Wednesday, September 14, 2016

Happy 67th birthday, Human Action!

Amazon sells the Kindle version of Human Action: Scholar's Edition for $3.82.  But why should anyone read this lengthy treatise?  I've dug up some reasons for doing so.
The publication of Human Action in September 1949 produced a quantum leap in [Ludwig von Mises's] prominence and impact. Overnight, Mises turned into the central intellectual figure of the entire American Right, an event that was paralleled during the next decade only in the case of Atlas Shrugged, the novel that catapulted Ayn Rand to even greater fame, at least among the general public. Mises now appeared to the public not merely as a scholar of the old school, but as one of the great minds of western civilization, a creative genius who had not only mastered all aspects of his science, but had completely transformed this science to offer a new way of looking at social processes and relationships. 
Human Action was a success without precedent. His 1922 treatise on socialism had been a sensation too, but only because of the general recognition that theoretical socialism offered no help with the problems of postwar reconstruction. The socialist avant-garde had seized power in Germany and Austria, but then had no idea what to do. And this crisis quickly turned from a theoretical one to a political one when socialist governments drastically aggravated conditions rather than improving them. Mises's comprehensive analysis in Gemeinwirtschaft (Social Economy) delivered a breathtakingly lucid explanation of this mess. But while the book provoked outrage and fury in the socialist camp and initiated a paradigm shift in the thinking of an entire generation, it had not become the rallying banner of a movement. Its author had been a relatively junior economist and no institutions were in place to concentrate and organize the readers the book had convinced.  
American ground was more fertile. It had been prepared by a long tradition of individual liberty and a recent reorientation toward that tradition. There were, in effect, the makings of a movement just waiting for Human Action to form its intellectual nucleus. . . . 
Neither Mises nor his friends expected the success the book would have. After his return from Mexico [where he had been lecturing], Mises left for a two-week vacation in the Berkshire Mountains. The book was released to the bookshops while he was away, on September 14, 1949. In his weekly Newsweek column, Henry Hazlitt announced and praised it, anticipating the role it would play in subsequent events: 
Human Action is, in short, at once the most uncompromising and the most rigorously reasoned statement of the case for capitalism that has yet appeared. If any single book can turn the ideological tide that has been running in recent years so heavily toward statism, socialism, and totalitarianism, Human Action is that book. 
This was almost a self-fulfilling prophecy. Not three months later, by December 6, more than 4,000 copies had been sold and the book was in its third printing. With the reports of ever more sales, Mises's euphoria lasted for months.   
-- Hülsmann, Jörg Guido (2007-09-04). Mises: The Last Knight of Liberalism (LvMI) (pp. 885-886). Ludwig von Mises Institute. Kindle Edition. 

"The core of any system of economic theory is the explanation of how prices are determined," economist Joseph T. Salerno tells us.  
As Mises (1998, p. 235) himself put it, “Economics is mainly concerned with the analysis of the determination of money prices of goods and services exchanged on the market.” Thus, the core of Human Action is parts three and four (pp. 201–684), entitled, respectively, “Economic Calculation” and “Catallactics or Economics of the Market Society.” In these two parts, comprising 484 pages, there is presented for the first time a complete and systematic theory of how actual market prices are determined. Of course, Mises did not create this theory out of whole cloth. In fact, the theory of price elaborated in Human Action represents the crowning achievement of the Austrian School of economics. It is the culmination of the approach to price theory originated by Carl Menger in 1871 and developed further by a handful of brilliant economists of the generation intervening between Menger and Mises. These latter included especially Eugen von Böhm-Bawerk, J.B. Clark, Phillip H. Wicksteed, Frank A. Fetter, and Herbert J. Davenport. Unfortunately, for reasons to be explained below, the entire Mengerian approach went into decline after World War I and had lapsed into nearly complete dormancy by the mid-1930s. Mises’s outstanding contribution in Human Action was to singlehandedly revive this approach and elaborate it into a coherent and systematic theory of price determination. (my emphasis)
This article is divided into sections, section 1 describes the development of the Mengerian approach to price theory up until World War I, by which time it had reached the zenith of its international influence. Section 2 describes its amazingly rapid decline and suggests four reasons for it, including two fundamental theoretical problems that had not been solved by the first two generations of Mengerians. Mises’s solitary struggle to revive the approach, beginning in the mid-1930s and culminating with the publication of Human Action in 1949 is the topic of Section 3. A revisionist thesis is also proposed in this section that disputes the conventional view that Austrian economics was riding high in the mid-1930s when it was suddenly and tragically buried by the “Keynesian avalanche.”
Read the rest of the article:

The Place of Human Action in the Development of Modern Economic Thought

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