The Online Library of Liberty

A project of Liberty Fund, Inc.

• Foreword to the Liberty Fund Edition
• Part 1: The Free Market Economy Versus Government Planning
• 1: Planning For Freedom *
• 2: Laissez Faire Or Dictatorship *
• 3: Capital Supply and American Prosperity *
• Part 2: Money, Inflation, and Government
• 4: Middle-of-the-road Policy Leads to Socialism *
• 5: Inflation and Price Control *
• 6: Economic Aspects of the Pension Problem *
• 7: Wages, Unemployment, and Inflation *
• 8: The Gold Problem *
• Part 3: Mises: Critic of Inflationism and Socialism
• 9: Benjamin M. Anderson Challenges the Philosophy of the Pseudo-progressives *
• 10: Lord Keynes and Say’s Law *
• 11: Stones Into Bread, the Keynesian Miracle *
• 12: Liberty and Its Antithesis *
• Part 4: Ideas
• 13: My Contributions to Economic Theory *
• 14: Economic Teaching At the Universities *
• 15: The Political Chances of Genuine Liberalism *
• 16: Trends Can Change *
• 17: Profit and Loss *

Foreword to the Liberty Fund Edition

In 1947, Ludwig von Mises received a letter from a complete stranger who had been reading Mises’s book on money. One paragraph didn’t make sense to him. He asked Mises for clarification. The letter writer was Fred C. Nymeyer, an Illinois businessman. In his reply, Mises complimented Nymeyer: His “thoroughness and critical acumen” in studying his book was “very flattering indeed for the author. You represent the unfortunately very rare type of discriminating readers for whom alone it is worthwhile to write books.”1 As a result of that exchange, Nymeyer and Mises soon met and became close friends.

Nymeyer believed the economic understanding he had gained from his study of Mises and the Austrian School of Economics had contributed to his success in business and he wanted to say thanks in some way. At Mises’s suggestion, therefore, he published in 1951, as a monograph, “Profit and Loss,” a paper Mises had given that year at the Beauvallon, France, meeting of the international free-enterprise Mont Pèlerin Society. Later when Nymeyer suggested putting out an anthology of several of Mises’s papers, Mises asked that “Profit and Loss” be included. Thus, Planning for Freedom appeared in 1952 with “Profit and Loss” plus eleven other Mises essays and addresses undoubtedly selected by Mises himself.2 A second edition of Planning for Freedom, enlarged by the addition of a thirteenth essay, came out in 1962, followed by a third memorial edition (1974) and a fourth edition (1980), which reprinted four more Mises papers, bringing the total to seventeen. The later editions of this anthology, published after Mises’s death in 1973, included also, as a tribute to Mises, various papers by other authors about him. As these additional materials have been covered in the burgeoning post–1980 Mises literature, they have been deleted here, making this edition of Planning Freedom a collection of Mises’s writings exclusively. Further, the articles and papers in this edition have been rearranged by subject into four parts: “The Free Market Economy versus Government Planning,” “Money, Inflation, and Government,” “Mises: Critic of Inflationism and Socialism,” and “Ideas.”

Many changes have taken place in the world during the decades since these papers were written. The trend toward interventionism has been slowed in some countries, speeded up in others. Editor’s notes have been introduced in this edition to explain some of these changes, as well as Mises’s references to historical events.

Many of the papers in this collection were written as speeches. When addressing a one-time audience, Mises always chose his words carefully and precisely. He sought to make complex topics—inflation, price controls, capital investment, social security, unemployment, etc.—simple and easy for his listeners to understand.

For instance, on price controls, if the government imposes a ceiling on the price of milk because it considers its price too high and because it wants the poor to be able to give their children more milk, farmers whose costs are so high that they cannot stay in business and sell milk at the controlled price will stop producing milk and will produce butter, cheese, or meat instead. The result: less milk for poor children (“Middle-of-the-Road Policy Leads to Socialism,” p. 43–44).

