Von Mises, Ludwig. Human Action. Scholar’s Edition.
All deductive systems are dangerous if formulated incorrectly. Their appeal lies in their power, and Mises’s system is powerful indeed. Mises advances Praxeology, an economidoctrine emerging from the Classical School when it was realized that human action and not the inherent value of an object is what drove economics (Mises 3). Since our knowledge is limited, our choices will always have an element of uncertainty.
Thus, Mises can advance his main theorem: Human action is purposeful action. And the second is like unto it, “All action aims at a removing or lessening a present uneasiness.” Action does not measure utility or value; it chooses between alternatives. When I choose between unit a and unit b, I am not choosing between the total stock of either, but simply between the marginal values of both a and b. And this leads to the key gain of the Austrian school: the doctrine of marginal utility. The marginal utility of a good decreases as its supply increases. Whenever I get a good, I devote it to the most important end. As I get more goods, I devote them to lesser ends. Obviously, this applies to subjective-use value and not a thing’s perceived objective value. This allows the Austrian School to avoid the hang-ups which plagued all of the Classical Economists from Smith to Ricardo to even Marx.
Not directly, but indirectly related to the above is another axiom: Because man is an acting man, situations change. Prices will change. There cannot be a universal “set price.” Past prices are a guide to future prices.
Mises has several challenging chapters on interest and the Industrial Revolution. He argues that interest is the price men pay for valuing present goods more than future goods. It is a ratio of commodity prices, not a price itself. Can we get rid of interest? Mises argues that as long as there is scarcity, there will be human action, and hence, interest (525). Originary interest: the discount of future goods as against present goods (521).
Society accomplishes more when one group produces more of what it is good at. If Group A is superior at producing everything, it still benefits from cooperating with an inferior partner. If Time = Money, then outsourcing frees up valuable time for A to produce what is more valuable. Mises writes, “ If the surgeon can employ his limited working time for the performance of operations for which he is compensated at $50 per hour, it is to his interest to employ a handyman to keep his instruments in good order and to pay him $2 per hour, although this man needs 3 hours to accomplish what the surgeon could do in 1 hour.”
Mises’s Utilitarianism is subject to some devastating defeaters, mainly Betrand Russell’s: the only way to justify an action is in light of its consequences, but the only way to justify whether those consequences are good are in light of the consequences’ consequences, and so on to infinity.
Fortunately, most of his system is salvageable from that.