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Economic Policy: Thoughts for Today and Tomorrow

Book notes for "Economic Policy: Thoughts for Today and Tomorrow" by Mises

Review:

> Those who call themselves “liberals” today are asking for policies which are precisely the opposite of those policies which the liberals of the nineteenth century advocated in their liberal programs. The so-called liberals of today have the very popular idea that freedom of speech, of thought, of the press, freedom of religion, freedom from imprisonment without trial—that all these freedoms can be preserved in the absence of what is called economic freedom. They do not realize that, in a system where there is no market, where the government directs everything, all those other freedoms are illusory, even if they are made into laws and written up in constitutions.

> Once you begin to admit that it is the duty of the government to control your consumption of alcohol, what can you reply to those who say the control of books and ideas is much more important? Freedom really means the freedom to make mistakes. This we have to realize.

Very simple overview of Mises' thoughts on liberty, the virtues of capitalism, what government should do, and what it should refrain from doing. As a representative of the Austrian school of economics, he supports free trade, free markets, individual freedoms etc., since he believes this is best for all (in the long run). 

(Yes, we will all be dead in the long run, but hey, our kids won't. Thank god our ancestors did not entirely sacrifice future growth for immediate gain, we would have a far lower standard of living if so)

It was less in-depth than I was expecting, but as he says on monetary policy

> I am rather embarrassed by the necessity to simplify these problems. There are so many complex problems in the monetary system, and I would not have written volumes about them if they were as simple as I am describing them here.

Which is fair enough. 

Highlights:

154-158 | Added on Tuesday, 3 October 2017 20:10:29
Big business, the target of the most fanatic attacks by the so-called leftists, produces almost exclusively to satisfy the wants of the masses. Enterprises producing luxury goods solely for the well-to-do can never attain the magnitude of big businesses. And today, it is the people who work in large factories who are the main consumers of the products made in those factories. This is the fundamental difference between the capitalistic principles of production and the feudalistic principles of the preceding ages.

168-169 | Added on Tuesday, 3 October 2017 20:11:45
Freedom of competition does not mean that you can succeed simply by imitating or copying precisely what someone else has done.

> ie railway competition is from roads, not other railways

224-226 | Added on Tuesday, 3 October 2017 20:15:12
Today, in the capitalist countries, there is relatively little difference between the basic life of the so-called higher and lower classes; both have food, clothing, and shelter. But in the eighteenth century and earlier, the difference between the man of the middle class and the man of the lower class was that the man of the middle class had shoes and the man of the lower class did not have shoes.

239-245 | Added on Tuesday, 3 October 2017 20:33:24
There are people in many countries who consider it very unjust that a man who has to support a family with several children will receive the same salary as a man who has only himself to take care of. But the question is not whether the employer should bear greater responsibility for the size of a worker’s family. The question we must ask in this case is: Are you, as an individual, prepared to pay more for something, let us say, a loaf of bread, if you are told that the man who produced this loaf of bread has six children? The honest man will certainly answer in the negative and say, “In principle I would, but in fact if it costs less I would rather buy the bread produced by a man without any children.” The fact is that, if the buyers do not pay the employer enough to enable him to pay his workers, it becomes impossible for the employer to remain in business.

297-301 | Added on Tuesday, 3 October 2017 20:37:57
We must realize, however, that this higher standard of living depends on the supply of capital. This explains the difference between conditions in the United States and conditions in India; modern methods of fighting contagious diseases have been introduced in India—at least, to some extent—and the effect has been an unprecedented increase in population but, since this increase in population has not been accompanied by a corresponding increase in the amount of capital invested, the result has been an increase in poverty. A country becomes more prosperous in proportion to the rise in the invested capital per unit of its population.

323-327 | Added on Tuesday, 3 October 2017 20:39:47
Those who call themselves “liberals” today are asking for policies which are precisely the opposite of those policies which the liberals of the nineteenth century advocated in their liberal programs. The so-called liberals of today have the very popular idea that freedom of speech, of thought, of the press, freedom of religion, freedom from imprisonment without trial—that all these freedoms can be preserved in the absence of what is called economic freedom. They do not realize that, in a system where there is no market, where the government directs everything, all those other freedoms are illusory, even if they are made into laws and written up in constitutions.

