===== PAGE 1 =====

Ludwig von Mises
on Principle

Larry J. Eshelman*

and uncompromising defenders of laissez faire. He was also

an outspoken advocate of utilitarianism and the doctrine of
social expediency, and a critic of any kind of objective ethics such as
natural law or natural rights. This raises the obvious question as to
how successful Mises was in turning the sow’s ear of social expediency
into the silk purse of laissez faire.

Murray N. Rothbard’s answer is that Mises was not successful —
that no one, not even Mises, could accomplish such a feat (1982,
pp. 205-13). Henry Hazlitt (1964) and Leland Yeager (1992), on the
other hand, have argued that utilitarianism really is not the sow’s
ear that its critics have made it out to be—or at least not the brand
of utilitarianism that they attribute to Mises: indirect utilitarianism.
Furthermore, they argue that only utilitarianism, properly under-
stood, can provide a moral foundation for laissez faire.

While I agree with Rothbard that utilitarianism, whether direct
or indirect, cannot provide a principled defense of laissez faire, I shall
argue that Mises’s method of justifying laissez faire has more in
common with the natural rights approach of Herbert Spencer and
Auberon Herbert than the utilitarianism of Bentham and Mill. It
should be stressed that I am not disputing the easily documented fact
that Mises proclaimed himself to be a utilitarian, and was highly
critical, even scornful of natural law and natural rights doctrines
(Rothbard 1980). One can dredge up quote after quote where Mises
defends utilitarianism and social expediency and attacks natural law
and natural rights theories. On the other hand, one cannot ignore
Mises’s “apparent use of natural law-type constructs, in spite of his
explicit rejection of natural law” (Tucker and Rockwell 1991, p. 48).

} udwig von Mises was one of this century’s most principled

*Larry J. Eshelman is an independent scholar living in New York.

The Review of Austrian Economics Vol.6, No. 2 (1993): 3-41
ISSN 0889-3047


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4 The Review of Austrian Economics Vol. 6, No. 2

In trying to understand Mises’s relationship to the natural law
tradition, one should keep in mind, as Mises pointed out, that the
natural law tradition is made up of a “bewildering diversity of doc-
trines” (1957, p. 45). The same can be said of utilitarianism. Defend-
ers, as well as critics, of these traditions rarely agree as to what
constitutes their defining criteria. For example, if one believes that
the essence of the natural law tradition is the fusion of the “ought”
and the “is,” or the doctrine that Nature has a purpose and morality
consists in following Nature’s intentions, then clearly Mises stands
opposed to that tradition. There are, however, other important fea-
tures of the natural rights tradition, especially with regard to meth-
odology, that generally distinguish it from the utilitarian tradition.

In the next three sections I distinguish three different senses in
which one may be properly labeled a utilitarian: (1) a nonmoral
functionalist sense concerned with whether means are efficient; (2) a
moral sense concerned with social harmony; and (3) a methodological
sense in which alternative institutions and actions are compared with
regard to how well they promote utility. It is my contention that Mises
was a utilitarian in only the first two senses, and that his criticism
of the natural rights tradition is aimed mainly at what he conceived
to be itsirrational, nonfunctional aspects—i.e., its appeal to intuition.
In the remaining sections I argue that Mises’s methodological ap-
proach to morality is more akin to the principled (or categorical)
stance taken by defenders of the natural rights tradition rather than

the comparative stance taken by utilitarians such as Bentham and
Mill.

Functionalism versus Intuitionism

It is important to begin by clarifying what Mises means by utili-
tarianism, and this can best be done by understanding what he was
contrasting utilitarianism with. For Mises the alternative to utili-
tarianism is an appeal to “intuition” (1922, p. 360; 1966, p. 883;
1957, pp. 53, 58), to an “inner voice” (1933, p. 41; 1957, p. 53), to

I am not claiming that these three senses of utilitarianism are explicit in Mises’s
writings, but only that they help resolve the apparent conflict between Mises’s princi-
pled stance toward liberty and his professed belief in social expediency. My approach
to Mises’s utilitarianism is similar to that taken by Hans-Hermann Hoppe with regard
to Rothbard’s natural rights: “my approach . . . seems to be more in line with what
Rothbard actually does when it comes to justifying the specific norms of libertarianism
than the rather vague methodological prescriptions of the natural rights theorists”
(Hoppe 1988, p. 61). I hope to show that in spite of his professed utilitarianism, Mises
takes a principled approach to ethics that has much in common with the approach taken
by Rothbard and Hoppe.


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Eshelman: Ludwig von Mises on Principle 5)

“considerations hidden to the human mind” (1966, p. 148), to “arbi-
trary laws imposed upon man by a tyrannical Deity with which man
has to comply without asking any further questions” (1962, p. 105).
For the intuitionist moral laws are viewed as “instruments by means
of which God or Nature directs human action according to inscrutable
design” (1945, p. 223). Mises places natural law and natural rights
in the intuitionist camp, and therefore rejects them as irrational and
arbitrary.

Although I think that this turns the natural law tradition into a
straw man, it must be admitted that there have been strong intui-
tionist elements within the natural law and natural rights tradition.
For example, Aquinas postulated the special faculty of synderesis as
the source of our knowledge of principles of natural law, and Locke’s
principal argument for natural rights seems to hinge on the premise
that God is our Maker (1988, p. 271). What makes Bentham’s utili-
tarianism appealing to many rationalists, including Mises, is that
Bentham swept away the remaining intuitionist vestiges of natural
law. Unfortunately, Bentham threw out more than the murky bath
waters of intuitionism.

To avoid stacking the deck against the natural law and natural
rights traditions by identifying utilitarianism with reason and natu-
ral law with intuition, I suggest that we re-label this contrast as
“functionalism” versus “intuitionism.” As Hayek pointed out, if we
refer to “any critical examination of such rules and of institutions
with respect to the function they perform in the structure of society”
as utilitarianism, then “every one who does not regard all existing
values as unquestionable but is prepared to ask why they should be
held would have to be described as a utilitarian. Thus Aristotle,
Thomas Aquinas, and David Hume, would have to be described as
utilitarians” (1976, p. 17). What Aristotle, Aquinas, Hume, Bentham,
Mill, and Mises have in common is not some appeal to “the greatest
happiness for the greatest number,” but a belief that morality serves
some earthly social function and can be understood by reason, as
opposed to something “imposed on mankind by mysterious powers”
(1933, p. 42).

Although the term “utilitarianism” has become identified with
Bentham’s doctrine of “the greatest happiness for the greatest num-
ber,” i.e., with the maximization of utility or social welfare, one must
keep in mind that when Mises advocates utilitarianism he is often
simply advocating that we ask what the purpose of a policy, institu-
tion, etc. is and judge it by how well it achieves this purpose. As such,
functionalism is not a moral doctrine, although it can be applied to
morality. In the next section I will examine functionalism as it relates


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6 The Review of Austrian Economics Vol. 6, No. 2

to morality, but here I am concerned with generic, nonmoral function-
alism.

The functionalist judges acts (or policies) in terms of how ade-
quate (or efficient) they are as means for accomplishing a given end.
In other words, all “oughts” are hypothetical or conditional and are
of the form: “If you want to accomplish E, then you ought to do M.”
The end or goal is not judged. Only the means are judged as to
whether or not they are appropriate to the given end. Even if one
considers the goal evil, one can still judge certain means as more
appropriate for accomplishing that goal, and thus good, relative to
the goal. Thus Mises, as a functionalist, says, “if there were people
who consider it as the ultimate end of their endeavors to destroy
civilization . . . , then we could not help applying to their doctrines
the standard of their ultimate end” (1949b, p. 300). (There remains
the question as to whether it would be ethical to give helpful advice
to someone who is intent upon destroying civilization.)

This is the brand of utilitarianism with which Mises, like most
economists, feels most comfortable. He can make judgments without
abandoning the value-free stance of the economist. Mises speaks
(1966, p. 764) as a nonmoral functionalist when he asserts, “Econom-
ics does not say that . . . government interference with the prices of
only one commodity . . . is unfair, bad, or unfeasible. It says . . .
that it makes conditions worse, not better, from the point of view of
the government and those backing its interference.” Rothbard (1982,
p- 206) quotes this passage and asks, “{H]Jow does Mises know what
the advocates of the particular policy consider desirable?” But I do
not think this criticism hits the mark. Mises’s point is simply that
such policies will not accomplish their proclaimed goals. Those who
advocate a minimum wage, for example, may really want to make
nonunion labor uncompetitive, but their proclaimed goal is that they
want to help the poor. By showing that certain policies will have the
opposite effect from that proclaimed, the functionalist can undermine
the arguments used in support of these policies.

If people’s goals were so diverse that hardly any two people shared
the same goals, the functionalist would not have much to contribute.
But Mises contends that most people share certain goals. In particu-
lar, he asserts that most “people prefer life to death, health to
sickness, nourishment to starvation, abundance to poverty” (1966,
p. 154). In so far as the socialist or interventionist argues that his
policy will make people more prosperous, he is subject to criticism
from the functionalist standpoint (1927, pp. 7-8; 1966, p. 183). It
should be stressed that Mises is not giving any moral relevance to
the fact that the majority prefers prosperity to poverty. For the


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Eshelman: Ludwig von Mises on Principle 7

generic functionalist such facts concerning majority preferences have
only practical relevance—i.e., arguments concerning appropriate
means will be relevant to more people than if only a minority shared
this goal.

