Human Action: A Treatise on Economics

Summary

Human Action is Ludwig von Mises's comprehensive treatise on economics, published by Yale University Press in 1949. It is an expanded English reworking of his German treatise Nationalökonomie, which had appeared in Geneva in 1940 with little notice because of the war. At nearly nine hundred pages, it attempts to build the whole of economics from a single starting point: the fact that human beings act. Mises defines action as purposeful behavior, the use of means to attain chosen ends. From this starting point he develops what he calls praxeology, the general science of human action, of which economics is the best-developed branch. He argues that its theorems are known by reasoning rather than by experiment, so that statistics and history can illustrate economic laws but cannot establish or refute them. This a priori method, together with his insistence that only individuals act and that values are subjective, sets the book apart from most economics of its time. The treatise is divided into seven parts. After the foundations, Mises discusses action within society, the division of labor and the role of economic calculation in money prices. The longest part, on catallactics or the economics of the market, treats prices, money, interest, time preference, entrepreneurship, profit and loss, wages and the business cycle. Here Mises presents the Austrian theory that credit expansion by banks lowers interest rates below their market level, encourages unsustainable investment and so produces booms that must end in depression. Later parts restate his argument that a socialist economy cannot calculate and examine the 'hampered market economy', in which government interventions such as price controls, credit expansion and confiscatory taxation lead, he argues, to consequences their sponsors did not intend and to pressure for further intervention. The final part considers the place of economics in society and in education. The book was reviewed widely, including by Henry Hazlitt in Newsweek, and became the central text of the revived Austrian school in the United States through students such as Murray Rothbard and Israel Kirzner. Mises revised it in 1963 and 1966; a Scholar's Edition of the 1949 text appeared in 1998. Mainstream economists have generally rejected its a priori method, and its political conclusions in favor of an unhampered market remain disputed, but it is widely regarded as the fullest statement of Mises's thought.

Top Lessons

• Purposeful action

  Mises begins from the idea that people act to reach chosen ends. Students can consider what follows from treating choice, not behavior alone, as the subject of economics.

• Method in the social sciences

  Mises argues that economic laws are known by reasoning, not by experiment. The claim invites discussion of how different disciplines establish knowledge.

• Booms and busts

  The Austrian theory of the trade cycle explains depressions as the result of earlier credit expansion. Students can compare it with other explanations.

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