In the first three pages of Human Action, Mises says that the liberal economics of Cantillon,
Hume, Smith and others -- more specifically, the unbiased, or amoral, study of human interaction
and interdependence under particular conditions -- was a totally new "domain" of human
knowledge. It could not correctly be called logic, mathematics, psychology, physics, nor biology.
For the first hundred years, however, people who studied this new knowledge believed that this
domain was confined "to a narrow segment of the total field of human action, namely, to market
phenomena."(p. 2) Toward the end of the 19th century this changed. The vehicle of change was
the emergence of the subjective theory of value. The subjective value theorists showed how, in a
market economy, all value could be traced causally to the subjective evaluations of individuals
acting in particular roles and performing particular functions. This exercise laid the foundation for
the development of a procedure that could be used for comprehending distinctly human action and
interaction of all types.
The subjective value theorists did not complete the job. "In the Methodenstreit between the
Austrian economists and the Prussian Historical School...and in the discussions between the
school of John Bates Clark and American Institutionalism,"(p. 4) the subjectivists tried to defend
the new domain of knowledge against Historicism and Positivism. However, they had an
incomplete grasp of the subjectivist system of thought. As a result, they could not defend it
against those who did not recognize the new domain. Mises sets out to overcome this
shortcoming by building "[t]he system of economic thought...up in such a way that it is proof
against any criticism on the part of irrationalism, historicism, panphysicalism, behaviorism, and all
varieties of polylogism."(p. 7)
Two different kinds of arguments have been made to the effect that economics is
"backward." First, "narrow- minded" naturalists and physicists criticize economics "for not
applying the methods and procedures of the laboratory." One task of Human Action is to
"explode this fallacy." Second, social critics have argued that social science has not been able to
solve social problems. These critics do not realize that the great progress in technology and the
standard of living were the consequence of policies advocated by the liberal economists.
But the lessons of the liberal economists have not been fully appreciated. Witness the rise of
Marxism and the spread of its ideas.
The destructive wars and social disintegration of the "this age" are due to the banning of
liberal teaching or, more fundamentally, to an anti-capitalist mentality.
Another aim of this treatise is to show that it is a mistake to think that because economics takes no position on values, it is useless in our understanding of "life and action."
2. What is so special about the subjective theory of value that its use enables "us" to realize that
this new domain of knowledge is not confined to market phenomena? Indeed, what is the
subjective theory of value and how does it differ from the teachings of Cantillon, etc. Is the
subjective theory of value the same as neoclassical economics?
3. Was John Bates Clark a discoverer of the subjective theory of value? If so, why did not a
branch of "Austrian economics" develop in the U.S. Or did it? And if so, what happened to it?
4. What is the meaning of all of those "isms" -- e.g, panphysicalism, polylogism?
5. Were the great advances in technology a consequence of the teachings of the liberal
6. Can future wars be prevented by the adoption of policies advocated by the liberal economists?
What are these policies?
7. From the discussion in the Introduction, what are Mises's goals in writing this treatise. If we can identify these goals, perhaps we can later evaluate this work by making a judgment about whether he achieves them.