Human Action: A Treatise on Economics

Human Action is one of the ten most insightful books on economics ever written. This is impressive, but even more impressive that Mises has more than one book on this list (in my opinion). Human Action is the most recent (hopefully not the last) great treatise on political economy. While some treatises compile the ideas of others, there are many original and important insights to this book. Perhaps the most important insight of this book concerns economic calculation. Mises sees economic calculation as the most fundamental problem in economics. The economic problem to Mises is that of action. We act to dispel feelings of uneasiness, but can only succeed in acting if we comprehend causal connections between the ends that we want to satisfy, and available means. Mises is drawing upon Menger's brilliant 1871 book here, but he has his own ideas as well. The fact that we live in a world of causality means that we face definite choices as to how we satisfy our ends. Human Action is an application of Human Reason to select the best means of satisfying ends. The reasoning mind evaluates and grades different options. This is economic calculation. Economic calculation is common to all people. Mises insisted that the logical structure of human minds is the same for everybody. Of course, this is not to say that all minds are the same. We make different value judgments and posses different data, but logic is the same for all. Human reason and economic calculation have limitations, but Mises sees no alternative to economic calculation as a means of using scarce resources to improve our well being. Human Action concerns dynamics. The opposite to action is not inaction. Rather, the opposite to action is contentment. In a fully contented state there would be no action, no efforts to change the existing order of things (which might be changed by merely ceasing to do some things). We act because we are never fully satisfied, and will never stop because we can never be fully satisfied. This might seem like a simple point, but modern economics is built upon ideas of contentment- equilibrium analysis and indifference conditions. It is true that some economists construct models of dynamic equilibrium, but the idea of a dynamic equilibrium is oxymoronic to Mises. An actual equilibrium may involve a recurring cycle, but not true dynamics. True dynamics involve non-repeating evolutionary change. Mises explains dynamic change in terms of `the plain state of rest'. A final state of rest involves perfect plans to fully satisfy human desires. A plain state of rest is a temporary and imperfect equilibrium deriving from past human plans. Though any set of plans is imperfect, to act means attempting to improve each successive set of plans. Movement from one plain state of rest to another represents the process of change, either evolutionary or devolutionary. How then do we experience progress? Mises links progress and profits. Profits earned from voluntary trades are the i

HUMAN ACTION is the most important work of economic or social theory written in the twentieth century. It is also the most important defense of laissez faire capitalism ever written. Ludwig von Mises (1881-1973) was born in the old Austro-Hungarian Empire. A prolific writer, he wrote two seminal works (SOCIALISM and THEORY OF MONEY AND CREDIT) before fleeing the Nazis. While living in Switzerland, he published an early version of this work in German in 1940. Over time, Mises added to it and rewrote it in English. Yale University Press published HUMAN ACTION in 1949. This book isn't just a work of economics, but a full-orbed "science of human action." Starting from a few principles that Mises believed to be a priori, he deduces an entire body of economic theory. The first 200 pages of this 900-page work are heavily philosophical. I would not recommend readers skip this section. You can't understand what Mises was for unless you understand why he was for it. Mises' final work, THE ULTIMATE FOUNDATIONS OF ECONOMIC SCIENCE, deals with these methodological issues on a more elementary level. HUMAN ACTION is a difficult work to read, particularly for those with minimal training in economics. Murray Rothbard's MAN, ECONOMY, AND STATE covers similar ground (at least as far as economics is concerned) but is more suitable for the beginner. Israel Kirzner has written the best introductory work on Mises.

