Planning for Freedom: Let the Market System Work: A Collection of Essays and Addresses (Library of the Works of Ludwig Von Mises) [Paperback]

Planning for Freedom is very much like two other books by Mises: Liberalism, the Classical Traditions and Bureaucracy. This book is notable for its clarity and brevity. It is a much easier read that Human Action. Anyone who wants to learn Austrian Economics would do well by starting with the two aforementioned books (see also Cost and Choice by JM Buchanan and Hayek's Individualism and Economic Order).

The section on Profit and Loss is perhaps the most insightful essay in this collection. Profits are the product of superior foresight in a world where nobody can fully anticipate the future economic conditions. Mises recognized that profits in a free market represent superior planning, rather than so called market power. This is important because it undermines numerous misconceptions regarding the need for governmental regulation of business.

Mises examines other types of intervention as well, especially inflation. Inflation is not merely a tax, as most economists recognize. Inflation disrupts commerce by misdirecting capital investment. Inflation and other forms of intervention do not yield their intended results. Intervention results in economic regress instead of improved economic order.

The arguments of this book have not gained widespread acceptance by either most economists or the educated public. But this is due primarily to their unfamiliarity with these arguments. If proponents of intervention considered Austrian economics carefully, they would find it difficult to defend their position. That is why this book is important. Planning for Freedom makes it easier to understand the Mises-Hayek case for free markets. You do not need to plow through 881 pages (in Human Action) to understand Mises. Reading the 168 page in this book (or the 134 pages of Bureaucracy) will suffice.

I find it difficult to review books I'm enthusiastic about because I want to mention everything. Since this would not be helpful to a potential customer, I'll confine myself to commenting on one my favorite essays in this collection, "Stones into Bread: The Keynesian Miracle." (As I understand it, the idea of turning stones into bread is a reference to Matthew (4:3), in which Satan proposes to Jesus that he use his powers literally to perform such a miracle.)

The one conviction sustaining the Federal Reserve and its policy of low interest rates is the idea that cheap credit promotes prosperity. Indeed it does. It also inaugurates and sustains the trade cycle, which means the period of prosperity contains the seeds of its own destruction. If the banks continue to loan money at below-market interest rates, the eventual result will be the destruction of the currency through hyperinflation. If the banks raise interest rates to slow the rise in prices, which has been the historical pattern in the U.S., the result is a cessation of activities thought to be profitable but which in fact aren't. Prices drop, businesses fail, unemployment rises in what is usually called a recession or depression.

John Maynard Keynes, the British economist referred to in the essay's title, stated in a 1943 essay ("Paper of the British Experts") that a policy of bank credit expansion would perform the miracle of turning a stone into bread. I roughly interpret this to mean credit expansion - the creation of money from nothing -- would increase the real wealth of the nation. As Mises discusses, Keynes and his disciples dismissed those who thought differently as being "orthodox" or "reactionary." Today, of course, such dissidents are simply ignored -- at least in the mainstream media.

Keynes had become something of a Messiah for central planners. Perplexed that governments' pro-unionism was followed by marked unemployment as the "orthodox " economists had predicted, the "'unorthodox' doctrinaires" found their salvation with the publication of Keynes' "General Theory" in 1936. Mises writes:

"The cause of unemployment [according to Keynes] was not the inappropriate labor policies, but the shortcomings of the monetary and credit system. No need to worry any longer about the insufficiency of savings and capital accumulation and about deficits in the public household. On the contrary. The only method to do away with unemployment was to increase 'effective demand' through public spending financed by credit expansion and inflation.

"The policies which the General Theory recommended were precisely those which the 'monetary cranks' had advanced long before and which most governments had espoused in the depression of 1929 and the following years."

Further on Mises tells us:

"Credit expansion, on an unprecedented scale engineered by the New Deal, for a short time delayed the consequences of inappropriate labor policies. During this interval the Administration and the union bosses could boast of the 'social gains' they had secured for the 'common man.' But now [1948] the inevitable consequences of the increase in the quantity of money and deposits has become visible; prices are rising higher and higher. What is going on today in the United States is the final failure of Keynesianism."

Keynesianism has failed, but unfortunately for us and our posterity, it still dominates political policy. We shouldn't be surprised; it puts government in control of the economy and therefore of our lives. The government's central bank inflated us into the current crisis with cheap credit and is attempting to inflate us out of it with even cheaper credit. The alternative proposed by Ludwig von Mises in this outstanding collection of essays is to let the market work. If we had, the current crisis would have ended earlier this year. We need to educate ourselves on the nature and operation of free markets, and for lay readers Planning for Freedom is an excellent way to start.

George Smith
Author, "The Flight Of The Barbarous Relic"

I todays economic climate, this is a must read. There are two opposing idealogies that are at war with one another. This war is more evident today than ever before.