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VOLUME 59, NO 7 SEPTEMBER 2009 Features 8 Human Action, 1949: A Dramatic Episode in Intellectual History by Israel M. Kirzner 12 Human Action: The 60th Anniversary by Bettina Bien Greaves 16 Human Action: The Treatise in Economics by Peter Boettke 19 What Human Action Has Meant to Me: Reflections of a Young Economist by Peter T.Leeson 22 The Case for Capitalism by Henry Hazlitt 28 A Triple Whammy for Austrian Economics by Sanford Ikeda 31 In Defense of Ideology by Mario J. Rizzo 34 Transforming America: The Bush-Obama Stimulus Programs by Randall G. Holcombe Page 16 39 The Myth of Unregulated Tobacco by Bruce Yandle Columns 4 Ideas and Consequences ~ In the Grip of Madness by Lawrence W.Reed 26 Our Economic Past ~ The Rise of Big Business and the Growth of Government by Robert Higgs 42 Give Me a Break! ~ Competition Would Save Medicine, Too by John Stossel 55 The Pursuit of Happiness ~ EFCA and Compromise by Charles W.Baird Page 26 Departments 2 Perspective ~ Human Action as a Work of Art by Sheldon Richman 6 Saving Is Killing the Economy? It Just Ain’t So! by Steven Horwitz 44 Capital Letters Book Reviews 50 New Deal or Raw Deal? How FDR’s Economic Legacy Has Damaged America by Burton Folsom, Jr. Reviewed by Robert Higgs 51 The Gridlock Economy: How Too Much Ownership Wrecks Markets, Stops Innovation, and Costs Lives by Michael Heller Reviewed by Art Carden 52 The Complete Idiot’s Guide to Global Economics by Craig Hovey with Gregory Rehmke Reviewed by George C. Leef 53 One Nation Under Debt: Hamilton, Jefferson, and the History of What We Owe Page 50 by Robert E. Wright Reviewed by David L. Littmann Perspective Human Action as a Work of Art Published by The Foundation for Economic Education hat can one say briefly about Human Action? Irvington-on-Hudson, NY 10533 When it was being written and people Phone: (914) 591-7230; E-mail: [email protected] www.fee.org Wwould ask what it was to be about, the answer given among Mises’s students was: Everything. President Lawrence W.Reed Editor Sheldon Richman Indeed. Managing Editor Michael Nolan From the setting forth of praxeology as the a priori Book Review Editor George C. Leef science of human action, to the description of the mar- Columnists ket’s operation, to the explanation of the business cycle, Charles Baird David R. Henderson to the proof that rational central planning is impossible, Donald J. Boudreaux Robert Higgs Mises’s work is nothing less than a work of art. It faith- Stephen Davies John Stossel Burton W.Folsom, Jr. Thomas Szasz fully captures the elegant orderliness of social reality that Walter E.Williams grows out of the logic of human action. I could go on, Contributing Editors but instead I will reprint here, slightly edited, what I Peter J. Boettke Dwight R. Lee wrote in these pages nine years ago. I can’t improve on it. James Bovard Wendy McElroy If I had to pick my favorite sentence in all of Mises’s Thomas J. DiLorenzo Tibor Machan Joseph S. Fulda Andrew P.Morriss Human Action (a daunting task in a 900-page book), it Bettina Bien Greaves James L. Payne would be this one:“The fact that my fellow man wants John Hospers William H. Peterson shoes as I do does not make it harder for me to get Raymond J. Keating Jane S. Shaw Daniel B. Klein Richard H.Timberlake shoes, but easier” (p. 673 of the Third Revised Edition). Lawrence H.White That sentence may seem rather pedestrian compared to Foundation for Economic Education all the sentences Mises used to establish the science of praxeology (human action) and to spin out its countless Board of Trustees, 2008–2009 implications for economics. But it’s a perfect example of Wayne Olson, Chairman Lloyd Buchanan Walter LeCroy how Mises showed that untutored intuitions about William Dunn Frayda Levy social interaction are often wide of the mark. Jeff Giesea Kris Mauren There is an old school of thought, widely identified Ethelmae Humphreys Roger Ream Edward M. Kopko Donald Smith with the Reverend Thomas Malthus, but actually quite older, that held the opposite of Mises’s position. Begin- The Foundation for Economic Education (FEE) is a ning with the undeniable assumption of scarcity, that non-political, non-profit educational champion of individual liberty, private property, the free market, school believed the human race was doomed to misery. and constitutionally limited government. Population would grow until it strained the carrying The Freeman is published monthly, except for combined January-February and July-August issues. Views expressed by capacity of the environment; then starvation, disease, the authors do not necessarily reflect those of FEE’s officers and conflict would set in and scale back the numbers. and trustees. To receive a sample copy, or to have The