Front Page Titles (by Subject) 6.: The Plea for Moral Reform - Interventionism: An Economic Analysis
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6.: The Plea for Moral Reform - Ludwig von Mises, Interventionism: An Economic Analysis 
Interventionism: An Economic Analysis, Edited with a Foreword by Bettina Bien Greaves (Indianapolis: Liberty Fund, 2011).
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Interventionism was written by Ludwig von Mises in 1940 and is here translated from the original German by Thomas Francis McManus and Heinrich Bund. Editorial additions and index © 1998, 2011 by Liberty Fund, Inc. Interventionism was originally published in 1998 by Foundation for Economic Education, Inc.
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The Plea for Moral Reform
Before we proceed, however, it appears advisable to give consideration to a doctrine which deserves some attention, if for no other reason than because it is backed by some of our most distinguished contemporaries.
We refer to the belief that it does not require the intervention of the government to bring the market economy to ways other than those it takes when it is able to develop unhampered. Christian social reformers and some representatives of an ethically motivated social reform think the religious and moral conscience ought to guide the “good” person in the economic realm as well. If all entrepreneurs would watch not only their profit and their selfish individual interests but would always think also of their religious and social obligations, the orders of the government would not be necessary to bring things into the proper channels. Not reform of the state would be required, but rather a moral purification of mankind, a return to God and to the moral law, an abandonment of the vices of selfishness and egoism. Then, it would not be difficult to bring private property of the means of production in accord with the social welfare. One would have freed the economy of the pernicious consequences of capitalism without having restricted, by governmental intervention, the freedom and initiative of the individual. One would have destroyed the Moloch Capitalism without having it replaced with the Moloch State.
We do not have to deal here with the value judgments underlying this doctrine. What these critics find objectionable in capitalism is irrelevant, and the errors and misunderstandings they expound need not concern us. We are only interested in their suggestion to build a social order on the dual foundation of private ownership of the means of production and of a moral law delimiting the exercise of this property right. This ideal social order supposedly is not socialism because under it the individuals, particularly the entrepreneurs, capitalists, and proprietors, are no longer guided by the profit motive, but by their consciences. Nor is it supposed to be interventionism, because it does not require governmental interventions to secure the working of the economic machine.
In the market economy the individual is free in his actions as far as private property and the market extend. Here, only his valuations count. Whatever he may choose, the choice he makes prevails. His action is, for the other parties in the market, a fact which they have to take into account. The consequences of his action in the market are reflected in profits or losses; they are the one cog fitting his activity into the machinery of social cooperation. Society does not tell the individual what to do and what not to do; nobody gives orders and demands obedience, no force is used unless for the protection of private property and of the market against violence. The cooperation is the result of the workings of the market. Those who do not fit themselves to the best of their ability into the social cooperation feel the consequences of their rebellion, their negligence, their errors and mistakes. This coordination does not require anything more from the individual than acting in his own interest. Therefore, there is no need of orders from an authority telling the individual what to do and what not to do, and there is no need of a power instrument to enforce such orders.
Beyond the realm of private property and market exchange lies the realm of unlawful actions; there society has erected barriers for the protection of private property and of the market against force, fraud, and malice. Here freedom no longer reigns, but compulsion. Here, not everything is permitted, here a line is drawn between the lawful and the unlawful. Here the police power is ready to intervene. If it were any different every individual would be free to break through the barriers of the legal order.
The reformers whose suggestions we are here discussing want to establish additional ethical norms besides the legal order and the moral code designed to maintain and to protect private property. They desire results in production and consumption different from those produced by the unhampered market in which there is no limitation upon the individuals save the one not to violate private property. They want to eliminate the forces which guide the actions of the individual in the market economy. They call them selfishness, egoism, the profit motive, or the like, and they want to replace them with other forces. They speak of conscience, of altruism, of awe of God, of brotherly love. And they want to replace “production for profit” with “production for use.” They believe that this would suffice to secure the harmonious cooperation of men in an economy based on the division of labor so that there would not be any need for interventions—commands and interdictions—by an authority.