In order for nonmoral functionalism to be an appropriate mode of
argument, however, it is not enough that everyone agree upon the end
in question. While it may be true that most people value prosperity
and abundance, it is not true that these are their only goals (Rothbard
1982, p. 209). Almost any policy purporting to achieve a particular
end will affect other ends as well. The functionalist cannot ignore
these other ends. Suppose, for example, most people are willing to
trade off some prosperity for increased economic equality. The func-
tionalist’s argument that certain alternative policies lead to greater
prosperity is no longer relevant if these policies cause greater in-
equality. In fact, Mises recognizes this weakness in the functionalist
argument. He suggests that the socialist might reply to the argument
that there is greater prosperity under capitalism as follows: “Granted
that each individual will be worse off under socialism than even the
poorest under capitalism. Yet we spurn the market economy in spite
of the fact that it supplies everybody with more goods than socialism.
We disapprove of capitalism on ethical grounds as an unfair and
amoral system. We prefer socialism on grounds commonly called
noneconomic and put up with the fact that it impairs everybody’s
material well-being” (1966, p. 679). Mises’s comment is, “If no other
objections could be raised to the socialist plans than that socialism
will lower the standard of living of all or at least of the immense
majority, it would be impossible for praxeology to pronounce a final
judgment” (1966, p. 679).

Another problem with nonmoral functionalism is that it is not
very useful for making a case against forms of statist intervention
that have little effect upon prosperity, e.g., oppression of the majority
against a small minority (Rothbard 1982, p. 211). In order to attack
these forms of statist intervention, the laissez-faire liberal needs a
stronger argument than nonmoral functionalism—he needs some
kind of moral argument. As we will see in the next section, Mises
indeed does resort to a form of moral functionalism when defending
laissez-faire liberalism. I will argue in the subsequent sections,
however, that his moral functionalism is not the moral utilitarianism
of Bentham and Mill.

2Mises believes, however, that a “final judgment” can be made, because economic
calculation is not possible under socialism, and so socialism is not a realizable system.


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8 The Review of Austrian Economics Vol. 6, No. 2

Social Harmony

The functionalist approaches morality by first determining the func-
tion or end of morality, and then assessing various moral rules
according to how well they serve this function. For Mises, as for most
moral functionalists, the function of morality is the preservation of
the social order: “Everything that serves to preserve the social
order is moral; everything that is detrimental to it is immoral”
(1927, p. 34). “The ultimate yardstick of justice is conduciveness
to the preservation of social cooperation. Conduct suited to preserve
social cooperation is just, conduct detrimental to the preservation of
society is unjust” (1957, p. 54). If man were not a social being, he
would not need morality. “Morality consists in the regard for the
necessary requirements of social existence that must be demanded of
each individual member of society. A man living in isolation has no
moral rules to follow” (1927, p. 33). Throughout Mises’s writings the
stress is on the “preservation of society” (1966, p. 149), the “preser-
vation of peace” (1966, p. 149), and the “preservation of social coop-
eration” (1962, p. 105). For Mises, “Human society is an association
of persons for cooperative action” (1927, p. 18), and cooperation
presupposes peace. “Society has arisen out of the works of peace; the
essence of society is peacemaking” (1922, p. 59). “The goal of liberal-
ism is the peaceful cooperation of all men” (1944, p. 50).

To avoid the ambiguities associated with “utilitarianism” as a moral
theory and to avoid begging the question against “natural rights,” I
suggest we call anyone who views the primary aim of justice to be the
“securing a peaceful living together” a social harmonist.* Amoral ration-
alist, in the sense of a social harmonist, is someone who believes that a
society of morally rational individuals would exist in a state of social
harmony. In other words, it would be a peaceful society with no need for
coercion. Societies only have to resort to coercion because not everyone
is rational in this social sense. Mises explicitly states that social
harmony is the ideal and is possible: “The ultimate ideal envisioned
by liberalism is the perfect cooperation of all mankind, taking place
peacefully and without friction” (1927, p. 105). “If all men were able
to realize that the alternative to peaceful social cooperation is the
renunciation of all that distinguishes Homo sapiens from the beasts
of prey, and if all had the moral strength always to act accordingly,

3This paragraph and many similar observations throughout this essay concerning
Mises’s social theory owe much to Joseph Salerno’s essay, “Ludwig von Mises as Social
Rationalist” (1990).

*I am borrowing the label “harmonist” from Mises, although giving it a somewhat
wider connotation (1957, p. 40).


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Eshelman: Ludwig von Mises on Principle 9

there would not be the need for the establishment of a social appara-
tus of coercion and oppression” (1962, p. 98).

Mises’s stress upon preserving social peace certainly fits in with
the utilitarian tradition of J. S. Mill. When discussing justice, Mill
stresses social peace: “It is their observance [of the rules of justice]
which alone preserves peace among human beings; if obedience to
them were not the rule, and disobedience the exception, everyone
would see in everyone else an enemy against whom he must be
perpetually guarding himself” (Mill 1971, p. 54).

It should be pointed out, however, that this stress upon social
harmony, although part of the utilitarian tradition, is not unique to
that tradition. Herbert Spencer, for example, describes his theory of
justice as an “attempt to find a definite expression for the fundamen-
tal principle of harmonious social order” (Spencer 1978, p. 66). Given
that some utilitarians have claimed Spencer as a fellow-traveler, it
should be noted that Lysander Spooner, who has never been mistaken
for a utilitarian, states that the natural law is “the science of peace;
and the only science of peace; since it is the science which alone can
tell us on what conditions mankind can live in peace, or ought to live
in peace, with each other” (Spooner 1982, p. 5). Along these same
lines, Locke wrote that the law of nature “willeth the Peace and
Preservation of all Mankind” (Locke 1988, p. 271).

More generally, according to A. P. D’Entreves, one the foremost
scholars of natural law, the primary focus of much of the natural law
tradition has been on the preservation of society:

No doubt natural law, as a moral precept, extends to “all acts of
virtue.” But human laws cover only those aspects of human behavior
which imply a coordination with other men. Thus, properly speaking,
the laws of men do not primarily aim at virtue, but only at securing
a peaceful living together: they do not forbid all that is evil, but only
that which imperils society. (D’Entreves 1970, p. 84)

Thus, we must include as social harmonists not only utilitarians
such as Bentham and Mill but also modern natural rights theorists
such as Locke and Spencer and most ancient and medieval natural
law theorists. If there are any natural law theorists who really
advocate the principle, “let justice be done, though the world perish,”
as opposed to, “let justice be done, lest the world perish,” then they
are not social harmonists.

But if the debate between natural law theorists and utilitarians
is not over utility as defined in terms of social harmony, then what is
it about? I suggest that the basic difference is one of methodology.


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10 The Review of Austrian Economics Vol. 6, No. 2

This difference has been succinctly summarized by another modern
defender of natural law, Paul Sigmund, as follows:

For natural law theorists . . . utility is a result of the observance of
natural law principles, whereas for utilitarians the principles of
justice are an indication or codification of long-run utility. Both take
account of the same moral experience and both often come to the same
conclusions, but one emphasizes the a priori and universal character
of our moral conclusions about man in society, and the other empha-
sizes the basis for these conclusions in human desires and in a
posteriori effects which follow their adoption. (1971, p. 152)

Among classical defenders of natural rights, Herbert Spencer
most clearly articulated this methodological distinction in order to
distinguish his moral theory from the utilitarianism of Bentham and
Mill. Spencer did not reject the label “utilitarianism,” since he too
saw happiness as the “ultimate end” (1989, p. 109) or “creative purpose”
(1970, p. 61). What he objected to was making happiness “the rule of
human conduct” (1970, p. 60) since the idea of the greatest happiness
was “capricious” (1970, p. 27). Instead of trying to estimate the empirical
consequences of an action or a policy, morality should be concerned with
ascertaining “the conditions by conforming to which this greatest hap-
piness may be attained” (1970, p. 61). Spencer did not object to being
called a utilitarian, provided this label was qualified with the word
“rational” to distinguish his doctrine from the “empirical utilitarian-
ism” of Bentham and Mill (Spencer 1978, p. 494).°

Utilitarians have tended to either dismiss or misinterpret
Spencer’s point about method (in so far as they have paid any
attention to Spencer at all). J. S. Mill is typical in this respect. Mill,
in reply to Spencer’s criticism of utilitarianism, asserted that there
was no essential disagreement between Spencer and himself (and
Bentham), dismissing Spencer’s stress upon necessary consequences
as not very important (Mill 1971, p. 56). Others have taken Spencer’s
methodological point more seriously but have interpreted it as being
the distinction between direct (act) utilitarianism and indirect utili-
tarianism. According to John Gray,

Indirect utilitarianism may be defined as that species of utilitarian
theory in which a strong distinction is marked between the critical
and practical levels of moral thought, and in which the principle of

SLocke, who wrote before utilitarianism had been developed as a distinct theory,
made a similar methodological distinction: “Utility is not the basis of the law or the
ground of obligation, but the consequence of obedience to it” (Sigmund 1971, p. 93).


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Eshelman: Ludwig von Mises on Principle 11

utility is evoked, solely or primarily, at the critical level. Utilitarian
appraisals apply, not to conduct, but to the considerations which
govern conduct—not only social rules, but the whole body of senti-
ments, attitudes and dispositions which lead us to one thing rather
than another. (Gray 1989, p. 122)

Gray classifies both J. S. Mill and Spencer as indirect utilitarians.

