is an illusion to expect that despotism will always side with the good causes. It is characteristic of despotism that it tries to curb the endeavors of pioneers to improve the lot of their fellow men. The foremost aim of despotic government is to prevent any innovations that could endanger its own supremacy. ... In the long run even the most despotic governments with all their brutality and cruelty are no match for ideas. ...
"The fallacy inherent in predicting the course of history is that the prophets assume no ideas will ever possess the minds of men but those they themselves already know of. Hegel, Comte, and Marx, to name only the most popular of these soothsayers, never doubted their own omniscience. ... Henceforth nothing of importance could ever happen.
"There was no longer any need for people to think. [ed. note: instead of prophets, we have the TV instead today] ...
"In this regard there was no difference between Mohammed and Marx,
between the inquisitors and Auguste Comte."
¹) I took utmost care not to quote from his polemique explanations, which are beautifully expressed nevertheless (and which I consider an almost poetic achievement), but I can't promise that I succeeded in my effort. It took me many hours to select and retrieve the parts which I found most interesing and which could be understood without having the whole context of this long book.
*) Wohlfahrtszwecke (in German original)
**) erstrebenswert (in German original) [which comprises more that what is "needed"]
"What more desirable societal state of affairs can be thought of than that higher phase of communist society; which, as Marx told us, society will give to each according to his needs"?
***) see "SOCIALISM: An Economic and Sociological Analysis" by Ludwig von Mises, 1922.
****) I replaced this phrase with a hopefully easier to understand phrase; it appears in the original English translation as follows: "Once production for use has been substituted for production for profit, the categories of cost and profit will become meaningless."
*****) "Incidentally it may be mentioned that this misconstruing of human wants and interests prevented Marx and other socialists from comprehending the distinction between freedom and slavery, ..."