328-330 | Added on Tuesday, 3 October 2017 20:40:06
Let us take one freedom, the freedom of the press. If the government owns all the printing presses, it will determine what is to be printed and what is not to be printed. And if the government owns all the printing presses and determines what shall or shall not be printed, then the possibility of printing any kind of opposing arguments against the ideas of the government becomes practically nonexistent.

380-387 | Added on Tuesday, 3 October 2017 20:52:42
Once you begin to admit that it is the duty of the government to control your consumption of alcohol, what can you reply to those who say the control of books and ideas is much more important? Freedom really means the freedom to make mistakes. This we have to realize. We may be highly critical with regard to the way in which our fellow citizens are spending their money and living their lives. We may believe that what they are doing is absolutely foolish and bad, but in a free society, there are many ways for people to air their opinions on how their fellow citizens should change their ways of life. They can write books; they can write articles; they can make speeches; they can even preach at street comers if they want—and they do this in many countries. But they must not try to police other people in order to prevent them from doing certain things simply because they themselves do not want these other people to have the freedom to do it.

473-478 | Added on Tuesday, 3 October 2017 20:59:15
In capitalist societies, technological progress and economic progress are gained through such people. If a man has an idea, he will try to find a few people who are clever enough to realize the value of his idea. Some capitalists, who dare to look into the future, who realize the possible consequences of such an idea, will start to put it to work. Other people, at first, may say: “They are fools”; but they will stop saying so when they discover that this enterprise, which they called foolish, is flourishing, and that people are happy to buy its products. Under the Marxian system, on the other hand, the supreme government body must first be convinced of the value of such an idea before it can be pursued and developed.

573-575 | Added on Tuesday, 3 October 2017 21:14:08
Government ought to do all the things for which it is needed and for which it was established. Government ought to protect the individuals within the country against the violent and fraudulent attacks of gangsters, and it should defend the country against foreign enemies. These are the functions of government within a free system

616-619 | Added on Tuesday, 3 October 2017 21:16:55
The government wants to interfere in order to force businessmen to conduct their affairs in a different way than they would have chosen if they had obeyed only the consumers. Thus, all the measures of interventionism by the government are directed toward restricting the supremacy of consumers. The government wants to arrogate to itself the power, or at least a part of the power, which, in the free market economy, is in the hands of the consumers.

651-652 | Added on Tuesday, 3 October 2017 21:19:38
Thus the government’s interference with the price of milk will result in less milk than there was before, and at the same time there will be a greater demand. Some people who are prepared to pay the government-decreed price cannot buy it.

> price decrease -> decrease in supply. So we move from people who need it the most (willing to pay the most) getting the milk, to people who arrive at the store first getting the milk.

648-654 | Added on Tuesday, 3 October 2017 21:20:41
The private entrepreneur, the private producer, cannot take losses in the long run. And as he cannot take losses in milk, he restricts the production of milk for the market. He may sell some of his cows for the slaughter house, or instead of milk he may sell some products made out of milk, for instance sour cream, butter or cheese. Thus the government’s interference with the price of milk will result in less milk than there was before, and at the same time there will be a greater demand. Some people who are prepared to pay the government-decreed price cannot buy it. Another result will be that anxious people will hurry to be first at the shops. They have to wait outside. The long lines of people waiting at shops always appear as a familiar phenomenon in a city in which the government has decreed maximum prices for commodities that the government considers as important.

682-684 | Added on Tuesday, 3 October 2017 21:23:37
Thus, the isolated interference with one or a few prices of consumer goods always brings about effects—and this is important to realize—which are even less satisfactory than the conditions that prevailed before.

808-811 | Added on Wednesday, 4 October 2017 19:50:43
In the same way, today, when a government increases the quantity of paper money, the result is that the purchasing power of the monetary unit begins to drop, and so prices rise. This is called inflation. Unfortunately, in the United States, as well as in other countries, some people prefer to attribute the cause of inflation not to an increase in the quantity of money but, rather, to the rise in prices.

829-832 | Added on Wednesday, 4 October 2017 19:52:11
There can be no secret way to the solution of the financial problems of a government; if it needs money, it has to obtain the money by taxing its citizens (or, under special conditions, by borrowing it from people who have the money). But many governments, we can even say most governments, think there is another method for getting the needed money; simply to print it.