There is no way I can say all that I want to say in this review. Murray Rothbard has aptly said: "Every once in a while the human race pauses in the job of botching its affairs and redeems itself by producing a noble work of the intellect. . . . To state that _Human Action_ is a `must' book is a greater understatement. This is the economic Bible of the civilized man."I would take Rothbard's praise further. This is not only the single most important economic tome ever, but also the most pathbreaking, definitive exposition of praxeology, the correct basis for social sciences and also necessarily the foundation for epistemology. Only a few living economists of the "Austrian" school of economics seem to have truly absorbed the true praxeological methodology forged by Mises. Mises' contribution to economics cannot be understated. In basing economics on the axiomatic status of action, Mises established the ultimate foundation for economic science. The fact that humans act -- that is, human beings *act* purposively to reach subjectively chosen ends -- is, of course, irrefutable (to argue against the axiom of action is itself an action). This, however, may seem like a trivial observation. Humans act, big deal? Why is it so important? Its importance is in praxeological economics' methodology deductive chains of reasoning to realize the implications. In understanding what is implied by action - values, ends, means, choice, cost, preference, profit, and loss - economic science can be deduced logically, so it is a purely an a priori science where economic laws tell describe apodictically true relationships in the real world. In this way, key economic principles follow from the action axiom (as well as a few general, explicit assumptions about the empirical reality in which the action occurs), such as the law of diminishing marginal utility, how taxation changes time-preference schedules, the counterproductive nature of interventionism, involuntary unemployment, and so on. So long as the logic deriving the principles is correct, then economic laws are a priori-valid, and empirical testing has no bearing on them.This book initially appeared in a difficult time, when positivist methodology and the Keynesian paradigm were dominant. Thus, upon _Human Action_'s release it was mostly derided and ignored by the mainstream, rather than studied and criticized. It did, however, gain notoriety among academic circles for rebuilding economic science from the ground up, all the while plowing through the epistemological shortcomings of previous standards. Mises has provided considerable ammunition for institutional critique. He uncovered the socialist calculation problem -- a central planning authority has no rational way to allocate resources for production without market prices -- and this is an insurmountable hurdle for any state-run economy. In fact, when analyzed fully, it shows that _any_ government intervention in the economy results in market distortion and ineffici

Review from Investor's Business Daily: March 6, 1999Acting Human Can great books live on, even in the Internet age? The re-release of an old classic argues yes. Every now and then a book comes along that both sums up and extends the collected wisdom of some science. ''Human Action,'' by Ludwig von Mises, was such a book. Fifty years after it first came out, it is still one of the classics of economics. Mises is probably best known as the mentor of Nobel prize-winning economist Friedrich Hayek, and as the father of the modern ''Austrian'' school of economics. ''Human action is purposeful behavior,'' wrote Mises. That may seem obvious. But many social scientists have treated man as some sort of automaton, responding in some programmed way to whatever conditions he faces. Mises said man is a species that plans and chooses his actions. Man thinks. And the actions a man takes are a ''conscious adjustment to the state of the universe that determines his life.'' Why care? Let's say the Federal Reserve expands the money supply whenever unemployment goes up. The theory behind this is that the Fed can stimulate the economy by artificially boosting demand. Or course, this will also lead to inflation. But if people are rational, they'll notice this policy and act in response. Every time unemployment goes up, firms will raise their prices and workers will demand higher wages. So pumping up the money supply will only affect prices, not real output. Robert Lucas, a University of Chicago economist, popularized this theory of ''rational expectations'' in the 1970s. He later won a Nobel prize for his work. But Mises had discovered the basic insights of rational expectations some 30 years earlier. Since individuals are free to choose their actions, there's always an element of uncertainty in economics. That's why attempts to make specific predictions about the economy are bound to fail. Mises resisted modern economics' heavy reliance on mathematical models and attempts to model itself after physics. Such efforts were bound to fail, he said. They overlooked the uncertainty that human choice brings to economic activity. And he said that economists' focus on models in which the economy is already in a state of equilibrium overlooks what's truly key: the actions that bring supply and demand into equilibrium. Unlike other economists, Mises rejected the use of the theory of economic man, or Homo economicus, in economics. That model holds that man is driven solely by economic motives, the desire to make the greatest material or economic profit. Mises thought that was too narrow. He preferred to study man as he really acted, with a multitude of motivations. Still, that doesn't mean that men don't often act for economic motives. Nor does Mises' belief that the future is uncertain mean that it is completely unpredictable. For instance, most economists would say that, all things equal, raising the minimum wage will boost unemployment.

Ludwig von Mises's _Human Action_ is essential reading for any supporter of free-market economics (and it might be nice if some of the _enemies_ of economic liberty read it too). Mises's plan here is to place the science of economics on a firm axiomatic foundation. In particular, his aim is to derive economic theory from the axiom that (my paraphrase) human beings act to achieve ends under conditions of scarcity in a world in which finite and delimitable causes have finite and delimitable effects.Two other major treatises will be of interest to readers of this work: Murray Rothbard's _Man, Economy and State_, and George Reisman's _Capitalism: A Treatise on Economics_.I also agree with the other reviewer who suggests reading Carl Menger's _Principles of Economics_. Mises describes that work as the book that made an economist of him, and it's a much quicker read than any of the three major treatises I've named.Also of great interest: Mises's _The Theory of Money and Credit_, described by Murray Rothbard as the best book on money ever written. And so it is.