Quotation of the Day…

by Don Boudreaux on November 24, 2011

in Civil Society, Complexity & Emergence, Myths and Fallacies

… is from Ludwig von Mises‘s 1958 essay “Economic Freedom in the Present-Day World,” reprinted as Chapter 47 in the Bettina Bien Greaves edited volume Economic Freedom and Interventionism:

Earlier ages had labored under the misapprehension that no man or group of men can profit but by the loss of others.  In entirely demolishing this fallacy, 18th-century social philosophy and economics paved the way for the unprecedented achievements of modern Western civilization.

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persiflage November 24, 2011 at 9:53 am

I detect significant backsliding to that former misapprehension among today’s economically illiterate.

People do not understand the basics – when caveman Oog bashed some peculiar rocks together and, using his intellect and labor skill, fashioned a spearpoint, he ADDED VALUE to the rock – so much additional value that caveman Ug was now willing to trade two whole deerskins for the rock! And both Oog and Ug came out with an enhanced lifestyle by that trade, because Ug was a better hunter and Oog a better craftsman with rocks.

The economy is not a zero-sum game as long as NEW VALUE is constantly being added by application of peoples intellect and labor.

vidyohs November 24, 2011 at 10:18 am

BTW, persiflage, I am glad to see our ancestors getting their due in the economic history of the world. :-)

Ubiquitous November 24, 2011 at 1:37 pm

Belief in the zero-sum game myth is based on two incorrect premises: (1) wealth is a given, static quantity, and (2) economic value is objective.

The latter premise is the cause of the former.

vidyohs November 24, 2011 at 10:16 am

IMHO persiflage is correct in as far as he goes; but, I have the conviction that a certain percentage of the people of the world never grew out of that misapprehension, and always have/always will believe that in order for X to succeed Y must suffer lack of success; that if X creates profit it is profit that had to be taken from Y (even though there is no evidence that Y ever made an effort at all).

That folks like Bastiat, Mises, Hayek, Freidman, Boudreaux, Roberts, tell them different, and that the zero sum world view is wrong, does not make it across that break in the brain.

Josh S November 24, 2011 at 10:26 am

Marx defined profit as exploitation of the worker, and he’s got more cachet on the left than Smith or, for that matter, Keynes (many leftists who think their views are Keynesian are actually rehashing Marx).

kyle8 November 24, 2011 at 7:02 pm

Damn, even Marx understood that wealth is created. He just didn’t have a clue as to how.

Josh S November 24, 2011 at 10:30 am

Since we’re talking about the 18th C, here’s a Smith quote where he identifies the knowledge problem centuries before Hayek:

All systems either of preference or of restraint, therefore, being thus completely taken away, the obvious and simple system of natural liberty establishes itself of its own accord. Every man, as long as he does not violate the laws of justice, is left perfectly free to pursue his own interest his own way, and to bring both his industry and capital into competition with those of any other man, or order of men. The sovereign is completely discharged from a duty, in the attempting to perform which he must always be exposed to innumerable delusions, and for the proper performance of which no human wisdom or knowledge could ever be sufficient; the duty of superintending the industry of private people, and of directing it towards the employments most suitable to the interest of the society.

Josh S November 24, 2011 at 10:30 am

Sorry, that’s from the final page of Book IV of Wealth of Nations.

Harold Cockerill November 25, 2011 at 7:32 am

The delusions our current sovereigns are laboring under are merely veils to hide their larcenous intent. They cannot create on their own and see any wealth not channeled through them as ill gotten.

vikingvista November 24, 2011 at 12:42 pm

A lot of people still haven’t gotten the memo.

Greg Webb November 25, 2011 at 12:13 am

Earlier ages had labored under the misapprehension that no man or group of men can profit but by the loss of others.  In entirely demolishing this fallacy, 18th-century social philosophy and economics paved the way for the unprecedented achievements of modern Western civilization.

Excellent quote. Greater liberty leads to greater prosperity. Greater government control, whether by kings or commissars, always leads to poverty.

Nikolai Luzhin, Eastern Promises November 25, 2011 at 1:24 pm

what tripe, given that all great fortunes are built on “the loss of others.”

it is called leverage

he unprecedented achievements of modern Western civilization came about when leverage was ended, and slavery and unions gained power and decent wages and working conditions for workers

Greg Webb November 25, 2011 at 2:38 pm

Pure nonsense, Luzha.

Josh S November 25, 2011 at 9:26 pm

The great fortunes of modern civilization were built when slavery ended, too. No Southern plantation owner commanded anything remotely like the wealth Bill Gates has at his disposal.

Jon Murphy November 26, 2011 at 8:39 am

Anyone else noticing this? The trolls are becoming self-policing! Nik says one thing and then IN THE VERY NEXT SENTENCE he contradicts himself! This is great. Now all we have to do is sit back and watch them do themselves in.

anthonyl November 27, 2011 at 10:03 am

Mises is making the point that wealth is creative and enriches everyone. The 18th century philosophers paved the way for this kind of respect for the emerging society based on individual liberty and markets. People coopt the achievements of this process and claim the victory of a higher standard of living as originating with governments but this is never the case. In the long run governments only make us poorer.

anthonyl November 27, 2011 at 10:21 am

What great fortunes do you speak of?

I see what you are trying to say. The achievements only came about after people were not allowed to make fortunes using leverage which you’re misinterpreting as slavery. Though this is not true. There are many fortunate people today eventhough slavery is gone. In fact there are people today with greater fortunes than people ever could achieve before.

That’s the point Mises makes. The realization that wealth comes from serving others, not making slaves of others.
Why would one pay slaves?

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