On market operations: “There is nothing automatic or mysterious in the operation of the market. The only forces determining the continually fluctuating state of the market are the value judgments of the various individuals and their actions as directed by these value judgments. . . . Supremacy of the market is tantamount to the supremacy of the consumers. By their buying and by their abstention from buying the consumers determine not only the price structure, but no less what should be produced and in what quantity and quality and by whom. . . . They make poor men rich and rich men poor” (“Inflation and Price Control,” p. 53–54).

When it comes to money, Mises rejected the imprecise definition of inflation as “higher prices.” For him, “Nothing is inflationary except inflation, i.e., an increase in the quantity of money in circulation and credit subject to check (check-book money). And under present conditions nobody but the government can bring an inflation into being” (“Wages, Unemployment, and Inflation,” p. 73).

“The inevitable result of inflationary policies is a drop in the monetary unit’s purchasing power. . . . In an industrial society all deferred payments must be stipulated in terms of money. They shrink with the shrinking of the money’s purchasing power. A policy of deficit spending [government spending in excess of income] saps the very foundation of all interpersonal relations and contracts. It frustrates all kinds of savings, social security benefits and pensions” (“Economic Aspects of the Pension Problem,” p. 64–65).

The longest, and by far the most important, paper in this collection is “Profit and Loss.” Mises was driven by the firm belief that the only way to save civilization and to promote peace and prosperity among nations was to change the ideas of the people. He fought to educate with the only weapons available to him—the spoken and written word. He did his best to explain free market principles, capitalism, and the workings of the market economy. Clarity of expression was extremely important. When a student asked a question in class, Mises quite often urged him to write down his ideas—in Mises’s view, the discipline of writing, of having to be precise, might very well help him answer his own question. Mises, of course, practiced what he preached; the books and articles he wrote are legion. In his magnum opus, Human Action (1949), Mises had written as precisely and as clearly as he could about all aspects of economics. Yet after publishing Human Action, Mises thought he could improve his explanation of profit and loss, so he took advantage of an opportunity to present a paper before the Mont Pelerin Society to explain still more fully entrepreneurial profits and losses. In that analysis, reprinted here, he destroys the Marxian theme that profits deprive laborers of their full share of production, that profits come from exploiting consumers, that profits are compensation for risk taking, management, or time. Successful entrepreneurs, Mises points out, actually create new wealth. They convert (transform, combine, refine, transport) raw materials and labor whose value is not fully recognized, or whose potential as factors of production may not even be recognized at all, into goods and services consumers want and are willing to pay more for than the costs incurred in their production. If the entrepreneurs’ returns from consumers exceed their costs, they earn profits. And in the process, they alleviate economic maladjustments. There is nothing normal or guaranteed about profits. An entrepreneur whose ideas, decisions, and actions fail to serve consumers suffers loss.

In the opening essay of this collection, Mises points out the futility of trying to change the world by government planning. His constant themes are that ideas are important, that ideas can change, and that new ideas can change the world. Anyone aware of world events since these articles were written will recognize that new ideas since then have changed the world in many respects, although not always in the freedom direction. How then does Mises recommend planning for freedom? “There is no other planning for freedom and general welfare than to let the market system work.”

Bettina Bien Greaves

September 2006

[1. ] When Mises checked the paragraph Nymeyer had questioned (p. 108 in the 1934 British translation), he discovered that the German original had indeed been misinterpreted. “Your criticism,” he wrote Mr. Nymeyer, “is fully justified. . . . If a new edition of the English translation is made, I will alter the passage concerned so as to avoid confusion.” A corrected translation of this paragraph has been made on pp. 129–130 of Liberty Fund’s 2005 printing of their edition of The Theory of Money and Credit.

[2. ] Mises suggested to Nymeyer later that the three-volume work Kapital und Kapitalzins by Mises’s mentor and professor Eugen von Böhm–Bawerk should be translated into English in its entirety and final version. As a result Nymeyer financed its translation by Hans F. Sennholz, then a student at New York University working for a doctorate under Mises, and published it as Capital and Interest (Libertarian Press, 1959).