trying to understand one of Mises lectures

Miscellaneous Newbies
1

The text is about how people think we have a ‘mixed economy’ because there are some government operated and run enterprises “like the telephone, telegraph, and railroads”

the text that confuses me is:

“That some of these institutions and enterprises are
operated by the government is certainly true. But this
fact alone does not change the character of our economic
system. It does not even mean there is a “little socialism”
within the otherwise nonsocialist, free market economy.
For the government, in operating these enterprises, is
subject to the supremacy of the market, which means it
is subject to the supremacy of the consumers. The government—
if it operates, let us say, post offices or railroads—
has to hire people who have to work in these
enterprises. It also has to buy the raw materials and
other things that are needed for the conduct of these
enterprises. And on the other hand, it “sells” these services
or commodities to the public. Yet, even though it
operates these institutions using the methods of the free
economic system, the result, as a rule, is a deficit. The
government, however, is in a position to finance such a deficit—at least the members of the government and of
the ruling party believe so.
It is certainly different for an individual. The individual’s
power to operate something with a deficit is very
limited. If the deficit is not very soon eliminated, and if
the enterprise does not become profitable (or at least
show that no further deficit losses are being incurred),
the individual goes bankrupt and the enterprise must
come to an end.
But for the government, conditions are different. The
government can run at a deficit, because it has the power
to tax people. And if the taxpayers are prepared to pay
higher taxes in order to make it possible for the government
to operate an enterprise at a loss—that is, in a less
efficient way than it would be done by a private institution—
and if the public will accept this loss, then of
course the enterprise will continue.
In recent years, governments have increased the number
of nationalized institutions and enterprises in most
countries to such an extent that the deficits have grown
far beyond the amount that could be collected in taxes
from the citizens. What happens then is not the subject
of today’s lecture. It is inflation, and I shall deal with
that tomorrow. I mentioned this only because the mixed
economy must not be confused with the problem of interventionism”

so im deducting that there is no amount/limit of interventionism that would create socialism just as long as the people are willing to be taxed for it and that it doesnt interfere with a free market?

i will definately have follow up questions once people translate the text.

I’m definately new to this stuff. I’ve always been politically active and love talking/arguing politics with people. I’ve always believed that in our political system that it was a necessary evil to vote and support politians even though you do not agree with everything they support because there was no set politically theory/principle/guidelines that they should follow. Now i feel retarded wasting so much time understanding politics when i should of been studying the underlying economic principles. I wrote off Ron Paul in '08 because i followed mainstream/media thought that he was crazy and reckless. I also was in the Marine Corps and didnt have enough time to really listen and understand his ideas. I’m out now so i started really studying Ron Paul because he was so close to everything ive believed in my whole life and what i believe America stands for. However i completely disagreed with his foreign policy in the realm of national defense (i completely agreed with his economic foreign policy). I couldnt with good conscience vote or support someone who is wrong with the most fundamental principle of government (protecting the people). So i picked up one of his books so i could understand where he is coming from and why he believes that way. NOW i dont understand how or why i used to believe that way (once again i was retarded). The sad part is i knew everything he was saying. That is the way i believe(d) our local, state, and national government should act as a society, but for some reason i excused our actions/policy because it involved/involves foreign nations whose government was/is immoral and criminal.

Also thanks to everyone who started the Mises Institute and contributed to its success because this web page is giving me enlightenment on almost all aspects of my life and life in general.

2

This is a good point.

This is approaching the right answer, but doesn’t go far enough. Mises’ point here is that government intervention is socialism. Mises here argues, as he does elsewhere including Planned Chaos, that it is impossible to have such a concept as a mixed economy. The market is a descriptive term, which amounts to the voluntary networks of interacting producers and consumers exchanging goods and services. As such, a system of pricing develops as a basis for economic calculation- how much of A should be produced, how costly is A’s production, is there a demand for A, when should A be produced, what is the least costly method of producing A, and so on. These calculations are vital for the successful allocation of scarce goods, which have alternative uses. This is what allows goods to be exchanged to where they are more needed from where they are needed less. If you’d like a greater elaboration, I would recommend Economic Calculation in a Socialist Commonwealth by Mises.

Every so often, the government feels inclined to intervene in the economy. While the intentions may be good, the effects of such intervention are contrary to economic efficiency as such interventions necessarily distort the price system. And so, each intervention yields satellite problems from the ‘corrected’ version of the original problem. So the government places a price ceiling on A, which means the value of the factors of production involved in producing A, such as B, C, D, also decline; because of the value of the factors involved in producing these goods are diminished, the same goes on, and so forth. Mises’ point is that, no matter how long it may take, this ideology necessarily leads to complete socialization of the economy.

Any attempt on the part of the government to intervene in the market necessarily interferes with the free market; the free market being categorized by private property rights and the Non-Aggression Principle. The government, as an entity that is a private property expropriating property protector, can’t not interfere in the market.

Hope this helps-

3

The lecture can be found here: http://mises.org/etexts/ecopol.asp

Here is an outline of what he is doing. His topic for the night is going to be interventionism. But before he discusses interventionism, he wants to make sure we don’t confuse “interventionism” with a “mixed economy”, because they are not the same thing.

So he begins by saying that a mixed economy is when the govt owns a business, like the post office, say, and runs it like anyone else would run a business, subject to the same market forces as anyone else.

Interventionism is something else. It is not when the govt runs a business, but when the govt imposes economic edicts that everyone in the country has to follow, like minimum wage, or price controls, or an insistence that all gasoline sold must contain 10% ethanol. These laws are certainly not a case of the govt running its own business, but of forcing all people to do things differently than they want to. That is interventionism.

Then he goes off and discusses interventionism at length for the rest of the lecture.

Now, when describing what he means by a mixed economy [the govt running a business] he mentions as an aside that govt businessess always lose a lot of money, and can get away with it because they can tax people. But that whole subsection is but a digression from the main topic, defining a mixed economy, which is itself only mentioned to put it away for the night and talk about interventionism.