Socialism: An Economic and Sociological Analysis

Summary

Socialism: An Economic and Sociological Analysis is Ludwig von Mises's comprehensive critique of socialist thought, published in German in 1922 as Die Gemeinwirtschaft and revised in 1932. J. Kahane's English translation appeared in London in 1936; Yale University Press reissued it in 1951 with an epilogue, and the Liberty Fund edition of 1981 added a foreword by F. A. Hayek. The book begins by observing that socialist ideas dominated the age, shaping the programs of parties that called themselves opponents of socialism as well as its supporters. Mises sets out to examine those ideas as a whole. In the first part he contrasts liberalism and socialism, discussing ownership, the state, democracy, the family and the social position of women, and argues that private property in the means of production is the basis of the division of labor. The second and central part examines the economics of a socialist community. Here Mises develops the argument of his 1920 article on economic calculation: without market exchange of factories, land and machinery there can be no prices for them, and without such prices planners cannot compare the costs of alternative methods of production. He also discusses distribution, the incentives of managers and workers, and the problem of a socialist state's relations with other nations. The third part questions the claim, central to Marxism, that history moves inevitably toward socialism; Mises criticizes the materialist conception of history and the theory of class struggle and offers his own account of social development as the growth of cooperation through the division of labor. The fourth part considers socialism as a moral demand, including arguments from Christian ethics and ethical socialism. The fifth part, on what Mises calls destructionism, argues that interventionist policies such as labor legislation, compulsory social insurance and confiscatory taxation consume accumulated capital. The book had a large effect on a generation of economists. Hayek wrote that it changed the views of many young idealists who had returned from the First World War, himself among them, and Wilhelm Röpke and Lionel Robbins acknowledged its influence. Socialist economists such as Oskar Lange answered its calculation argument in the 1930s. Critics have also found its treatment of ethics and religion one-sided, but it remains one of the most thorough examinations of socialism written from a liberal standpoint.

Plot or Argument

• Part I: Liberalism and socialism

  Mises defines ownership, contrasts liberal and socialist views of the state, democracy and the family, and argues that private property underlies social cooperation.

• Part II: The economics of a socialist community

  He develops the argument that socialism cannot calculate without prices for the means of production and examines distribution, incentives and international relations under socialism.

• Part III: The alleged inevitability of socialism

  He criticizes the materialist interpretation of history and the theory of class struggle, presenting social evolution as the extension of the division of labor.

• Parts IV and V: Socialism as a moral imperative; destructionism

  He examines ethical and Christian arguments for socialism and argues that interventionist policies consume the capital on which prosperity depends.

Characters

• Ludwig von Mises, author

  Viennese economist examining socialism from a liberal standpoint.

• Karl Marx, opponent

  Founder of the doctrines of historical materialism and class struggle that Mises criticizes.

• F. A. Hayek, reader and successor

  Mises's student, who credited the book with changing his own views.

• Oskar Lange, later respondent

  Polish economist who answered the calculation argument with a model of market socialism.

Lessons

• Defining the terms

  Mises defines socialism as public ownership of the means of production rather than as a set of aims. Students can consider how definitions shape arguments.

  • How does Mises define socialism?
  • Why might others define it differently?

• Ideas and history

  Mises disputes the claim that history inevitably leads to socialism. Students can weigh claims that the future is already determined.

  • What does Mises object to in the materialist view of history?
  • Is any political outcome historically inevitable?

• Means and ends

  Much of the book argues that socialism would fail to reach its own goals. This invites discussion of judging policies by their consequences as well as their intentions.

  • Why does Mises focus on whether socialism can work rather than whether it is just?
  • Can good intentions justify a policy that fails?

Context

Mises wrote in Vienna after the First World War, when Austria and Germany were debating the socialization of industry, the Soviet state was establishing a planned economy, and social democratic parties were among the largest in Central Europe.

Composition

Die Gemeinwirtschaft: Untersuchungen über den Sozialismus was published by Gustav Fischer in Jena in 1922, with a revised second edition in 1932. J. Kahane's translation of the second edition was published by Jonathan Cape in 1936. Yale's 1951 edition added Planned Chaos as an epilogue, and the Liberty Fund edition (1981) includes a foreword by Hayek.

