Opinion from a Libertarian ViewPoint

Posts Tagged ‘Trade’

What Mises Understood about Prices and Trade That Socialist Economists Did Not – Foundation for Economic Education

Posted by M. C. on February 14, 2023

However, when the utter failure of socialist economics was definitively exposed for all to see in the demise of the Soviet Union, Robert Heilbroner, who had spent most of his career as an unabashed socialist, raised the white flag and admitted that Mises was correct about socialism in a September 1990 New Yorker article entitled “After Communism.”

Walter Block
Walter Block
Robert Batemarco
Robert Batemarco

Socialism is a very popular system. Vermont Senator Bernie Sanders attracts thousands of fellow economic innocents on college campuses, and even professional economists of the ilk of Paul Samuelson were taken in by the siren song of this ineffective and evil system. (He predicted in his economics textbook that the USSR would overtake the American economy).

There stood Ludwig von Mises, like the Rock of Gibraltar, standing in the path of socialists of all types and varieties. He laid down the line: under socialism without free market prices, planning would necessarily be irrational. How and why, then, the existence of this pernicious system in Russia from 1917 to 1991 with the dissolution of the Soviet Union. How is it that socialism still exists in places like Cuba, North Korea, and Venezuela? That is because market prices, generated elsewhere, were available to the economic dictators. During the period of USSR socialism, there was the Chicago board of trade and Consumers’ Reports. They made market prices available to the Soviet planners; they were a not-totally-unreasonable approximation to Russian realities. Nowadays, at least quasi-market prices are available in many areas of the world (they are only quasi since every government, bar none, engages in taxes and subsidies, price ceilings and floors, etc., which would not exist in the pure free market, and thus still misallocate resources on their basis).

Without prices that reflect consumer desires and relative scarcities, it is impossible to determine whether platinum or steel should be used, for example, for rails for locomotives. The former is more efficient, but is needed elsewhere in the economy. But to what degree? Or, should a tunnel be dug through a mountain; or should the new road go all around it? The former is much more expensive, now, but will save gigantic transportation costs for years to come. Without accurate prices and interest rates, it is impossible to make a rational calculation of the relevant benefits and costs. Should rowboats be constructed of wood, metal or plastic? A rational decision, again depends upon free market prices, which are to the economy what maps are to geography.

It is no accident that there was virtually one-way traffic between East and West Germany, and between North and South Korea. The latter in each pair instituted systems that were at least within sight of the free enterprise, private property, limited government system advocated by Mises. The former were—and now are in the case of last mentioned—economic basket cases.

But Mises’ contribution to the socialist calculation debate—in his 1922 book Socialism: An Economic and Sociological Analysis—was but the tip of the iceberg in terms of his overall accomplishments. He also made important contributions to the theory of money in his 1912 book The Theory of Money and Credit. There, he demonstrated that whichever monetary commodity arises from the free interplay of market forces is the only path to soundness. He must be credited with a critique of interventionism (small interventions escalate); he did so in his 1977 book A Critique of Interventionism. In many of his publications he made the case for private property rights and economic freedom (the two are necessarily intertwined). His sterling contribution to the Austrian business cycle theory (an artificial lowering of the interest rates creates an unsustainable boom, which necessarily ends in a depression) can be found in his 1912 book, The Theory of Money and Credit.

Perhaps his most profound contribution concerns praxeology (in his 1962 book, The Ultimate Foundation of Economic Science and especially in his magisterial 1949 book, Human Action). This is the view that there is such a thing as economic law, which can only be illustrated, not tested. 

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The Humanity of Trade | Mises Institute

Posted by M. C. on December 28, 2021

Yet, if we base our thinking on the natural urge of the individual to better his circumstances and widen his horizon, operating always under the natural law of parsimony (the most gain for the least effort), we are compelled to the conclusion that effort which does not add to the abundance of the marketplace is useless effort.

Frank Chodorov

Wherever two boys swap tops for marbles, that is the marketplace. The simple barter, in terms of human happiness, is no different from a trade transaction involving banking operations, insurance, ships, railroads, wholesale and retail establishments; for in any case the effect and purpose of trade is to make up a lack of satisfactions. The boy with a pocketful of marbles is handicapped in the enjoyment of life by his lack of tops, while the other is similarly discomfited by his need for marbles; both have a better time of it after the swap.

