Prior to World War I, Mises had established himself as a leading economic theorist among the younger generation in German-language economics, and in fact in Continental Europe more widely, with The Theory of Money and Credit (1912). During the subsequent interwar years of the 1920s and 1930s, Mises’s reputation as a theorist and methodologist spread internationally.
Mises’s status as an economic thinker because this book, Socialism: An Economic and Sociological Analysis, played a major role in establishing that reputation. In his article “Bertil Ohlin,” Paul Samuelson speculated that, had the Nobel Prize in Economic Sciences been established when the other prizes were, Mises would have been one of the early recipients.
Mises’s status as an eminent economist is also evidenced by the fact that he is invoked in various well-known and iconic works, such as Albert Hirschman’sThe Passions and the Interests or John Kenneth Galbraith’s The Affluent Society
Samuelson’s speculation is based on Mises’s contributions to technical economics in value theory, capital theory, and monetary theory. The acknowledgements from the likes of Hirschman and Galbraith are due to Mises’s contributions to social philosophy.
A Classic in Our Time
Socialism promised to rid the world of social ills and usher in an era of peace and harmony. The promise made was that “Paradise on Earth” was within our collective will. The exploitation of man by man would be abolished, and, for the first time in human history, a just social world would be in the grasp of mortals here on earth.
With regard to socialist proposals, this meant that the examination was about whether collective ownership of the means of production (the means chosen) would be effective at realizing the ends sought (the rationalization of production and the ensuing burst of productive capacity that would enable the social harmony promised).
All the dream-aspirations in the world cannot curtail the fundamental problem with socialist organization that Mises had scientifically dissected.
The argument Mises provides is straightforward. Without private ownership in the means of production, there will not be a market in the means of production. Without a market for the means of production, there will not be monetary prices established on the market (which reflect the exchange ratios, or relative trade-offs people are willing to make). And, without monetary prices, reflecting the relative scarcities of different goods and services, there will be no way for economic decision-makers to engage in rational economic calculation.
The reason why this objection is so decisive is because it requires the reader to consider explicitly how much they take for granted, given that they live within a market economy where so much of the necessary foundation for social cooperation under the division of labor is simply part of the background of our mundane economic existence.