Lesson 27.75 | Ludwig Von Mises

Austrian Economist apart of the Austrian School. Focused on Free Markets and Human Action

What is his influence today

Influences Libertarian Thinkers, and Debates about central banking and government intervention.

What do his critics say?

Say that his ideas rely too much on theory and dismiss government roles in stabilization.

What were his 2 major contributions to Economic Thought?

1.) Economic Calculation Problem
- Problem that without private property and market-determined prices for factors of production, a central planner has no objective way to calculate costs or efficiently allocate resources toward their most valued uses.

- Without market exchange, there are no prices.
- Without prices, central planners cannot perform the cardinal accounting (profit and loss analysis), leading to the misallocation of capital.

2.) Austrian Business Cycle Theory
- Theory stating “Booms and Busts” are due to monetary intervention by central banks.

What was Mises’s Other major contribution relating to social sciences?

Praxeology:
Study of why and how people act and choose to reach their goals, based on the fact that Humans act for a reason.

Deductions:
- Action is not a reflex, it is purposeful choice.

- Actions are for a goal, because you want to change your current situation. If you were satisfied, you wouldn’t do anything.

- Actions cost, because time and resources are limited, meaning something must be sacrificed.

- Actions cannot be predicted by math or stats. They can only be done through logic.