The error inherent in this doctrine is that it fails to recognize the important part the forces which it condemns as immoral play in the workings of the market. Precisely because the market economy does not demand anything from the individual with regard to the use of the means of production; precisely because he does not have to do anything not in his own interest; precisely because the market economy accepts him as he is; and precisely because his “egoism” is sufficient to coordinate him to the whole of social cooperation, his activity does not need the direction of norms nor of authorities enforcing the adherence to these norms. If the individual looks out for his own interest within the framework provided by private property and market exchange he is doing everything the society expects of him. In following the profit motive his action necessarily becomes social.
By trying to replace the profit motive, the guiding principle of private ownership of the means of production, by so-called moral motives, we are destroying the purposiveness and the efficiency of the market economy. Simply by advising the individual to follow the voice of his conscience and to replace egoism by altruism we cannot create a reasonable social order which could supplant the market economy. It is not enough to suggest that the individual should not buy at the lowest price and should not sell at the highest price. It would be necessary to go further and to establish rules of conduct which would guide the individual in his activity.
The reformer thinks, for instance, the entrepreneur is hard and selfish when he uses his superiority to undersell his less efficient competitor and thus forces him to give up his entrepreneurial position. But just what is the “altruistic” entrepreneur to do? Shall he never sell at prices below those of any one of his competitors? Or shall he, under certain conditions, have the right to undersell competitors?
The reformer thinks also: The entrepreneur is hard and selfish when he takes advantage of market conditions and refuses to sell the goods cheaply enough to make them available to the poor who cannot afford them at the prevailing high price. What is the “good” entrepreneur supposed to do? Shall he give the goods away? As long as he asks any price for them, no matter how low, there will always be a demand which will not be satisfied. Which potential buyers is the entrepreneur entitled to exclude from the acquisition of the goods by insisting on a certain price?
We do not have to analyze here in detail the consequences of a deviation from the market price. If the seller is not permitted to undersell his less efficient competitors at least a part of the supply will not be sold. If, in the interest of the poor, he is supposed to sell below the market his stock will not be sufficient to satisfy all those who are willing to pay his low price. We shall have more to say on this matter in our analysis of interferences with the price structure.6 Here, we merely wish to emphasize that it is not enough simply to tell the entrepreneur that he should not be guided by the market. We would have to tell him what to do. We would have to tell him how far to go in his price concessions and price demands. If the profit motive will no longer determine what and in what quantities he is to produce we shall have to give him definite orders which he will have to obey. This means that his activity must be guided by the very type of authoritarian orders which the reformers tried to make superfluous by appealing to conscience, morality, and brotherly love.
When we speak of “just” prices and “fair” wages we have to keep in mind that the only standard by which we can measure the justice and fairness of prices and wages is their compatibility with an ideal social order. If this ideal social order is sought outside of the market economy, then it cannot be realized by merely exhorting the individual to be “just” in his actions. It is necessary to specify what is just or unjust in each instance. Furthermore, rules must be established exactly regulating all possible cases, and an agency must be authorized to interpret these norms authentically, to enforce them, and also to supplement and modify them whenever necessary. It is irrelevant whether this authority is the worldly state or a theocratic priesthood.
Reformers address their plea for the abandonment of egoism in favor of altruism to the entrepreneurs and proprietors, sometimes to the workers. But the decisive factors in a market economy are the consumers. They determine the attitudes the entrepreneurs and proprietors take. Therefore this plea should be addressed to the consumers. The reformers would have to make the consumer renounce the better and cheaper goods so as to protect less efficient producers. The consumers would have to boycott those goods the sale of which endangers the continuance of conditions which appear socially desirable. And the consumers would have to impose upon themselves restrictions in their buying so as to make it possible for their less wealthy fellow citizens to purchase. If the reformers expect this attitude from the consumer, then they would have to tell him just how, where, and what he should buy, and at what prices. In addition they would have to take measures to force the consumer who does not follow these instructions to obey. But then the reformers would have done precisely what they wanted to avoid, namely, they would have regulated the economy by definite orders and would have penalized the disobedience of such orders.
Interference by Restriction
[6. ]Cf. below, chapter II, section 2.