Although it is true that Spencer believed that direct utilitarian-
ism would lead to social “confusion” (1970, p. 16), his objection was
much deeper than this. What Spencer mainly objected to in the
utilitarian philosophy was its lack of principle, i.e., its stress on
expediency. Now this may seem to be consistent with Gray’s point
about indirect utilitarianism: “Indirect utilitarianism is distinct from
a sophisticated act-utilitarianism view, then, because it requires that
certain practices and conventions be accorded enough weight for their
claims to be able to resist erosion by utilitarian appraisals” (Gray
1989, p. 130, italics added). Spencer thought, however, that if anything,
it was “incomparably less difficult” to “trace out the consequences a
given act will entail” than to do so for “some public measure,” but that
in neither case could one make “trustworthy inferences” (1970, p. 73).
Ironically, in one of the key texts that is supposed to provide evidence
that Mill was an indirect, and therefore, a principled utilitarian Mill
states, “All persons are deemed to have a right to equality of treat-
ment, except when some recognized social expediency requires the
reverse” (Mill 1971, p. 56). A little later he says, “Thus to save a life,
it may not only be allowable, but a duty to steal or take by force the
necessary food or medicine, or to kidnap and compel to officiate the
only qualified medical practitioner” (Mill 1971, p. 57). (Perhaps this
is a utilitarian’s ideal of resisting “erosion,” but to nonutilitarians it
looks more like a mud slide.)

Of course Mill’s failure to take a principled stance should not be
used to convict all indirect utilitarians. I argue in the next section,
however, that what I call the comparative—categorical contrast better
captures the distinction Spencer was trying to make than the direct-
indirect contrast. The direct-indirect distinction is a question of what
one should compare. The direct utilitarian compares acts, choosing
those whose consequences provide more utility. The indirect utilitar-
ian compares rules, institutions, policies, sentiments, choosing those
whose consequences provide more utility. In both cases, a compara-
tive approach is taken. The distinction between direct and indirect
utilitarianism is based on a distinction between what is being com-
pared. Spencer, on the other hand, rejects the comparative approach,
taking instead a categorical approach to social harmony.


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12 The Review of Austrian Economics Vol. 6, No. 2

Comparative versus Categorical Harmonists

The comparative harmonist compares the alternatives, whether they
be acts, rules, institutions, etc. and picks the best from among these
alternatives. Comparative harmonists differ as to how to choose
among alternatives. Some argue that happiness should be maxi-
mized, others that pain and suffering should be minimized. Others
argue for maximizing liberty instead of happiness. Still others, like
Hayek, argue for maximizing expectations or “chances of anyone
selected at random” (Hayek 1976, pp. 129-30). Some, like Bentham,
presuppose that happiness can be quantified and summed, whereas
others resort to devices such as taking the stance of an impartial
spectator or making decisions behind a veil of ignorance. But in all cases
these doctrines assume a moral framework in which the moral theorist
chooses the best from among the alternatives. Thus the comparative
harmonist can be described as a maximizer, although it should be
stressed that this means choosing the best among known alternatives,
not the best among all possible alternatives.

The categorical harmonist, on the other hand, believes there are
only two moral alternatives: social harmony or social chaos, the way
of reason or the way of the beasts.’ As Cicero put it, “There are two
types of conflict: one proceeds by debate, the other by force. Since the
former is the proper concern of man, but the latter of beasts, one
should only resort to the latter if one may not employ the former”
(Cicero 1991, p. 14). The categorical harmonist views those who are
not rational, i.e., who seriously imperil social harmony, as enemies of
the social order and thus subject to coercion. Whereas for the com-
parative harmonist the primary moral relationship is maximization,
for the categorical harmonist it is reciprocity—social harmony is
possible only among those who are committed to social harmony.

The categorical harmonist separates people into two general
classes—those within the law and those outside. Those who by their
actions demonstrate that they either have contempt for the social
order or are incapable of acting in accordance with social harmony
are declared outlaws and treated accordingly. Thus Locke writes,
“In transgressing the law of nature, the offender declares him-
self to live by another rule than that of reason and common equity”
(1988, p. 272). Furthermore, by putting oneself outside the reach of
reason, one forfeits one’s right to be treated as a reasonable being:
“IOlne may destroy a man who makes war upon him, or has

®0r to use Murray Rothbard’s apt phrase, the categorical harmonist adopts a
“polar analysis” (1970, p. 264).


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Eshelman: Ludwig von Mises on Principle 13

discovered an enmity to his being, for the same reason that he may
kill a wolf or a lion; because such men are not under the ties of the
common law of reason, have no other rule, but that of force and violence”
(1988, p. 279).

The comparative harmonist, on the other hand, does not automat-
ically declare those who disregard the conditions for social harmony
to be outlaws. His moral world is not so black-and-white, and for this
reason gives the illusion of being more humane and tolerant. Since
the underlying principle of morality for the comparative harmonist
is to maximize utility (or happiness or social welfare), the fact that
an individual is behaving irrationally—acting in ways that are harm-
ful to the social welfare—does not exclude this individual from being
included in the utility calculus.

This basic difference in moral outlook is reflected in how the
categorical and comparative harmonist justify punishment. For both
the categorical and the comparative harmonist, there is a presump-
tion against the use of physical force. This is what distinguishes social
harmonists from social nihilists—those who believe that might is
right. Categorical and comparative harmonists differ, however, con-
cerning what overrides this presumption against the use of force. For
the categorical harmonist, force is justified only against someone who
shows a disregard for social harmony. (The nihilist, by declaring
through his actions that he believes that might is right, can hardly
complain when we use force against him.) For the comparative

"In another passage Locke states, “a criminal, who having renounced reason, the
common rule and measure, God hath given to mankind, hath by the unjust violence
and slaughter he hath committed upon one, declared war against all mankind, and
therefore may be destroyed as a lion or a tiger, one of those wild savage beasts, with
whom men can have no society nor security: And upon this is grounded the great law
of nature, who so sheddeth mans blood, by man shall his blood be shed” (1988, p. 274).
Auberon Herbert takes a similar stance: “My justification [in knocking a thief down]
was, that he had established between himself and the rest of society the force relation,
and therefore I had to deal with him as I should have dealt with a wild beast that had
attacked me” (Herbert 1978, p. 101). “The men who do so restrain their neighbor, . . .
are men who disallow this universal law [against aggression], and therefore lose the
rights which they themselves possess under it” (p. 141). This same reciprocity based
moral framework is presupposed by Rothbard’s discussion (in the context of animal
rights) of what he calls the “Martian problem”: “If we should ever discover and make
contact with beings from other planets, could they be said to have the rights of human
beings? It would depend on their nature. If our hypothetical ‘Martians’ were like human
beings—conscious, rational, able to communicate with us and participate in the division
of labor, then presumably they too would possess the rights now confined to ‘earth-
bound’ humans. But suppose, on the other hand, that the Martians also had the
characteristics, the nature, of the legendary vampire, and could only exist by feeding
on human blood. In that case, regardless of their intelligence, the Martians would be
our deadly enemy and we would not consider that they were entitled to the rights of
humanity” (Rothbard 1982, p. 156).


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14 The Review of Austrian Economics Vol. 6, No. 2

harmonist, on the other hand, force is justified only by showing that
the consequences outweigh the intrinsically negative utility of the
use of force. Thus, for a categorical harmonist punishment is viewed
primarily as restitutional and retributive, whereas for a comparative
harmonist punishment is viewed primarily as a deterrent and for
reforming the criminal. The former is backward looking and proper
to a nomocratic social theory where justice is measured against one’s
relationship to law and the need to preserve social harmony. The
latter is forward looking and proper to a teleocratic social theory
where justice is measured against a goal—the maximization of utility.

In a society based on a categorical moral framework, if someone
disturbs the order of society, he is expected to restore the order—to
make restitution. If he refuses to be bound by that order, he, in effect,
declares himself an enemy of that order and becomes an outlaw and
is no longer protected by the law (or more precisely, not protected by
the law to the extent of, and in proportion to, his disregard for social
harmony). In a society based on a comparative moral framework, on
the other hand, punishment is justified only if it positively contrib-
utes to the overriding purpose of maximizing utility. The murderer’s
happiness counts just as much as everyone else’s, including his
potential victims. (This is a logical consequence of the principle that
“equal amounts of happiness are equally desirable, whether felt by
the same or different persons” [Mill 1971, p. 56].) The reason the
murderer can be justifiably restrained and punished is that the
resulting pain and suffering caused to the murderer (and, indirectly,
to his mother, friends, etc.) is outweighed by the pain prevented to
the rest of society. Punishment is justified only if the pain inflicted
by punishment is outweighed by the expected social benefits. Like-
wise, punishing someone who has not done anything that threatens
the peace of society is justified if the pain inflicted is outweighed by
the social benefit. Admittedly, comparative harmonists can come up
with plausible rationales why punishing the innocent would rarely
maximize utility. The point is, however, that, unlike the categorical
harmonist, the comparative harmonist has to do this in a roundabout
and rather tenuous manner, making some rather strong assumptions
about future consequences and the interpersonal comparison of utili-
ties.

Both the similarities and the differences between the compara-
tive and categorical harmonists are illustrated by how their defend-
ers attempt to justify these two moral frameworks. Both begin with
the individual’s desire for happiness, but even here there is a subtle
difference in emphasis. Whereas the comparative harmonist stresses
the individuals desire to maximize his own happiness, the categorical


===== PAGE 13 =====

Eshelman: Ludwig von Mises on Principle 15

harmonist tends to stress the universal law of self-preservation.
Many categorical harmonists go so far as to argue that each individ-
ual has a duty to preserve himself. Locke, for example, attempted to
ground this obligation by arguing that men are the “workmanship of
one omnipotent, and infinitely wise maker” (1988, p. 271), and so are
ultimately the property of God. Others, such as Aristotelian rights
theorists, have argued that the duty of self-preservation follows from
man’s inherent nature. But the categorical harmonist is not neces-
sarily committed to justifying a duty to preserve oneself—i.e., he
need not be committed to the strong assumption that a person who
fails to defend himself is irrational and violates his nature or God's
trust, and so should be condemned. What distinguishes the categori-
cal harmonist is that he starts with the fact that it is reasonable to
expect most people to try to preserve themselves (whether they
have a duty to or not), and, in particular, to defend themselves from
attack.

