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Source link: http://archive.mises.org/16818/misess-gift-of-human-action/

Mises’s Gift of Human Action

May 6, 2011 by

Human Action is not just about epistemology, economic history, and philosophy. Human Action opens you to a unique perspective of looking at the world, and more specifically at economic science. This perspective is unavailable anywhere else.

FULL ARTICLE by Jonathan M. Finegold Catalan


Ned Netterville May 6, 2011 at 10:24 am

Good luck with this letter. My godson graduated from Harvard with his degree in economics, worked on Wall Street for a couple of years and then returned to Harvard for an MBA. While he was in school I asked him if he had ever heard of Mises or Austrian economics, and he said no. When I expressed some surprise that Harvard’s econ department hadn’t required its students to at least be familiar with Mises and Austrian economics, probably expressing myself in an accusatory tone, he defended Harvard by pointing out that what Harvard really taught its business students was leadership. I could not argue with this, nor can I say that Harvard did him a disservice by stressing leadership over a broad education in economics, for today he is the president of a very large financial institution. There is a good chance that he got to where he is today without ever reading Human Action, and of course most folks would measure the quality of a professional education by the success it helped one achieve in one’s profession as opposed to one element of that education.

Professor N. Gregory Mankiw is in a similar situation. He is a professor of economics at Harvard, which many would say is at or near the top of his profession. Like my godson, Professor Mankiw reached that position without reading HUMAN ACTION, so why should he bother doing so now?

I read HUMAN ACTION and subsequently read Keynes’ THE GENERAL THEORY OF EMPLOYMENT, INTEREST AND MONEY, in tandem with Henry Hazlitt’s THE FAILURE OF THE NEW ECONOMICS as well as the anthology of articles debunking Keynes’ theories, THE CRITICS OF KEYNESIAN ECONOMICS, which Hazlitt edited.

Mr. Catalan, you say in your letter to Professor Mankiw, “I have no doubt that you have read The General Theory…” Presumably he has, because based on the many books he has published, macroeconomics is a special interest of his, and as you say, macroeconomic models developed from Keynes’ GENERAL THEORY.

Having read both HUMAN ACTION and the GENERAL THEORY, i can say this: HA is the most provocative, startlingly-revealing, honest book on economics or any other science or technical discipline I have ever read. Keynes’ GT is the most convoluted, confusing, dishonest book on any subject. The only positive features of the GT are its occasional, eloquent, rhetorical flourishes and its frequent, finely honed satire and sarcasm, usually directed at J. B. Say, David Ricardo and “classical” economists and economics.

How is it possible to explain the popular success among academics of Keynes over Mises? Keynes’ theories supported government spending, Mises’ theories discredited almost all such spending. Government spending on education is always popular with academics. It is as simple as that: follow the money. OPM, sounds like opium, is equally addicting, stands for other people’s money. Mankiw is not immune.

Jonathan M. F. Catalán May 6, 2011 at 10:57 am

For what it’s worth, the current head of the undergraduate department of economics at Harvard is Jeffrey Miron, who is a libertarian (see his Libertarianism A to Z). I’ve started seeing a lot of evidence that Mankiw has been approaching libertarian positions with a much more open mind than he probably would have a decade or more ago.

Peter May 6, 2011 at 10:30 am

Misesian revolution. How naive can you get?
Mises’ theory is one of true free trade, in other words fair to all. The paper money Mafia would not be able to run their extortion and protection racket under a true Mises system.
No matter how good Mises’ theory, it never had a chance to be selected by parasitic mobsters out to control the world. Keynes’ system allows precisely that and was selected because of it, no matter how bad it is.
The best and fairest system will NEVER be selected as long as the mobsters are not stamped into the ground for good. Men of good will have to rule to choose a fair system. We are miles and miles from that.

Jonathan M. F. Catalán May 6, 2011 at 10:55 am

It should be cleared that Keynes’s ideas weren’t just accepted by politicians, but also by most of the academia — some of which were prior ‘followers’ of Hayek, including Kaldor and Hicks (the latter of which tried to integrate Hayekian capital theory [well, a version of it] with his former neoclassical synthesis). I think it’s disingenuous to argue that the academics had corrupt, political intentions — we just have to accept the fact that Keynes was very persuasive (and that Keynes’s ideas weren’t unique to him — i.e. they were already floating around [it's said Keynes may have been influenced by the Cambridge circle before publishing The General Theory]).

