Ludwig Von Mises

This is an existing post I am rewriting here because the original seems to have been attacked by spammers who managed to take the blog offline for a few (long) hours !

Von Mises is an interesting economist recommended by Phil Carret, this is what he said in about him:

Ludwig van Mises, the greatest economist of the twentieth century, in my judgment. He was a founder of the Austrian economics movement, which has never taken off compared with Lord Keynes, and I regard Keynes as disastrous for all concerned. Van Mises was in favor of free enterprise and so am I. There is nothing like competition.

After that recommendation and out of respect to Phil I just downloaded some of his books, here are some excerpts…

In his 1922 work Socialism – An Economic and Sociological Analysis:

The only certain fact about Russian affairs under the Soviet regime with regard to which all people agree is: that the standard of living of the Russian masses is much lower than that of the masses in the country which is universally considered as the paragon of capitalism, the United States of America. If we were to regard the Soviet regime as an experiment, we would have to say that the experiment has clearly demonstrated the superiority of capitalism and the inferiority of socialism.

In Interventionism, An Economic Analysis (1940), Ludwig Von Mises wrote:

The usual terminology of political language is stupid. What is ‘left’ and what is ‘right’? Why should Hitler be ‘right’ and Stalin, his temporary friend, be ‘left’? Who is ‘reactionary’ and who is ‘progressive’? Reaction against an unwise policy is not to be condemned. And progress towards chaos is not to be commended. Nothing should find acceptance just because it is new, radical, and fashionable. ‘Orthodoxy’ is not an evil if the doctrine on which the ‘orthodox’ stand is sound. Who is anti-labor, those who want to lower labor to the Russian level, or those who want for labor the capitalistic standard of the United States? Who is ‘nationalist,’ those who want to bring their nation under the heel of the Nazis, or those who want to preserve its independence?

Mises developed the theory of the ‘sovereignty of the consumer’ in a free-market economy; in his view, the consumer ultimately dictates everything that happens. This argument was set out in Human Action:

‘The captain is the consumer…the consumers determine precisely what should be produced, in what quality, and in what quantities…They are merciless egoistic bosses, full of whims and fancies, changeable and unpredictable. For them nothing counts other than their own satisfaction…In their capacity as buyers and consumers they are hard-hearted and callous, without consideration for other people…Capitalists…can only preserve and increase their wealth by filling best the orders of the consumers… In the conduct of their business affairs they must be unfeeling and stony-hearted because the consumers, their bosses, are themselves unfeeling and stony-hearted.’

Human Action, about forecasting:

If it were possible to calculate the future structure of the market, the future would not be uncertain. There would be neither entrepreneurial loss nor profit. What people expect from the economists is beyond the power of any mortal man.

About monetary policy:

The policy prescriptions for business cycles of Mises-Hayek and of Keynes were diametrically opposed. During a boom period, Mises counseled the immediate end of all bank credit and monetary expansion; and, during a recession, he advised strict laissez-faire, allowing the readjustment forces of the recession to work themselves out as rapidly as possible.

Not only that: for Mises the worst form of intervention would be to prop up prices or wage rates, causing unemployment, to increase the money supply, or to boost government spending in order to stimulate consumption. For Mises, the recession was a problem of under-saving, and over-consumption, and it was therefore important to encourage savings and thrift rather than the opposite, to cut government spending rather than increase it. It is clear that, from 1936 on Mises was totally in opposition to the worldwide fashion in macroeconomic policy.

Human Action, on profits as an outcome of entrepreneurial success and market forecast:

Entrepreneurial judgment is one of those things that cannot be bought on the market. The entrepreneurial idea that carries on and brings profit is precisely that idea which did not occur to the majority. It is not correct foresight as such that yields profits, but foresight better than that of the rest. The prize goes only to those dissenters who do not let themselves be misled by the errors accepted by the multitude. What makes profits emerge is the provision for future needs for which others have neglected to make adequate provision.

Entrepreneurs and capitalists expose their own material well-being if they are fully convinced of the soundness of their plans. They would never venture to take their economic life into their hands because an expert advised them to do so. Those ignorant people who operate on the stock and commodity exchanges according to tips are destined to lose their money, from whatever source they may have got their inspiration and “inside” information.

In fact both the economists and the businessmen are fully aware of the uncertainty of the future. The businessmen realize that the economists do not dispense any reliable information about things to come and that all that they provide is interpretation of statistical data referring to the past. For the capitalists and entrepreneurs the economists’ opinions about the future count only as questionable conjectures. They are skeptical and not easily fooled. But as they quite correctly believe that it is useful to know all the data which could possibly have any relevance for their affairs, they subscribe to the newspapers and periodicals publishing the forecasts. Anxious not to neglect any source of information available, big business employs staffs of economists and statisticians.

Business forecasting fails in the vain attempts to make the uncertainty of the future disappear and to deprive entrepreneurship of its inherent speculative character. But it renders very valuable services in assembling and interpreting the available data about economic trends and developments of the recent past.

Best!
jrv

Sources:
Ludwig von Mises Institute.
en.wikipedia.org/wiki/Ludwig_von_Mises

About jrv

I was born in Spain and lived in Belgium, Chile, France, USA, Argentina among other places. Currently I am trying to settle down in a wild place. I am "retired", even though now I dedicate more hours "working" for my investments than I ever worked in the real labor market where I used to work in IT and Banking. I am a family man, I have a lovely wife, several sons and one step daughter. I have humble tastes, I like to stay home and read about companies and investments. I started investing at 25 before the internet bubble exploded. I did not know much about investing and liked technical analysis so my results were pretty bad. Fortunately I did not have much to lose. Some years later in 2006 bored of doing only real state investments and with quite a lot of money saved I opened an account in a cheap and excellent online broker and started again. This time I did not want to commit the same mistake, so I decided to follow a model. I heard that Warren Buffett was the best at making money via stocks so I started by reading a lot about him, all of his shareholders letters and several of the books that he recommended. I learned a lot, started applying his investing principles and reading a lot of 10K's. Digested news from lots of different sources. Basically I started buying very good and cheap companies and holding them for ever if possible and if nothing changed fundamentally. When the housing crisis started I was more than 75% cash. At that time I identified good companies at incredibly cheap prices so I invested most of my savings in stocks. In less than I year I doubled. By the second semester of 2009 I turned my software company into an investment vehicle and dedicated myself full time to it. My wife and I decided to change our lifestyle and moved from Belgium to the beach in a wild country. The goal was to keep fixed costs low in order to be able to live with a minimum 6-8% yearly return but specially to move away from the inhuman life of civilization and to have finally some peace and sunny weather to concentrate better on investing. Now I can think and study about companies 60 hours a week and I am doing great. I can finally do what I want full time and can proudly say that I have never been so happy, specially also with my just born 4th son, my other great kids and my sweet wife who supports me fully while I study most of the day and patiently wait for the opportunity to make a swing ! You can learn a bit more about my portfolio by viewing it at www.kuchita.com/view/sumo.php or you may learn more about me and my family by following the link "Author's site" from the menu above.
This entry was posted in General and tagged , , . Bookmark the permalink.

The Intelligent Investor Blog Posts Feeds

Receive posts by email?

One Response to Ludwig Von Mises

  1. jrv says:

    Testing math captcha to stop the huge amount of spam I have received.
    I hope this will kill’em all :) !

Comments are closed.