869-877 | Added on Wednesday, 4 October 2017 20:09:01
The situation is this: those people to whom the money comes first now have a higher income, and they can still buy many commodities and services at prices which correspond to the previous state of the market, to the condition that existed on the eve of inflation. Therefore, they are in a very favorable position. And thus inflation continues step by step, from one group of the population to another. And all those to whom the additional money comes at the early state of inflation are benefited because they are buying some things at prices still corresponding to the previous stage of the the exchange ratio between money and commodities. But there are other groups in the population to whom this additional money comes much, much later. These people are in an unfavorable position. Before the additional money comes to them they are forced to pay higher prices than they paid before for some—or for practically all—of the commodities they wanted to purchase, while their income has remained the same, or has not increased proportionately with prices.

918-922 | Added on Wednesday, 4 October 2017 20:12:15
How long can a central bank continue an inflation? Probably as long as people are convinced that the government, sooner or later, but certainly not too late, will stop printing money and thereby stop decreasing the value of each unit of money. When people no longer believe this, when they realize that the government will go on and on without any intention of stopping, then they begin to understand that prices tomorrow will be higher than they are today. Then they begin buying at any price, causing prices to go up to such heights that the monetary system breaks down.

939-943 | Added on Wednesday, 4 October 2017 20:13:35
Yet the gold standard has one tremendous virtue: the quantity of money under the gold standard is independent of the policies of governments and political parties. This is its advantage. It is a form of protection against spendthrift governments. If, under the gold standard, a government is asked to spend money for something new, the minister of finance can say: “And where do I get the money? Tell me, first, how I will find the money for this additional expenditure.”

946-948 | Added on Wednesday, 4 October 2017 20:13:59
But under inflationary conditions, people acquire the habit of looking upon the government as an institution with limitless means at its disposal: the state, the government, can do anything. If, for instance, the nation wants a new highway system, the government is expected to build it. But where will the government get the money?

954-956 | Added on Wednesday, 4 October 2017 20:14:42
I am rather embarrassed by the necessity to simplify these problems. There are so many complex problems in the monetary system, and I would not have written volumes about them if they were as simple as I am describing them here.

978-979 | Added on Wednesday, 4 October 2017 20:17:04
The setting of wage rates above the level they would have on the unhampered market always results in the unemployment of a considerable part of the potential labor force.

1007-1012 | Added on Wednesday, 4 October 2017 20:19:25
What does “full employment” mean? It has to do with the unhampered labor market, which is not manipulated by the unions or by the government. On this market, wage rates for every type of labor tend to reach a point at which everybody who wants a job can get one and every employer can hire as many workers as he needs. If there is an increase in the demand for labor, the wage rate will tend to be greater, and if fewer workers are needed, the wage rate will tend to fall. The only method by which a “full employment” situation can be brought about is by the maintenance of an unhampered labor market. This is valid for every kind of labor and for every kind of commodity.

1292-1295 | Added on Wednesday, 4 October 2017 20:42:21
Under interventionist ideas, it is the duty of the government to support, to subsidize, to give privileges to special groups. The idea of the eighteenth century statesmen was that the legislators had special ideas about the common good. But what we have today, what we see today in the reality of political life, practically without any exceptions, in all the countries of the world where there is not simply communist dictatorship, is a situation where there are no longer real political parties in the old classical sense, but merely pressure groups.

1325-1329 | Added on Wednesday, 4 October 2017 20:44:30
One situation, especially interesting in the United States, concerns sugar. Perhaps only one out of 500 Americans is interested in a higher price for sugar. Probably 499 out of 500 want a lower price for sugar. Nevertheless, the policy of the United States is committed, by tariffs and other special measures, to a higher price for sugar. This policy is not only detrimental to the interests of those 499 who are consumers of sugar, it also creates a very severe

1325-1329 | Added on Wednesday, 4 October 2017 20:44:42
One situation, especially interesting in the United States, concerns sugar. Perhaps only one out of 500 Americans is interested in a higher price for sugar. Probably 499 out of 500 want a lower price for sugar. Nevertheless, the policy of the United States is committed, by tariffs and other special measures, to a higher price for sugar. This policy is not only detrimental to the interests of those 499 who are consumers of sugar, it also creates a very severe problem of foreign policy for the United States.