In like manner, the Detroit worker who has helped to pile up a heap of automobiles in the warehouse is none the better off for his efforts until the product has been shipped to Brazil in exchange for his morning cup of coffee. Trade is nothing but the release of what one has in abundance to obtain some other thing one wants. It is as pertinent for the buyer to say “thank you” as for the seller.

The marketplace is not necessarily a specific site, although every trade must take place somewhere. It is more exactly a system of channeling goods or services from one worker to another, from fabricator to consumer, from where a superfluity exists to where there is a need. It is a method devised by man in his pursuit of happiness to diffuse satisfactions, and operating only by the human instinct of value. Its function is not only to transfer ownership from one person to another, but also to direct the current of human exertion; for the price indicator on the chart of the marketplace registers the desires of people, and the intensity of these desires, so that other people (looking to their own profit) may know how best to employ themselves.

Living without trade may be possible, but it would hardly be living; at best it would be mere existence. Until the marketplace appears, men are reduced to getting by with what they can find in nature in the way of food and raiment; nothing more. But the will to live is not merely a craving for existence; it is rather an urge to reach out in all directions for a fuller enjoyment of life, and it is by trade that this inner drive achieves some measure of fulfillment. The greater the volume and fluidity of marketplace transactions the higher the wage level of Society; and, insofar as things and services make for happiness, the higher the wage level the greater the fund of happiness.

The importance of the marketplace to the enjoyment of life is illustrated by a custom recorded by Franz Oppenheimer in The State. In ancient times, on days designated as holy, the marketplace and its approaches were held inviolable even by professional robbers; in fact, stepping out of character, these robbers acted as policemen for the trade routes, seeing to it that merchants and caravans were not molested. Why? Because they had accumulated a superfluity of loot of one kind, more than they could consume, and the easiest way of transmuting it into other satisfactions was through trade. Too much of anything is too much.

The marketplace serves not only to diffuse the abundances that human specialization makes possible, but it is also a distributor of the munificences of nature. For, in her inscrutable way, nature has spread the raw materials by which humans live over the face of the globe; unless some way were devised for distributing these raw materials, they would serve no human purpose. Thus, through the conduit of trade the fish of the sea reach the miner’s table and fuel from the inland mine or well reaches the boiler of the fishing boat; tropical fruits are made available to northerners, whose iron mines, translated into tools, make production easier in the tropics. It is by trade that the far-flung warehouses of nature are made accessible to all the peoples of the world and life on this planet becomes that much more enjoyable.

We think of trade as the barter of tangible things simply because that is obvious. But a correlative of the exchange of things is the exchange of ideas, of the knowledge and cultural accumulations of the parties to the transaction. In fact, embodied in the goods is the intelligence of the producers; the excellent woolens imported from England carry evidence of thought that has been given to the art of weaving, and Japanese silks arouse curiosity as to the ideas that went into their fabrication. We acquire knowledge of people through the goods we get from them. Aside from that correlative of trade, there is the fact that trading involves human contacts; and when humans meet, either physically or by means of communication, ideas are exchanged. “Visiting” is the oil that lubricates every marketplace operation.

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The Dumbest Thing Ever Said about Trade – LewRockwell

Posted by M. C. on September 4, 2018

Trade fosters peace and goodwill.

The only battlefield we should be worrying about is the marketplace.


Just recently, on the South Lawn of the White House, Trump spoke about the U.S. economy after the Bureau of Economic Analysis released the latest GDP figures. Naturally, since Trump is an economic nationalist with a mercantilist mindset, and his ignorance and incoherence on trade know no bounds, he made these statements:

Perhaps one of the biggest wins in the report, and it is indeed a big one, is that the trade deficit—very dear to my heart, because we’ve been ripped off by the world—has dropped by more than $50 billion. $52 billion, to be exact. It’s dropped by more than fifty. Think of that. The trade deficit has dropped by more than $50 billion.

At the same time, we are finally cracking down on decades of abusive foreign trade practice. We were abused by companies. We were abused by the companies within countries. But in particular, we were abused by countries themselves, including allies. Abused like no nation has ever been abused on trade before. Because we had nobody watching. They stole our jobs and they plundered our wealth. But that ended.

Trump makes America sound like a helpless, abused stepchild. Read the rest of this entry »

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