Reception

The book shaped the thinking of Hayek, Röpke, Robbins and others in the interwar years and prompted replies from socialist economists. Its calculation argument was widely thought answered in the 1930s, then reconsidered after the collapse of Soviet-type economies. The Liberty Fund edition has remained in print.

Comparisons

• Economic Calculation in the Socialist Commonwealth

  The 1920 article's argument forms the core of the book's second part, which develops it and answers early critics.

• The Communist Manifesto

  Marx and Engels's call to abolish private property and their theory of class struggle are the main doctrines the book examines and rejects.

• The Road to Serfdom

  Hayek, who said Mises's book changed his views, later wrote a shorter political warning against central planning.

• Human Action: A Treatise on Economics

  Mises's later treatise places the critique of socialism within a general theory of human action and the market.

• Liberalism

  Written five years later, the shorter Liberalism presents positively the program that Socialism defends against its critics.

• A Humane Economy

  Röpke, influenced by Mises, criticizes collectivism but places more weight on community and moral order than Mises does.

• The Open Society and Its Enemies

  Popper also attacks the Marxist claim that history follows inevitable laws, on philosophical rather than economic grounds.

• Animal Farm

  Orwell's fable shows a revolution in common ownership hardening into a new tyranny, a literary counterpart to Mises's analysis.

Quotes

For Students

A reading companion for classical Christian high school students. See the student guide.

Reading Guide

Watch for

• How Mises defines socialism and liberalism.
• The calculation argument in Part II.
• His criticism of historical materialism.
• What he means by 'destructionism'.

Key terms and names

Means of production

Land, factories, machines and materials used to produce other goods.

Economic calculation

Comparing costs and returns in money to choose among alternatives.

Historical materialism

Marx's theory that economic forces determine the course of history.

Destructionism

Mises's term for policies that, in his view, consume accumulated capital.

Division of labor

Specialization of tasks among people, which Mises treats as the basis of society.

Seminar Questions

1. Comprehension What are the five parts of the book about?
2. Comprehension Why does Mises think a socialist community cannot calculate?
3. Interpretation Why does Mises discuss the family and religion in a book about economics?
4. Interpretation What does Mises mean when he says opponents of socialism had accepted its principles?
5. Big Question Is it fair to judge a political ideal by whether it can be put into practice?
6. Big Question Does history have a direction?

Faith Connections

• Acts 4:32-35 (Scripture)

  The early Jerusalem church held 'all things common', a passage often cited in debates over Christianity and socialism that Mises addresses in Part IV.

• Leo XIII, Rerum Novarum (Great Conversation)

  Leo XIII's 1891 encyclical rejects socialism and defends property while also urging just wages, a religious argument to set beside Mises's economic one.

Logic and Rhetoric

Central argument: Socialism, defined as public ownership of the means of production, cannot calculate costs and so cannot run a modern economy; it is not historically inevitable; and policies that move partway toward it consume capital and reduce prosperity.

Rhetorical device: systematic refutation. Mises takes up in turn the economic, historical, ethical and religious arguments for socialism, answering each in a separate part.

Debate: Resolved: Public ownership of the means of production cannot sustain a modern economy.

Writing Prompts

Essay: Explain Mises's argument that socialism cannot calculate, and assess one reply to it.

Comparison with The Communist Manifesto: Compare the Manifesto's account of history and property with Mises's. Marx and Engels treat private property as a passing stage of class history; Mises argues that without it no one can calculate costs at all. Which claim does each side leave unanswered?

Creative Prompts

• Essay

  Mises says even the opponents of socialism in his day accepted its main ideas. Choose one idea that is widely accepted today and explain how you would examine it as Mises examined socialism.

• Classroom

  Hold a structured debate on whether common ownership of productive property can work, with one side using Mises's arguments and the other answering them.

• Dialogue

  Write a conversation in 1920s Vienna between Mises and a young socialist student about the future of Europe.

Further Reading

• Economic Calculation in the Socialist Commonwealth, Ludwig von Mises

• Capital, Karl Marx

• On the Economic Theory of Socialism, Oskar Lange

• Ludwig von Mises: Scholar, Creator, Hero, Murray N. Rothbard