The Commentary


Check out this timely article by Jeffrey Tucker of Laissez Faire Books to subscribers on the classic insights of Mises in his very accessible book Liberalism:

Business Goes Bonkers: Canadian Edition Dear Laissez Faire Today Reader, What's the most striking difference between government and the market economy?

Ludwig von Mises had a surprising answer, one he explained in his stunning 1927 book Liberalism, the e-book of the week released into the Laissez Faire Club.

Mises said it was cost accounting. In the noncommercial bureaucracies of government, everything is a guess. You don't know how much to spend on what, whether there is any rational point to what you are doing, whether this plan or that plan succeeded or failed, where to cut if you have to, which managers or sectors are doing a good job and which are failing.

The public sector is faking it all of the time.

Why? Because government doesn't have access to pricing signals that allow it to calculate profit and loss. Therefore, it has no real guide to assess the economic worthiness of anything it does. Lacking this rationality, bureaucracies always end up following the whims of unchecked power.

They are lorded over by bullies, pushed around by politics and stagnate into factories of confusion and bitterness. Private enterprise is different. In the world of commerce, pricing signals rule.

There is a test for how resources are used. Expansions and cuts are guided by balance sheets. Employees are producers who are valued, and not exploited.

Whether the business is big or small, it follows the same path and always watches that North Star of profitability, which, in turn, is ultimately guided by the decisions of consumers.

For this reason, wrote Mises, monetary calculation and cost accounting constitute the most important intellectual tools of the capitalist entrepreneur.

Mises celebrated the famous statement by Goethe, who pronounced the system of double-entry bookkeeping "one of the finest inventions of the human mind."

Now, you might be asking: Well, if that's true in theory, something has gone terribly wrong in practice. Private enterprise sometimes seems as screwy in practice as government. It makes irrational decisions. It fosters bureaucracy. It follows the whims of politics. It goes through manic booms and busts.

What's up? Mises explained this too, in this same book. The cause is what he called interventionism. The more the government regulates, intrudes, taxes, erects barriers, wrecks the money, wages war, confiscates, prohibits and all the rest, the more private enterprise is subject to the same irrationality that permanently rules government. Mises' description from 1927 reads like he is looking into a crystal ball. It's utterly chilling.

It's also thrilling. Why?

Because he helps the reader understand. So much becomes clear once you see the world the way he does.


Take advantage of the opportunity to read this new edition of his great classic. We asked the great London-based intellectual entrepreneur Toby Baxendale to write the introduction, and it is smashing one. He really provides a new look at this wonderful book. 


You can get Liberalism by joining the Laissez Faire Club now. The book releases on Friday."


The Comments


Mises gave us the basis of how human action works in the context of being human. Comments?