Peter May 6, 2011 at 12:47 pm

It should also be clear that what is the IN thing is determined by the mobsters, and also what is OUT. They do that by lavishing money on what serves their purposes, and withholding it for what doesn’t. And that was true then and is still so today, at least for the better part of academia. Radically true, sadly, and nothing disingenuous about it. If it had been a pure and honest academic contest, Mises would actually have stood a chance. Most academics are not stupid. They just know on what side their bread is buttered.

Joe M May 6, 2011 at 12:50 pm

If you are expecting a close-minded, repetitive treatise on a peripheral view of economics, then you will definitely be surprised. Mises was a brilliant defender of laissez-faire capitalism, and he was adamant in his analysis. But few scholars were more widely read and few scholars were as generous. Mises was never interested in advancing an agenda. His only concern was discovering the truth: correct economic theory. His examinations were never based on speculation or sloppy conjecture.
No truer words have been spoken. The key is that Mises was looking for the truth without an agenda. To think that Harvard and the rest of the elite schools don’t have an agenda is just nonsense. Keynes was chosen the economist of choice not out of rational thought but through politics. Johnathan, I enjoy your articles but in this instance I believe you are very naive. Of course I might be more of an cynic than you but I have lived longer.
Always follow the money

Jonathan M. F. Catalán May 6, 2011 at 2:49 pm

Keynes was never ‘chosen’ as anything. His academic respect game out of genuine persuasion. It’s definitely true that some economists, like Paul Samuelson, were always going to be more open to Keynes than they were to Hayek, just because Keynes’s economics tended to coincide more with their social vision, but to claim that Keynes’s influence was purely political is nonsense. It’s not about how long anyone has lived or following the money, it’s about historic fact.

Ned Netterville May 6, 2011 at 5:10 pm

Mr. Catalan, following the money leads to historic facts. Although it is generally attributed to William Goldman, who put it on the lips of Deep Throat in the movie version of ALL THE PRESIDENT’S MEN, I believe that it was an adage of investigators long before that. I would also suggest that most of Keynes’ academic respect was derived from his analysis of the Versailles Treaty that Keynes published as THE ECONOMIC CONSEQUENCES OF THE PEACE, which was more a statistical analysis than an economic treatise.

If one reads Keynes’ GT and Hazlitt’s chapter by chapter analysis of it in THE FAILURE OF THE NEW ECONOMICS with an open mind, it is virtually certain that one will agree with Hazlitt’s overall assessment of the GT: “I have been unable to find in it a single important doctrine that is both true and original. What is original in the book is not true, and what is true is not original. In fact, as we shall find, even much that is fallacious in the book is not original, but can be found in a score of previous writers.” I certainly had no trouble agreeing with that conclusion–or worse. If Hazlitt’s analysis is accurate, how is it possible that so many academics bought into Keynes’ economic nonsense, for that is what he purveyed in the GT? The only answer I can think of is: “follow the money.” Much of Keynes’ academic popularity in America came with his GT during the Great Depression, a time when the federal government’s gushing font of money was the only such source available.

Joe M May 6, 2011 at 6:31 pm

I will take your word for it that he was convinced by genuine persuasion. So what is his excuse after all of these years? Has he been living in a cave without actually seeing how Keynes theories have proven false? For a man who has graduated from Princeton, MIT and now teaches at Harvard you would think he would have more on the ball. This is what he wrote in November 2008, in the New York Times:
“If you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes. Although Keynes died more than a half-century ago, his diagnosis of recessions and depressions remains the foundation of modern macroeconomics. His insights go a long way toward explaining the challenges we now confront.” This guy is a true believer. If he read Human Action he would not gain any insight. I was giving this guy the benefit of the doubt. He is truly a true believer. I wonder who paid for his education?
The politics I was referring to in my previous post had to do more with the academia internal type. You know the type where pressure can be put on you to follow the party line. Seems like a lot of professors and scientists in this enlightened age are following the money and tenure. (also government grants) I guess they have reached the highest level of Maslow’s hierarchy of needs. In the case of Mankiw he has not reached the point of self-actualization. He is still concerned with security. If and when he does reach self-actualization he might read Human Action.
The following pretty much sums up Mankiw and his ilk. This is the closing comments from the National Inflation Association as it pertains to Mankiw and people of his stripe.

