Contra Marx, Mises understood that human desires and needs are not determined merely by biology.
Karl Marx held that human interests are “uniquely and entirely determined by the biological nature of the human body.”1 He thought that people were exclusively interested in gaining as many tangible goods as they could. Therefore, a person’s wants would not depend on his ideas but on his physiological condition. More is better.
The question Ludwig von Mises posed, on the other hand, is: More of what?
Economics is concerned with how this is decided. It is one thing to say that under socialism men enjoy their toil because they will find self-actualization in producing goods for each other. It is another thing entirely to demonstrate who, under socialism, will choose what is made for whom, how, where, with what, and by whom.
The basic economic problem, as it is sometimes called by economists, is that resources are scarce but human wants are unlimited. While primitive men faced with starvation (and animals) may well only be interested in the quantity of food the can secure, as soon as civilization reaches its early stages people are faced with the problem of choosing which one of their various competing desires they should satisfy. Given there are various ways of satisfying the same needs, they also have to answer the question of how they should satisfy them.
Mises defines human action itself as the employment of scarce means for the attainment of preferred ends. To act is to choose between two or more things that we cannot have both of, preferring one and setting aside the other.2
Under capitalism different business owners attempt to make competing products in all different ways, and the consumer will ultimately decide which of them get rich and which go out of business. Each of us, as customers, apply our scarce means, setting aside some products to buy others, and in doing so we decide what is produced and by whom. How is the same going to be determined efficiently in a moneyless society where wage labor has been abolished, such as Marx envisaged?
We Act Based on Our Idea of What Is Best for Us
Ultimately, some authority must decide. This is unsatisfactory to Mises. For him, a free man gets to decide himself how he spends his income, but in a society where an authority supplies those things they think the people need—or ought to have—men are not free. Marxism does not differentiate between these two modes of want satisfaction and therefore does not apprehend the difference between freedom and slavery. The Marxian image of freedom looks more like this: “If a man who wants to get the bible gets the Koran instead, he is no longer free.”3
To Mises, people can only determine for themselves their own interests, and the authority cannot give the people what they choose according to their own values, but only according to what the authority thinks their values ought to be. If the “paltry” individual disagrees, so much the worse for him. Mises writes: “One does not serve the interests of a man who wants a new coat by giving him a pair of shoes or those of a man who wants to hear a Beethoven symphony by giving him admission to a boxing match. It is ideas that are responsible for the fact that the interests of people are disparate.”4
This remains an issue of contention to this day. Should the consumer decide what kind of healthcare they receive, or is it better if the government decides on their behalf and supplies it to them as a public service? While socialized healthcare is a popular idea, those who can afford private services usually avail themselves of the best they can buy. This reveals that most people accept that the private sector does a better job of providing healthcare than the state. Those who cannot afford private care in countries with socialized medicine have to accept whatever they are given. They cannot push administrators to improve the quality of services by threatening to “take their business elsewhere.” Similarly, politicians are sometimes the subject of scandals when the media unearths the fact they sent their children to a private school. It is roundly taken as an admission that they don’t believe the services provided by government are good enough for their own children but are willing to impose them upon their constituents.
Mises says that even if we granted, for the sake of argument, that there was no uncertainty concerning what people wanted or how it should be produced, there would still remain the question of weighing people’s short-term interests against their long-term ones. Everyone has to evaluate for himself how much he values the health that comes from strict exercise and diet, for example, against the enjoyment of leisure and tasty snacks. This depends on one’s own, individual ideas and subjective evaluations.
The same applies on a larger scale for production in society. Should we save more so that more can be invested in machines and technology that will make society wealthier in the long term, or should we enjoy increased material standards of living in the here and now? There is no correct, objective answer to such a question. A subjective evaluation has to be made by someone or some people. Under capitalism individuals make their own decisions as to how much to consume and how much to save, and the aggregatation of those individual decisions forms the final answer. Under socialism—who knows? Usually it is left to a government department to guess and impose their will upon the people. Invariably this leads to mass overproduction of certain commodities and underproduction of others. Sadly too often it has led to famine: in the Soviet Union from 1921–22 and 1946–47, as well as in the Ukraine (1932–34), China (1958–62), Cambodia (1979), Ethiopia (1983–85), and in North Korea (1995–99). To Mises these famines were not chance occurrences that could have happened under any system. They were a direct result of the fact that under socialism central planners have no reliable means of calculating what to produce or how to produce it, and were completely predictable by economic theory.5
Marx does not attempt to solve this problem. Perhaps he never even considered that it might actually be a problem. He simply claimed that socialism, as the next stage in history, would be an earthly paradise in which questions such as these would settle themselves and everyone would get all they needed. The Land of Cockaigne, as Mises likes to refer to it.
How to Achieve the Socialist Paradise?
Of course, if this were true, then no one could deny that socialism was in everyone’s interests. Who could oppose it? The problem begins when any discussion of how they will get what they need is dismissed as “unscientific.” This may well be why all attempts at communism have so far not only failed but resulted in death and misery for countless victims. The primary reason these regimes fail is not merely because their leaders were evil, although they may have been, or because America intervened to undermine the regime—as it certainly did, for example, in Nicaragua, Venezuela, Cambodia, East Timor, and many other places. The fundamental reason was because of a failure to organize production.
In a hypothetical paradise people would no longer need any ideas. They wouldn’t have to make judgments and evaluate which course of action is likely to secure their needs. All would be given. However, in reality, ideas determine what people consider to be their interests. A person’s interests cannot be independent of their ideas. It is ideas that determine what people consider their interests to be. You can say it is in my interests to eat well, but that’s only if I want to live and be healthy. If I choose to die, or am already dying and want to eat chocolate cake until I finally pop off, then who can dispute my evaluation of my interests? Free men do not act in accordance with their interests, because what their interests are are an arbitrary questions of judgment. We act invariably upon what we believe our interests to be.