It is in the next step of the argument, the move from the individ-
ual’s desire for happiness to the derivation of the basic principle of
morality, that the comparative and categorical harmonists most radi-
cally differ. The comparative harmonist’s argument is always some
version of Mill’s notorious inference from the fact that each individual
desires his own happiness to the desirability of the general happiness
(1971, p. 37). The categorical harmonist, on the other hand, asks:
Given the nearly universal law that people will defend themselves
when attacked, under what conditions is social harmony possible?
The prototypical answer is given by Spencer. After noting that the
desire for self-preservation applies to all creatures, and thus lacks an
ethical quality, he takes the next step:

Ethical character arises only with the distinction between what the
individual may do in carrying on his life-sustaining activities, and
what he may not do. This distinction obviously results from the presence
of his fellows. Among those who are in close proximity, or even some
distance apart, the doing of each are apt to interfere with the doings of
others; and in the absence of proof that some may do what they will
without limit, while others may not, mutual limitation is necessitated.
The non-ethical form of the right to pursue ends, passes into the ethical
form, when there is recognized the difference between acts which can
be performed without transgressing the limits, and others which
cannot be so performed. (Spencer 1981, p. 150)

Auberon Herbert makes a similar move. Beginning with the premise
that “Underneath all life lies the great law of self-preservation,” he


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16 The Review of Austrian Economics Vol. 6, No. 2

notes that this is “a law which we may fulfill either by using force as
the animals do, or by universally accepting the reasonable relation
which, forbidding force, guarantees equal freedom to all” (Herbert
1978, p. 101).

In brief, although the comparative harmonist shares with the
categorical harmonist the goal of preserving society, this is seen only
as a first step, albeit a necessary one, toward a more ambitious goal.
The comparative harmonist judges the institutions of a society as
inadequate, no matter how peaceful that society may appear on the
surface, if these institutions can be modified so as to increase the total
social welfare. Of course, one must weigh the costs of making any
modification against future gains, and in practice a comparative
harmonist may be very conservative in weighing these costs, as
Bentham was, but in principle any institution is always subject to
revision since someone may come up with a new alternative that is
even better than any of the previous alternatives that have been
considered in the past. In essence the comparative harmonist is
always a social tinkerer.

Mises and Maximization

We can now address the question of whether Mises was a utilitarian
in the maximizing, comparative sense or whether he was a categorical
harmonist. In this section I argue that the evidence clearly indicates
that he was not a maximizer, and in the next section I take up the
question of whether he can more properly be classified as a categori-
cal harmonist.

Now it may seem that when Mises says that laissez-faire liberal-
ism promises “the most abundant possible satisfaction of all those
desires that can be satisfied by the things of the outer world” (1927,
p. 4), he does not leave much doubt that he is a moral utilitarian of
the maximizing variety. But as was pointed out in the first section,
when the issue is an agreed-upon policy goal, e.g., prosperity, then
Mises can as a value-free economist recommend certain liberal poli-
cies as the best means for accomplishing this goal. In any case, one
should not read too much into such statements. After all, natural
rights liberals also believe that laissez faire will lead to a better
world. More relevant are statements such as “the only yardstick that
must be applied to [law and legality, the moral code and social
institutions] is that of expediency with regard to human welfare”
(1966, p. 147). Here Mises leaves no doubt that he is advocating a
moral doctrine, not functionalism in general, and this moral doctrine
seems to imply the maximization of social welfare. But compare this
passage to a very similar passage: “The ultimate yardstick of justice


===== PAGE 15 =====

Eshelman: Ludwig von Mises on Principle 17

is conduciveness to the preservation of social cooperation. Conduct
suited to preserve social cooperation is just, conduct detrimental to
the preservation of society is unjust” (1957, p. 54). No categorical
harmonist would have problems with this passage. Furthermore, in
the former passage the very next sentence reads, “The utilitarian
economist does not say: Fiat justia, pereat mundus. He says: Fiat
justia, ne pereat mundus.” This is one of Mises’s favorite points: the
utilitarian rejects “Let justice be done, though the world perish” for
“Let justice be done, lest the world perish.” The contrast is between
destroying and preserving the social order, not between maximizing
and failing to maximize utility. Or consider the following passage,
“The policy of liberalism is the policy of the common good, the policy
of subjecting particular interests to the public welfare” (1922, p. 456).
Taken out of context, this is the kind of statement that one would
typically attribute to a social harmonist concerned with maximizing
utility. Mises immediately adds, however, that this is “a process that
demands from the individual not so much a renunciation of his own
interests as a perception of the harmony of all individual interests”
(1922, p. 456). What Mises clearly means is that in order for social
harmony to be possible, individuals cannot completely ignore other
individuals. This is fully consistent with the categorical harmonist’s
argument for rights.’

It becomes even more difficult to attribute a maximizing inter-
pretation to these passages in the light of other statements made by
Mises that seem to explicitly reject a maximizing view of utilitarian-
ism. These statements can be divided into two categories that parallel
the two major objections that critics have raised against utilitarian-
ism: (1) Utilitarianism demands that individuals be willing to sacri-
fice themselves to the greater good, but why should any individual
agree to do this? (2) Utilitarianism presupposes that interpersonal
comparisons of utility can be made; yet, this presupposition is highly
dubious, if not incoherent.’

Mises employs both these objections against moral doctrines that
he rejects. With regard to the first objection, Mises’s major criticism
of “anti-utilitarian” doctrines, in addition to his rejection of their

8Compare Herbert: “Man is predestined to find his complete happiness, as Mr.
Spencer teaches, only when the happiness of others becomes to him an integral part of
his own; but this development of his nature cannot take place unless he is living under
those true conditions which belong to a free life” (Herbert 1978, pp. 116-17).

See, for example, Narveson (1988, pp. 150-153). In addition to these two funda-
mental objections, critics have also argued that utilitarianism has certain counter-in-
tuitive implications—e.g., the punishment of the innocent under certain circumstances.


===== PAGE 16 =====

18 The Review of Austrian Economics Vol. 6, No. 2

appeal to intuition, is that they require self-sacrifice. According to
Mises, one of the contributions of “utilitarianism” is that the “dual-
ism of motivation assumed by most ethical theorists” was overthrown
(1922, p. 357). “Utilitarian philosophy . . . reduced these apparent
antagonisms [selfishness vs. altruism, economics vs. ethics, individ-
ual vs. society] to the opposition of short-run and long-run interests”
(1957, p. 55). This may be true of Mises’s brand of “utilitarianism,”
as it is true of those categorical doctrines of social harmony that
stress reciprocity, but it is not true of any maximizing doctrine of
social harmony.

It is instructive to contrast Mises with Henry Hazlitt on this
point. Although Hazlitt, who describes himself as a utilitarian, be-
lieves that “for 99 percent of the people 99 percent of the time, the
actions called for by enlightened self-interest and morality are iden-
tical” (1964, p. 124), “[t]here remains the rare case when the individ-
ual must be called upon to make a ‘genuine’ sacrifice” (p. 125). He
cites Bentham’s argument that we can be forced to help in Good
Samaritan situations if the cost to us is not too great, and as an
example he mentions forcing a doctor to “attend a patient suffering
from a contagious disease” or to aid victims of an epidemic (p. 111).
In these cases there is a conflict between long-term self-interest and
social utility, and the maximizing-utilitarian sides with social utility.
Mises, on the other hand, never admits to such a conflict, but repeat-
edly claims, as we have seen, that one of the major discoveries of
“utilitarianism” is that there is no such conflict."

With regard to the second objection to utilitarianism, given that
Mises believes that only ordinal comparisons of utility can be made
and that interpersonal comparisons of utility make no sense, it would
be surprising if he were then to try to base his moral theory upon the
maximization of utility. In fact, he is explicitly critical of any such
doctrine:

Some economists believe that it is the task of economics to establish
how in the whole of society the greatest possible satisfaction of all
people or of the greatest number could be attained. They do not
realize that there is no method which would allow us to measure the

Even Mises’s defense of conscription (one of his few lapses from a pure libertarian
position) is not cast in terms of maximizing utility, but as a condition that may
sometimes be necessary in order to preserve society from “ruthless oppressors” (1966,
p. 282). Underlying his argument is the assumption that defense is a public good. This
assumption met with little resistance, even among categorical harmonists (Spencer, for
example, makes a similar case for conscription [1978, p. 87)), until the public goods
argument itself was challenged by Rothbard (1962, pp. 883-90; 1970, ch. 1).


===== PAGE 17 =====

Eshelman: Ludwig von Mises on Principle 19

state of satisfaction attained by various individuals. They miscon-
strue the character of judgments which are based on the comparison
between various people’s happiness. While expressing arbitrary
value judgments, they believe themselves to be establishing facts.
(Mises 1966, p. 242)

He then adds, “The reformers searching for the maximum of general
satisfaction have told us merely what state of other people’s affairs
would best suit them” (1966, p. 243). In another context he raises the
question, “Is society, people asked, merely a sum of individuals or is
it more than this and thereby an entity endowed with independent
reality? The question is nonsensical. Society is neither the sum of
individuals nor more nor less. Arithmetical concepts cannot be ap-
plied to the matter” (1957, pp. 251-52)."