“It is the destructive Keynesian theories of economists like Mankiw that have gotten the U.S. economy into the dire situation it is in today. Mankiw and other professors like him are brainwashing American students into believing that forcing people to spend is the key to a healthy economy and the way to solve all economic problems is to create a lot of inflation. All across America, students are graduating colleges with hundreds of thousands of dollars in debt, no jobs, and no idea of how the economy actually works. They will spend the rest of their lives paying off their debts and trying to get the false economic information they were taught out of their heads. The college education system in America is the single largest fraud that exists today, and NIA is going to expose the truth about the government’s conspiracy to turn American students into debt slaves.”
I wish in the future you would not even mention Mankiw types with someone of the stature of LVM.

Rick Hull May 6, 2011 at 6:34 pm

Hi,Great letter. I am reading the intro of the epub version and noticed a few typos. Mainly die instead of the in several places. I am guessing some rogue search/replace is the culprit. Preface is nonetheless fascinating so far. Must read Menger and Schumpeter now.

Sent from my phone. Cheers.

John James May 14, 2011 at 6:05 am

If you notice any typos in any Mises.org publications, please add them to the list here!

Predrag May 7, 2011 at 9:28 am

Good letter, Jonathan! I hope we’ll get to read the response.

Ankur Chawla May 8, 2011 at 3:10 am

Good article, Jonathan. This has actually convinced me to read General Theory more than anything else.

Paul May 8, 2011 at 8:42 am

One thing Mankiw stresses when studying economics is humility. But it is highly unlikely that we can expect the next edition of ‘Macroeconomics’ to integrate Austrian theories, even if Mankiw does read Mises. It’s just too much of an overhaul, even in methodology alone.

Mankiw seems to be sincere in wanting his students to learn, but there’s only so much an ego can take. I know that if I suddenly found out tomorrow that all that I’ve learned from mises.org was wrong, I wouldn’t admit it, much less revise my earlier works on account of this.

Colin Phillips May 8, 2011 at 11:18 am


“I know that if I suddenly found out tomorrow that all that I’ve learned from mises.org was wrong, I wouldn’t admit it, much less revise my earlier works on account of this.”

This is an upsetting attitude, but quite common. In theory scientists, including social scientists, will drop their favourite theory instantly the moment something they relied on was disproved, but too often this is not the case. Scientists are just people.

In reality, some people will resort to anything to avoid changing their minds. In such cases, our only solution is to educate the people around them, so that the next generation is capable of critical thinking for themselves. This immunizes the next generation, and we must then wait for the holders of that notion to die out.

This is why sites like mises.org are so important. The resources are available so that anyone who is interested can find all they need to see the world through the specialist tools of an economic viewpoint. Things that most people ascribe to vague social movements (like inflation and other forms of terrorism) can be understood for the first time as being the natural, almost inevitable product of the situations of individuals, human action and motivation. It’s the best form of education there is. The world finally makes sense.

Sorry about the ramble.

David K.Meller May 8, 2011 at 11:22 am

I would be keenly interested in hearing from Mr. Finegold-Catalan about Professor Mankiew’s impressions and reactions to Human Action upon reading it, and perhaps discussing it further with him in the coming months. Perhaps after H-A, Prof. Mankiew may also then want to treat himself to some other Mises literature, from Bureaucracy to Ultimate Foundations of Economic Science, and/or Theory and History. I think that any of these works stand well by themselves, but familiarity with Human Action could only benefit readers there.

David K. Meller

Weimar May 8, 2011 at 9:38 pm

Great letter, Jonathan. It’s a good thing you’re doing and a good manner in which you’re doing it!

TPL001 May 10, 2011 at 1:42 am

What can I say? Keynes’ General Theory should be relegated to the dustbin of history. It is junk. He has a few insights, but Mises, who was extremely well read, pushes out insights every which way.

And Mises spent a lot of time on philosophy and method, unlike Keynes, whose banal postulations are stated as fact. At least Keynes did have some understanding of the classical school. But Mises knew Menger and the classical school and the historical school, etc. Remember that BOTH Mises and Hayek stated that reading Menger made an economist of them — both of them! Keynes, like some idiot savant, is a political economist. Remember that this is politics. No wonder that Mises wrote an article stating that Keynes’ ideas are like the miracle of turning stones into bread.

I concur with Joe M’s citation, above, from the National Inflation Association, that many people who graduate do not even understand how the economy operates, and that debt and consumption are the ways to prosper! Keynes rejected Say’s Law in favor of that git Gesell.

Thank you for the article. Best of luck with your mission.

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