The Austrian economist Ludwig von Mises believed that the world is made up of contrasting experiences and that personal choices create the physical reality that each individual experiences. In his work, Human Action: A Treatise on Economics, von Mises presents a case for laissez-faire capitalism based on his research on human decision making.
Mises believed that the scientific method within economics is not as effective as the laws of apodictic certainty, which is individual objective expression rooted in Aristotelian logic or natural epistemology. Epistemology is an innate way of knowing. Apodictic propositions are clearly provable and logically certain so a free-market economy will outdistance any government-planned economy and act as a foundation for civilization, according to von Mises.
Human action is, as Mises described it, the application of human reason to select the best means to satisfy an end. The mind grades and evaluates different choices and that process can be considered economic calculation. Mises believed that economic calculation is a common trait in all people. The logical mind is the same for everyone, according to Mises, but that's not the same as saying that all minds are the same.
Even in contentment there is action, but Mises believed that a final state of rest involves perfect plans to satisfy human desires. All plans are imperfect but the action itself attempts to improve the plans so moving from a state of rest to another state of rest is the process of change or the expansion of economic calculation.
Mises also links profits and progress. Voluntary trade profits are an indicator of economic success in Mises's thoughts. The monetary calculation of profits is the measuring stick that determines whether a company generated a net increase in consumer well being over economic costs.
Market prices are indispensable in terms of improving the human condition when economic calculation and monetary calculation are closely associated. Monetary calculation takes place primarily in financial markets and is a vital component in entrepreneurship, which is at the center of all progress as well as failure.
Entrepreneurs who estimate costs more effectively enjoy high profits while serving consumers, while entrepreneurs that miscalculate monetary costs suffer financially and stop production or economic action.
According to Mises, Human Action is a natural trial and error system, and it is the only process that really matters in a thriving economic atmosphere. Financial speculation, entrepreneurship and monetary calculation are the foundation for Mises's Human Action masterpiece.
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