It should be emphasized that a comparative harmonist cannot
escape Mises’s objection against making judgments based on inter-
personal comparisons of utility by resorting to such devices as assum-
ing the role of an impartial spectator or making decisions behind a
veil of ignorance. In fact, Mises explicitly criticizes the “old liberals”
for assuming the stance of a “perfect king” whose only objective is to
make his citizens happy (a precursor to the impartial spectator):

[T]he economists compare this hypothetical system [embodying their
own value judgments], which in their eyes embodies the moral law
itself, with the market economy. The best they can say of the market
economy is that it does not bring about a state of affairs different
from that produced by the supremacy of the perfect autocrat. They
approve of the market economy only because its operation, as they
see it, ultimately attains the same results the perfect king would aim
at. (Mises 1966, p. 691)

Mises contends that the fiction of the “perfect king” contributed to
the modern notion of a godlike state.

Although one can find passages where Mises quotes Bentham’s
“greatest happiness” principle without comment (e.g., 1966, p. 175),
on other occasions he is rather dismissive. For instance, he charac-
terizes it as expressing “not very aptly” the view that laissez-faire
liberalism does not favor any special group (1927, p. 7). In another
passage he interprets it as simply meaning that social man “must
adjust his conduct to the requirements of social cooperation and look
upon his fellow men’s success as an indispensable condition of his

contrast Mill's statement that “the truths of arithmetic are applicable to the
valuation of happiness, as of all other measurable quantities” (Mill 1971, p. 56).


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20 The Review of Austrian Economics Vol. 6, No. 2

own” (1966, p. 833). He goes on say that “if we interpret welfare in
this manner, the concept is void of any special significance. It can
be invoked for the justification of every variety of social organiza-
tion. . . . A principle that is broad enough to cover all doctrines,
however, conflicting with one another, is of no use at all” (1966,
p. 834).

In summary, Mises believed, like Spencer and Herbert, that it was
legitimate to speak of the general welfare as the ultimate goal of
morality, but also like Spencer and Herbert, he did not believe that
one could give this principle any operational content. Its main value
is that it distinguishes the social harmonist from the moral intuition-
ist, but there is always the danger that it will be used as a cover for
special interests. As Mises stresses, “No decent man likes to be so
rash as to raise objections against the realization of welfare”; how-
ever, “in the mouths of the welfare propagandists the notion of welfare
has a definite meaning. They intentionally employ a term, the gener-
ally accepted connotation of which precludes any opposition” (1966,
p. 834). Although Mises does not believe that an appeal to the general
welfare can provide a definite guide to policy, he does not want to play
into the hands of the welfare propagandists by being misinterpreted
as being opposed to the general welfare.

Freedom is Indivisible

Having argued that Mises is not a comparative harmonist, but actu-
ally an astute critic of any maximizing moral framework, we must
now consider whether he can more properly be described as a cate-
gorical harmonist. This brings us back to the central question with
which we began: How could Mises be both a principled defender of
laissez faire and a defender of the doctrine of social expediency? Our
argument so far has been that the passages where Mises explicitly
defends social expediency can be interpreted as defending the func-
tionalist doctrine that morality is concerned with preserving society
and attacking any appeal to mysteriously intuited principles. The
question remains as to whether Mises’s principled approach to laissez
faire is a categorical approach.

12Mises made a similar statement in his final book: “That every human action has
to be judged and is judged by its fruits or results is an old truism. It is a principle with
regard to which the Gospels agree with the often badly misunderstood teachings of
utilitarian philosophy. But the crux is that people widely differ from one another in
their appraisal of the results. What some consider as good or best is often passionately
rejected by others as entirely bad. The utopians did not bother to tell us what
arrangement of affairs of state would best satisfy their fellow citizens. They merely
expounded what conditions of the rest of mankind would be most satisfactory to
themselves” (1962, pp. 96-97).


===== PAGE 19 =====

Eshelman: Ludwig von Mises on Principle 21

As we have seen, for the categorical harmonist social harmony
1s not a relative, i.e., comparative matter, but a black-and-white, i.e.,
categorical matter. In Auberon Herbert's words, “It must be the battle
of principles—the principle of liberty against the principle of force”
(Herbert 1978, p.51); “force and reason . . . are the two opposite poles” (p.
91). “Force—whether disguised or not under the forms of voting—has
but one meaning. It means universal confusion and strife” (p. 335).
Mises in very similar words contrasts the “principle of violence” and
the “principle of peace”: “Violence and law, war and peace, are the two
poles of social life” (1922, p. 34). “History is a struggle between two
principles, the peaceful principle, which advances the development
of trade, and the militarist-imperialist principle, which interprets
society not as a friendly division of labor, but as the forcible
repression of some members by others” (1922, p. 268). Furthermore,
the principle of violence cannot form the basis of a social coherent
theory: “Try to realize completely the principle of violence, even only
in thought, and its anti-social character is unmasked. It leads to
chaos, to the war of all against all. No sophistry can evade that. All
anti-liberal social theories must necessarily remain fragments or
arrive at the most absurd conclusions” (1922, p. 37). “It is impossible
to defend honestly the case for violence against the case for peaceful
cooperation. Thus the advocates of violence are resorting to the trick
of calling the methods of violence and threat of violence to which they
resort ‘nonviolence’. . . . The fundamental antagonism between the
realm of mutual peaceful agreement and that of compulsion and
coercion cannot be eradicated by idle talk about two ‘sectors’ of the
economy, the private and the public. There is no conciliation between
constraint and spontaneity” (1968, p. 37).

For Mises the sole justification for force is social preservation:

Society welcomes as members all who can see the benefit of peace
and social collaboration in work. It is to the personal advantage of
every individual that he should be treated as a citizen with equal
rights. But the man who, ignoring the advantages of peaceful collabo-
ration, prefers to fight and refuses to fit himself into the social
order, must be fought like a dangerous animal. It is necessary to
take up this attitude against the anti-social criminal and savage
tribes. Liberalism can approve of war only as a defense. For the rest
it sees in war the anti-social principle by which social cooperation is
annihilated. (1922, p. 284)

Note that Mises, like Locke and other categorical harmonists, com-
pares the anti-social individual to a dangerous animal. Likewise, for


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22 The Review of Austrian Economics Vol. 6, No. 2

Mises, “[aln unbridgeable gulf separates man from all those beings
that lack the ability to grasp the meaning of social cooperation” (1962,
p. 105). Unfortunately, not every member of our species can cross this
gulf, for “[t]here have always been people who were emotionally unfit
to conceive the fundamental principle of cooperation under the sys-
tem of the division of tasks” (1962, pp. 88-89).

Mises’s categorical approach is perhaps best represented by his
claim that “freedom is indivisible” (1957, p. 376), and his rejection of a
middle way between socialism and capitalism (1950b). “The liberal
program is an indivisible and indissoluble whole, not an arbitrary
assembled patchwork of diverse components. Its various parts condi-
tion one another. The idea that political freedom can be preserved in
the absence of economic freedom, and vice versa, is an illusion” (1949a,
p. 38). The same principle is appealed to when Mises argues against
interventionism: “There is no middle way. Control is indivisible”

(1949c, p. 55)."

I3Mises has very little to say about the justification of punishment. On a number
of occasions he does say that force must be used to protect society, e.g., “In order to
preserve peaceful cooperation, one must be ready to resort to violent suppression of
those disturbing the peace” (1950a, p. 303). He does note that, “To punish criminal
offenses committed in a state of emotional excitement or intoxication more mildly than
other offenses is tantamount to encouraging such excesses” (1966, p. 16). This might
be taken to mean that he holds a deterrence theory of punishment. This does not mean,
however, that his position is one of maximization. Categorical harmonists recognize
that punishment has a deterrence effect, but they typically believe that this must be
subject to proportionality—i.e., one must not punish a person more severely than his
anti-social act would merit. According to Locke, one “may bring such evil on any one,
who hath transgressed that Law, as may make him repent the doing of it, and thereby
deter him, and by his Example others, from doing the like mischief,” but one may do
so “only to retribute to him... what is proportionate to his Transgression” (Locke 1988,
p- 272). At least twice Mises mentions the possibility of considering criminals to be
mentally ill, but he does so for the sake of argument, not because he agrees with this
premise: “We may agree that he who acts antisocially should be considered mentally
sick and in need of care. But as long as not all are cured . . . . some provision must be
taken lest they jeopardize society” (1966, p. 149; 1944, p. 48).

Herbert likewise argued that freedom is indivisible: “The nature of man is
indivisible; you cannot cut him across, and give one share of him to the state and leave
the other for himself” (1978, p. 140). The view that there is no middle way is common
to the natural rights tradition. As we have seen, Locke contrasted the “common law
of reason” with the “rule. . . of force and violence” (1988, p. 279). He was just as explicit
in his Letter on Toleration: “There are two sorts of contests amongst men; the one
managed by law, the other by force: and they are of that nature, that where the one
ends, the other always begins” (Locke 1991, p. 45). Lysander Spooner also makes use
of a similar “no middle ground argument”: “There is . . . no middle ground between
absolute communism, on the one hand, which holds that a man has a right to lay his
hands on any thing, which has no other man’s hands upon it, no matter who may have
been the producer; and the principle of individual property, on the other hand, which
says that each man has an absolute dominion, as against all other men, over the
products and acquisitions of his own labor, whether he retains them in his actual
possession, or not” (Spooner 1855, p. 88).


===== PAGE 21 =====

Eshelman: Ludwig von Mises on Principle 23

Although he does not explicitly distinguish them, Mises has two
arguments against a middle way."”’ The first argument is the “tar-
baby” argument. Like Br’er Rabbit and the Tar Baby, each act of
intervention creates more problems than it solves and leads to new
interventions. This process escalates until one has created such a
mess that it is almost impossible to extract oneself. This argument is
especially applicable to economic policies such as price controls
(Mises 1950Db, pp. 22-24), but it can also be applied to “social” policies
such as drug controls (Thornton 1991).