Freeman This process was assumed to be more or less the perma- come regularly to your door, call 800-960-4333, or e-mail [email protected]. nent fate of mankind. The Freeman is available on microfilm from University Microfilm How could it not be? Growing numbers of people International, 300 North Zeeb Road,Ann Arbor, MI 48106. would be vying for limited resources. Life had to be Copyright © 2009 Foundation for Economic Education, except for graphics material licensed under Creative Commons poor, nasty, brutish, and short—though not, as Hobbes Agreement. Permission granted to reprint any article from had it, solitary. this issue, with appropriate credit, except “Competition Would Save Medicine,Too.” Mises was surely not the first to see it otherwise, but Cover: Detail from portrait of Ludwig von Mises by George V. he was second to none in spelling out why the pes- Augusta, 1971. simists are wrong. He first seemed to concede their THE FREEMAN: Ideas on Liberty 2 PERSPECTIVE: Human Action as a Work of Art point, then zeroed in on what they missed.“The char- economics department in the United States; and Peter acteristic mark of the ‘state of nature,’” Mises wrote,“is Leeson, visiting professor at the University of Chicago irreconcilable conflict. The means of subsistence are and one of the rising stars of Austrian economics. scarce and do not grant survival to all . .The source Finally, the Human Action tribute winds up with Henry of conflict is always the fact that each man’s portion Hazlitt’s 1949 Newsweek column about the treatise. curtails the portions of other men.” Hazlitt had much to do with introducing Mises to What saves man from the dismal existence of wild American readers. animals? The division of labor, the first topic taken up I hope you enjoy the photo spread of Mises reflecting by Adam Smith in The Wealth of Nations. As Mises his close association with FEE. put it, “What makes friendly relations between human Also in this issue, Sanford Ikeda registers his discon- beings possible is the higher productivity of the tent with economics reporting in the newspapers, espe- division of labor. It removes the natural conflict of cially the way the definitions squeeze out any place for interests. For where there is division of labor, there is Austrian economics. no longer question of the distribution of a supply not Barack Obama would have us believe he is ushering capable of enlargement.” Mises drives home the point: in a post-ideological age, where preconceived notions “Because many people or even all people want bread, are equated with dogmatism. Mario Rizzo cautions clothes, shoes, and cars, large-scale production of these that to throw out ideology is to throw out something goods becomes feasible and reduces the costs of important. production to such an extent that they are accessible at The last year of Fed expansion, bank nationalizations, low prices.” “stimulus” spending, and bailouts has put the American The upshot is that because of the productivity spe- economy even deeper into the arms of the State. In fact, cialization makes possible, the rest of the animal king- Randall Holcombe says, these measures and precedents dom holds few lessons for mankind. Anyone who have fundamentally changed the U.S. economy. believes government’s role is to temper the market with Congress has decreed that tobacco will no longer go cooperation needs to learn that lesson. The market unregulated. Unregulated? Are those folks in Washing- is cooperation. ton joking? Bruce Yandle relates the long history of tobacco regulation. * * * Here’s what our columnists have whipped up: To celebrate the 60th anniversary of the publication Lawrence Reed wants to know who bailed out whom of Mises’s Human Action, we’ve brought together several over the last year. Robert Higgs looks at big business’s high-powered contributors, spanning several genera- role in the emergence of American statism. John Stossel tions, all with a special connection to the man and the imagines what would result from a truly competitive groundbreaking book: Israel Kirzner, who earned his healthcare system. Charles Baird looks at the Employee Ph.D. under Mises at New York University and who is Free Choice Act. And Steven Horwitz, reading claims regarded as the dean of Austrian economics; Bettina Bien that saving is keeping the economy in recession, Greaves, a retired FEE staff member who was Mises’s responds,“It Just Ain’t So!” close friend, attended his NYU seminar, and compiled This issue’s reviewers scrutinize books on the New a bibliography of his work; Peter Boettke, a leading Deal, ownership, global economics, and debt. member of the “third generation” of American Aus- Readers react to past articles in Capital Letters.

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