Mises’s other argument against a middle way is the the “slippery-
slope” argument. He argues, for example, that government interven-
tion implies socialism:

All these champions of interventionism fail to realize that their
program thus implies the establishment of full government suprem-
acy in all economic matters. . . . Thus the doctrine and the practice
of interventionism ultimately tend to abandon what originally distin-
guished them from outright socialism and to adopt entirely the princi-
ples of totalitarian all-round planning. (Mises 1966, pp. 723-24)

Mises is not saying that the slide to totalitarianism is inevitable. No
one can predict the outcome. The slide down the slope may be slow or
it may be fast, and it may be halted before descending all the way to
the bottom. But assuming, as Mises does, that the social world is
ultimately ruled by ideas, then to sacrifice principle for the sake of
social expediency is to kick over the intellectual prop which has
prevented descent down the slide to totalitarianism. Mises makes
this quite clear when arguing against the regulation of drugs:

[Olnce the principle is admitted that it is the duty of government to
protect the individual against his own foolishness, no serious objec-
tions can be advanced against further encroachments. . . . And why
limit the government’s benevolent providence to the protection of the
individual’s body only? Is not the harm a man can inflict on his mind
and soul even more disastrous than any bodily evils? . .. The mischief
done by bad ideologies, surely, is much more pernicious, both for the
individual and for the whole of society, than that done by narcotic
drugs. (Mises 1966, pp. 733-34)

I15Note, however, that when discussing “why all men should receive equal treatment
under the law” (1927, p. 28), Mises does explicitly distinguish two arguments that
parallel the distinction I make above. The first is an economic argument concerning
the conditions for prosperity, the second, a moral or social harmonist argument
concerning the conditions for social peace.


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24 The Review of Austrian Economics Vol. 6, No. 2

For Mises the issue is one of principle: “We see that as soon as we
surrender the principle that the state should not interfere in any
questions touching on the individual’s mode of life, we end by regulating
and restricting the latter down to the smallest detail” (1927, p. 54).

The slippery-slope argument has played a central role in the
categorical defense of rights.'® Unlike comparative harmonists, cate-
gorical harmonists are not moved by the purported fact that an
exception will have certain positive consequences. They see this as
the first step down a slippery slope. Although comparative harmon-
ists may recognize the value of a principled approach and the danger
of allowing exceptions, they argue that the absolutist, categorical
approach implied by the slippery-slope argument is too extreme. They
may admit that intervention often has negative consequences that
outweigh any positive benefits, but insist that this must be estab-
lished case by case.

Such an attitude is exemplified by Yeager in a panel discussion
on utilitarianism and natural rights: “I do not know for sure what
position to take on things. I do not have an infallible pipeline to the
truth” (Shah 1988, p. 9). When questioned as to what position he
takes with regard to insider trading his response is: “I cannot take a
firm position for or against insider trading. If I were to study the
actual factual details of particular cases, I do not know whether I
would come out condemning it or not” (p. 5). Rothbard, another
panelist, is quick to point out that Yeager’s answer “shows the differ-
ence between viewing liberty and the free market as an organic
tendency versus holding it as an absolute principle” (i.e., between
what I have been calling a comparative and a categorical approach),
and adds, “I am in favor of saying that there is nothing wrong with
insider trading except for breach of contract” (p. 5).

It seems to me that there is little doubt that Mises, in spite of his
professed utilitarianism, would have sided with Rothbard on this
issue. It is because Mises takes such a principled stance with regard
to government intervention that he is often perceived as “dogmatic.”
Critics ask how Mises can dismiss the middle way of intervention in
such an a priori fashion? For the comparative harmonist one must
weigh the evidence in each case—any a priori claim to the contrary
is a veiled appeal to intuition or “an infallible pipeline to the truth.”

Herbert, for example, argues in response to those who do not see a sharp
dichotomy between the principle of force and the principle of peace and who want to “judge
each case on its merits” that “apart from any fixed principle, the merits will be always
determined by our varying personal inclinations. It is all slope, ever falling away into
slope, with no firm level standing place to be found anywhere” (Herbert 1978, p. 281).


===== PAGE 23 =====

Eshelman: Ludwig von Mises on Principle 25

Liberty of Conscience

The charge that the categorical harmonist must fall back on intuition
has some historical justification. As we have seen, the categorical
harmonist’s stance is that force is only justified against those who are
not reasonable—i.e., when rational interaction breaks down. The
problem has always been deciding when this happens. Clearly, if one
person uses force against another person who is amenable to reason,
then the user of force is the one who has opted out of rational
discourse. But this still leaves the problem of determining when the
other party is or is not amenable to reason. The fact that my opponent
does not agree with me may only mean that I have not given him a
good reason to agree.

Up until the sixteenth century, categorical harmonists, as repre-
sented by natural law theorists, still relied heavily upon our supposed
common religious and moral intuitions to determine what is reason-
able. But in the context of the religious wars of the sixteenth century,
social theorists started to face the fact that people’s intuitions dif-
fered. Whereas during the Middle Ages the foundation for society had
been considered to be “peace and unity,” it was realized by a few social
theorists in the sixteenth century, such as Sebastian Castellio, that
coerced unity was the major cause of strife. This became the central
insight of the seventeenth century defenders of toleration, e.g., Roger
Williams, Henry Robinson, and the Levellers. The argument was
summarized by Locke at the end of the seventeenth century: “It is not
the diversity of opinions, which cannot be avoided; but the refusal of
toleration to those that are of different opinions, which might have
been granted, that has produced all the bustles and wars, that have
been in the Christian world, upon account of religion” (Locke 1991,
p. 52).

The major theme of these social theorists was that any defense of
toleration must be a principled defense. In discussing the question of
a state sanctioned church, Locke asks which church are we to choose?
He notes that it “will be answered, undoubtedly, that it is the orthodox
church which has the right of authority over the erroneous or hereti-
cal.” To which he scornfully replies, “This is, in great and specious
words, to say just nothing at all. For every church is orthodox to itself;
to others, erroneous or heretical. Whatsoever any church believes, it
believes to be true; and the contrary thereupon it pronounces to be
error” (Locke 1991, p. 24). Nor can we allow the prince to choose, for
“the religion of every prince is orthodox to himself. . . . If it be once
permitted to introduce anything into religion, by the means of laws
and penalties, there can be no bounds put to it; but it will, in the same


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26 The Review of Austrian Economics Vol. 6, No. 2

manner, be lawful to alter everything, according to that rule of truth
which the magistrate has framed unto himself” (Locke 1991, p. 37).
In other words, there is no middle ground.

"It should be stressed that Locke’s insight that “every one is
orthodox to himself” (Locke 1991, p. 14), did not imply relativism.
Locke believed that there was “but one truth, one way to heaven”
(Locke 1991, p. 19). His point was that men disagreed about what this
truth was, and that it was intellectually dishonest to assume away
this disagreement. Diversity of opinion must be our starting point—it
is implied by each man’s uniqueness, his fallibility, and the scarcity
of time. No one has “the leisure, patience, and means, to collect
together all the proofs concerning most of the opinions he has. . .. And
yet we are forced to determine ourselves on the one side or the other.
The conduct of our lives, and the management of our great concerns,
will not bear delay” (Locke 1933, p. 382). Any moral theory that
ignores scarcity (including that of time) and diversity (including that
of opinions) fails to apply to the world as it is.

Thus if there is to be social harmony, there is no alternative but
to tolerate each other. Quoting Locke again:

Since therefore it is unavoidable to the greatest part of men, if not
all, to have several opinions, without certain and indubitable proofs
of their truth; and it carries too great an imputation of ignorance,
lightness, or folly, for men to quit and renounce their former tenets
presently upon the offer of an argument, which they cannot imme-
diately answer, and show the insufficiency of: it would methinks
become all men to maintain peace, and the common offices of human-
ity and friendship, in the diversity of opinions; since we cannot
reasonably expect, that anyone should readily and obsequiously quit
his own opinion, and embrace ours with a blind resignation to an
authority, which the understanding of man acknowledges not. (1933,
p. 382)

Later natural rights theorists realized that this argument for
religious tolerance could be generalized to apply to all opinions and
practices. Spencer, for example, argued that just as “[t]he advocate
of religious freedom does not acknowledge the right of any council, or
bishop, to choose for him what he shall believe or what he shall
reject(,] [slo the opponent of a poor law, does not acknowledge the
right of any government, or commissioner, to choose for him who are
worthy of his charity, and who are not” (Spencer 1981, p. 197). Herbert
applied this same argument against public education (1978, p. 73)
and compulsory taxes. In the case of the latter he argued,


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Eshelman: Ludwig von Mises on Principle 27

Because free countries have affirmed many years ago that a compul-
sory church rate is immoral and oppressive, for the sake of the
burden laid upon individual consciences; and in affirming this truth
they have unconsciously affirmed the wider truth, that every tax or
rate, forcibly taken from an unwilling person, is immoral and op-
pressive. The human conscience knows no distinction between
church rates and other compulsory rates and taxes. The sin lies in
the disregarding of each other’s convictions, and is not affected by
the subject matter of the tax. (Herbert 1978, pp. 393-94)

Note that this general argument against coercion is basically the
same argument that Locke used against religious intolerance—given
that people disagree about the best course of action, on the one hand,
and the necessity of action (and the impossibility of waiting until
there is agreement), on the other hand, the only peaceful solution is
toleration, i.e., the mutual respect of each other’s rights. This argu-
ment was also the basis for Spencer’s case against utilitarianism:
Given all the conflicting alternative proposals advocated under the
banner of utility, if nothing were “to be done till all agreed upon them,
we might stand still to the end of time.” On the other hand, “[ilf each
man carried out, independently of a state power, his own notions of
what would best secure ‘the greatest happiness of the greatest num-
ber,’ society would quickly lapse into confusion” (1970, p. 16). To avoid
this dilemma, the utilitarian has to fall back upon an “umpire,” i.e., the
government, for without the authority of government “such a morality
must ever remain inoperative” (p. 16). Consequently, “Let but rulers
think, or profess to think, that their measures will benefit the commu-.
nity, and your philosophy stands mute in the presence of the most
egregious folly, or the blackest misconduct” (Spencer 1970, p. 4). Once
we clear away all the euphemisms, the stark reality of the comparative
approach (whether direct or indirect) stares us in the face: whoever can
gain control of government is who decides. Once the decision as to what
is and is not permitted is given to government, then as Locke asserted,
“there can be no bounds put to it” (Locke 1991, p. 37).

Central to Spencer’s argument is the insight that utilitarianism
as a moral doctrine is “inoperative” and has to fall back upon the
authority of the government. In other words, utilitarianism fails to
satisfy the requirement that a moral principle be “praxeologically
realizable” or “operational,” to use Hans-Hermann Hoppe’s termi-
nology (1988a, p. 261). This was also Spencer’s objection against

17 As Hoppe explains, “it must be possible for us, who invariably must act and employ
resources, to actually implement such a criterion and consistently act upon it.” Given


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28 The Review of Austrian Economics Vol. 6, No. 2

proposals for a “right to a maintenance”:

One party says that a bare subsistence is all that is implied. Another,
that the applicant can demand all the comforts usually enjoyed by
those in his station. Another, that he may as fairly claim the luxuries
of life as those above him. And the extreme party will be content with
nothing short of the socialist principle, of community of property. Who
is to say which of these is the true expression of the right? The
gradations are infinite, and how can it be decided where the claim
begins and where it ends? Who can tell the rate-payer how much of
his property can be justly demanded by his fellow creature? Who can
tell the pauper when he asks for more pay, that he receives just as
much as he is entitled to? or can explain to him why he has a right
to what he already receives, but no right to anything more? And yet,
if this were really a right, ought it not be capable of such a definition?
(Spencer 1981, p. 205)

This inherent indeterminacy was what Herbert had in mind when
he said that no one can draw a “force line,” i.e., a line between the
legitimate (apart from self-defense) and illegitimate uses of force
(1978, p.89). In response to the suggestion that we “allow society . . .
to decide such matters as we are all pretty well agreed should be so
decided,” Herbert replies, “[t]here never can be agreement amongst
men as to what these matters are” (p. 131). Ultimately, one ends up
“sanctioning not only the right of some men to coerce others, but their
right to decide how and when and for what purposes they shall coerce
others. It is the power holders, freed from any general principle that
controls and directs them, who have to decide as to the limits and
application of their own power. For who else can do so?” (pp. 131-32).
The argument is not that it is difficult to draw a line between the
proper and the improper use of force. Anyone can draw a line. The
problem is that no two people agree where this line should be drawn.
There are only two stopping points—the doctrine that force can only
be used in self-defense and the doctrine that might is right. The point
that Herbert continually stresses is that when the issue is seen as
where to draw this “force line,” i.e., the attempt to find a middle way
somewhere between these two points, the decision will always be

some criterion such as the greatest happiness or the stance of an impartial spectator,
Hoppe asks, “what if [we] . . . do not choose the same but incompatible societies—the
criterion of maximum average utility has already done its work—but there is still
disagreement” (Hoppe 1988a, p. 262). Elsewhere Hoppe notes that “in advocating a
consequentialist position, utilitarianism is strictly speaking no ethic at all when it
fails to answer the all-decisive question ‘what am I justified in doing now?’” (1988b,
p- 54).


===== PAGE 27 =====

Eshelman: Ludwig von Mises on Principle 29

made by those who have the most power, i.e., the question will
ultimately be decided in favor of might."

This brings us to the most misunderstood part of the categorical
harmonist’s argument—the appeal to equal rights. In Spencer’s
words, quoted earlier, the crucial move was that “in the absence of
proof that some may do what they will without limit, while others
may not, mutual limitation is necessitated” (Spencer 1981, p. 150).
Note the similarity between Spencer’s argument and Locke’s with
regard to toleration. After arguing that all churches are orthodox to
themselves, Locke concludes, “So that the controversy between these
churches about the truth of their doctrines, and the purity of their
worship, is on both sides equal” (Locke 1991, p. 24). The point is not
that the doctrines are equally good, but that there is no evidence that
anyone on earth has been given the prerogative to decide. As Herbert
asks, “Who shall decide between us? There is no moral tribunal before
which you can summon unlimited power” (1978, p. 312).

Mises’s Categorical Defense of Liberty

In an earlier section we saw that Mises takes a principled stance to
liberty, and how this is in line with the categorical moral tradition.
In this section I argue that the basis for his principled stance is the
same as that developed by Locke (and others before him) and gener-
alized by Spencer and Herbert.

First, note that with regard to the critical issue of toleration,
Mises takes a principled approach:

Liberalism demands tolerance as a matter of principle, not from
opportunism. It demands toleration even of obviously nonsensical

18 This is a common theme running throughout Herbert’s writings: “Admit that any
one . .. may restrain by force the exercise of the faculties of others, and in what sea of
moral confusion you are at once plunged. Who is to decide which is the better man or
the more civilized race, or how much freedom is to be allowed or disallowed. To settle
this question men must sit as judges in their own case; and this means that the
strongest will declare themselves the most civilized, and will assign such portions of
freedom as they choose to the rest of the nation or the rest of the world as the case may
be. Are you prepared for this?” (1978, p. 98). “Once admit that force is right in itself,
and then you cannot pick out any special sect or party, confer special privileges upon
them, and declare that they alone, and nobody else are entitled to use force. That would
be a mere arbitrary and fanciful selection, as arbitrary and fanciful as picking out
certain opinions, and declaring that these are orthodox, and that all other opinions are
heterodox. If force is good in the hands of some men, it is good in the hands of other
men; if it is a good instrument to serve some causes, it is good to serve other causes”
(p. 231). “IU]ntil they have found some law by which they can distinguish the right from
the wrong use of power, by which they can justly satisfy not only their own minds but
the minds of others, they are simply leaving in suspension the greatest matter that
affects human beings” (pp. 132-33).


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30 The Review of Austrian Economics Vol. 6, No. 2

teachings, absurd forms of heterodoxy, and childishly silly supersti-
tions. It demands toleration for doctrines and opinions that it deems
detrimental and ruinous to society and even for movements that it
indefatigably combats. For what impels liberalism to demand and
accord toleration is not consideration for the content of the doctrine
to be tolerated, but the knowledge that only tolerance can create and
preserve the condition of social peace without which humanity must
relapse into the barbarism and penury of centuries long past. (Mises
1927, pp. 56-57)

It should be emphasized that Mises’s defense of toleration is “utili-
tarian” only in the sense that every categorical harmonist’s argument
is utilitarian—it is concerned with the conditions that make social
harmony possible. It is only because most comparative harmonists
abandon their comparative approach when it comes to the question
of toleration and take a principled approach that this is not noticed.

Second, Mises, when discussing toleration, draws on the same
insight expressed by Locke’s slogan “everyone is orthodox to himself”
(Locke 1991, p. 14): “Mere opportunists excepted, everyone is con-
vinced of the rightness of his opinions. But, if such a conviction by
itself were a justification for intolerance, then everyone would have a
right to coerce and persecute everyone else of another way of thinking.
.. . In such a case there must always be war and enmity between men”
(1922, pp. 166-67). According to Mises, one of the major “blunders” of
rationalism was its “neglect of the problem of erroneous thinking.
Most of the rationalist philosophers failed to see that even honest
men, sincerely devoted to the search for truth, could err. . . . A
doctrine of which they disapproved could in their opinion have been
prompted only by purposeful deceit” (1957, p. 270). Mises is here
simply applying the insight of Locke concerning religious disagree-
ments to rationalism.

Third, Mises, like Locke and Spencer, objects to the uniformi-
tarian assumption that underlies most moral systems: “One of the
motives that impel men to search for an absolute and immutable
standard of value is the presumption that peaceful cooperation is
possible only among people guided by the same judgments of value”
(1957, p. 51). According to Mises, rationalists made a similar mistake,
which is their other major blunder: “{TThey assumed that all men are
endowed with the same power of reasoning” (1957, p. 270). The fact
of the matter is that there is diversity of opinion. Postulating immu-
table standards of value, even if true, will not make this diversity of
opinion go away, nor will a faith in the rationality of man. The great
insight of laissez-faire liberalism is that a free society “can function


===== PAGE 29 =====

Eshelman: Ludwig von Mises on Principle 31

in spite of the fact that its members disagree in many judgments of
value” (1957, p. 61; 1966, p. 693).

Finally, Mises, like Spencer and Herbert, sees the case for liberty
as a generalization of the case for religious toleration. The socialist
is just as blind as the religious fanatic to the insight that everyone is
orthodox to himself:

No socialist author ever gave a thought to the possibility that the
abstract entity which he wants to vest with unlimited power... could
act in a way which he himself disapproves. A socialist advocates
socialism because he is fully convinced that the supreme dictator
of the socialist commonwealth will be reasonable from his—the
individual socialist’s—point of view, that he will aim at those ends
of which he—the individual socialist—fully approves, and that he
will try to attain these ends by choosing means which he—the
individual socialist—would also choose. Every socialist calls only
that system a genuinely socialist system in which these conditions
are completely fulfilled; all other brands claiming the name social-
ism are counterfeit systems entirely different from true socialism.
(Mises 1966, pp. 692-93)

In another passage Mises is even more explicit in identifying social-
ism with intolerance and fanaticism:

It is customary to call the point of view of the advocates of the welfare
state the “social” point of view as distinguished from the “individu-
alistic” and “selfish” point of view of the champions of the rule of law.
In fact, however, the supporters of the welfare state are utterly
anti-social and intolerant zealots. For their ideology tacitly implies
that the government will execute what they themselves deem right
and beneficial. They entirely disregard the possibility that there
could arise disagreement with regard to the question of what is right
and expedient and what is not. (Mises 1922, pp. 520-21; italics added)

The parallels between Mises’s case for a principled, categorical
approach to social harmony and that of Locke, Spencer and Herbert
is somewhat obscured by Mises’s unfortunate insistence that all
values are arbitrary. It should be stressed, however, that Mises’s
argument in no way depends upon this premise, and in fact would be
strengthened without it. The fundamental premise is not that ulti-
mate ends, unlike means, are arbitrary and not amenable to rational
argument. The starting point for social philosophy, rather, is that
people disagree with regard to both means and ends. Even if ultimate
ends were totally arbitrary, as Mises asserts, there would be no


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32 The Review of Austrian Economics Vol. 6, No. 2

problem if everyone happened to agree on these ends. On the other
hand, even if questions of means are in principle rationally determin-
able, insofar as we have not yet resolved which means are best and
thus come to an agreement, we are faced with a moral problem of
what to do in the meantime. In fact, in spite of Mises’s stress on the
arbitrariness of ends and the rationality of means, he admits that we
often disagree about means (1966, p. 692; 1957, p. 174). He also points
out that the distinction between ends and means is not always
straightforward—that what are ends for some people may be means
for others (1957, p. 37).

One must be careful to not let Mises’s assertions about the
arbitrariness of values cause one to miss his main point. When Mises
attacks absolute values, he almost always has in mind the belief that
such values are handed down from Providence (1922, p. 35) and are
independent of society (1966, p. 720). Such “heteronomous doctrines”
(1966, p. 883) are antithetical to Mises’s methodological individual-
ism: “The rejection of methodological individualism implies the as-
sumption that the behavior of men is directed by some mysterious
forces that defy any analysis and description” (1962, p. 82). Further-
more, when Mises asserts that all value judgments are personal
(1957, pp. 14, 59), usually what he is attacking is the belief that one
has the right to impose these absolute values on others. This may not
be apparent to the reader because of an ambiguity in Mises’s writings
between “personal” in the sense of “arbitrary” or a “matter of taste”
(like ice cream), and “personal” in the sense of “not to be imposed on
others.” Although Mises is not careful to distinguish these two senses
of “personal,” clearly it is only the latter with which he is concerned.
This is illustrated by the following passage: “If a man assigns a higher
value to the concerns of the collective than to his other concerns, and
acts accordingly, that is his affair. So long as the collectivist philoso-
phers proceed in this way, no objection can be raised. But they argue
differently. They elevate their personal judgments of value to the
dignity of an absolute standard of value” (1957, p. 59). As Mises
makes clear a few pages later, he is not insisting that the collectivist
admit that his beliefs are arbitrary; what he is attacking is coercion:
“There is, of course, but one way to make one’s own judgments of value
supreme. One must beat into submission all those dissenting” (1957,
pp. 60-61).

Finally, although I agree with Rothbard that Mises’s sweeping
statement that all values are arbitrary is itself arbitrary (Rothbard
1982, p. 212; see also Tabarrok 1990), it seems to me that a coherent
and plausible case can be made for Mises’s nonjustificationist stance
with regard to social harmony. The categorical harmonist’s argument


===== PAGE 31 =====

Eshelman: Ludwig von Mises on Principle 33

for rights presupposes a commitment to social harmony. Unlike many
natural rights and natural law theorists, Mises believes that it is
impossible to give any ultimate reason why one should be committed
to peaceful cooperation. Instead, he treats this commitment as a
hypothetical imperative: “Praxeology and economics do not say that
men should peacefully cooperate within the frame of societal bonds;
they merely say that men must act this way if they want to make
their actions more successful than otherwise” (1966, p. 883). When
face to face with the social nihilist, i.e., someone who believes that
might is right, it is not clear what the social harmonist could say that
would be relevant. This is not to say that one’s commitment to social
harmony is arbitrary. Mises argues that we can ignore those who have
no regard for social harmony—e.g., such exceptional cases as
Caligula—Dbecause of “their tendency to be self-destructive” (1933,
p. 38). That is, we can give reasons for ignoring such cases. What
we cannot do, however, is provide arguments that would convince the
Caligulas of this world. The problem is that argument presupposes
that conflict-free interaction is possible (Hoppe 1988a, p. 63; 1989,
p- 132), whereas such interaction is precisely what the nihilist rejects.
He may use words in ways that resemble, and are parasitic upon,
argument, but he is not committed to resolving anything by argu-
ment. Argument for the nihilist is simply an expedient, an ammuni-
tion-savings measure. The most appropriate response to the nihilist
(who has demonstrated by his actions that he really is a nihilist) is
to reach for our clubs and hit him over the head. Given that he
believes that might is right, he can hardly file a moral complaint
against us for such actions.

The real intellectual challenge to the social harmonist comes not
from the overt nihilist, but the righteous nihilist—the person who
claims that he is committed to social harmony, but uses force against
anyone who disagrees with him on the grounds that they are being
irrational. It is the righteous nihilist (or “theocrat” [1966, p. 151;
1962, p. 107; 1949a, p. 43]) who is the target of Mises’s charge of
arbitrariness, just as he was the target of Locke, Spencer, and Her-
bert. And it is in this light, I believe, that we should read Mises’s
repeated attacks on absolute and immutable ethical principles. In
fact, in this regard Mises often uses language that is reminiscent
of that used by Herbert. For example, just as Mises sarcastically
speaks of “those individuals to whom, by the mysterious decrees of
some mysterious agency, the task of determining the collective will
and directing the actions of the collective has been entrusted”
(1962, p. 107), Herbert characterizes the socialist (and other users
of force) as trying to persuade us “that there exists a mysterious


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34 The Review of Austrian Economics Vol. 6, No. 2

dispensation given from some unknown quarter in his own special
favor” (Herbert 1978, p. 232).

Natural versus Conventional Property Rights

If Mises really is a categorical harmonist, then this should be re-
flected in his defense of private property. For the most part this is the
case. Social cooperation under the division of labor, peace, and prop-
erty are so closely tied together for Mises that he uses them inter-
changeably when talking about the nature of society and the goal of
liberalism: “That Liberalism aims at the protection of property and
that it rejects war are two expressions of one and the same principle”
(1922, p. 59). “The basis and starting point of social cooperation lie in
peacemaking, which consists in the mutual recognition of the ‘state
of property’” (1922, p. 467). “The program of liberalism, therefore, if
condensed into a single word, would have to read: property, that is,

private ownership of the means of production. . . . All the other
demands of liberalism result from this fundamental demand” (1927,
p. 19).

But what are we then to make of Mises’s statement that private
property “is a human device” and is “not sacred” (1966, p. 683)? Even
more troublesome is his statement that if liberals “considered the
abolition of the institution of private property to be in the general
interest, they would advocate that it be abolished, no matter how
prejudicial such a policy might be to the interests of property owners”
(1927, p. 30).

The first statement is problematic only if we take it metaphori-
cally to mean that property rights are arbitrary conventions. How-
ever, Mises is simply asserting, as the next sentence makes clear, that
private property was not conferred on man by God or Nature, but is
a human discovery which has a definite history. Although some
natural rights theorists might disagree with this, Herbert Spencer
would not be one of them. I believe the second statement (about his
willingness to abolish property if it were in the general interest)
should be taken with a rhetorical grain of salt. What Mises is stress-
ing is that his defense of private property is not based on some special
intuition, but upon the fact that private property is intrinsically
linked with the very conditions for social harmony.

There is no question that Mises rejects the idea that private
property is arbitrary. His major complaint against most moral phi-
losophers was their conviction that “there was in the course of
social events no such regularity and invariance of phenomena as
had been found in the operation of human reasoning and in the
sequence of natural phenomena. They did not search for the laws


===== PAGE 33 =====

Eshelman: Ludwig von Mises on Principle 35

of social cooperation because they thought that man could organize
society as he pleased” (1966, p. 2). And he explicitly states that
capitalism “is the only possible social system. One may undertake to
modify one or another of its features as long as in doing so one does
not affect the essence and foundation of the whole social order, viz.,
private property” (1927, p. 88).

The only question at issue is whether Mises’s defense of property
rights is a pragmatic defense of the status quo—i.e., a defense of
currently existing titles regardless of how they were acquired. There
are several passages that seem to suggest this: “The basis and
starting point of social cooperation lie in peacemaking, which con-
sists in the mutual recognition of the ‘state of property.’ Out of de facto
having, maintained by force, arises the legal concept of ownership”
(1922, p. 467). “Law is a settlement, and end to strife, and avoidance
of strife” (1922, p. 34; italics added). “Possession is protected even
though it is, as the jurists say, no title. Not only honest but dishonest
possessors, even robbers and thieves, may claim protection for their
possessions” (1922, p. 34).

If these passages are interpreted to mean that possession is the
whole of the law, not nine-tenths, then one can argue that Mises does
not provide a principled but only a pragmatic, ad hoc defense of
property. As Rothbard points out, any ethic relying upon such an ad
hoc defense of property rights, “pushed to its logical conclusion, must
also defend every criminal in the property that he has managed to
expropriate,” and is thus “ethically nihilistic” (Rothbard 1982, p. 52).
Such a doctrine would imply that if A steals X from B, then A, being
in possession of X, has a right to X. But it would also imply that if B
“steals” X back from A, then B has a right to X. In other words,
whoever can retain possession of X has a right to it—i.e., might is
right.

Given the incoherence of such a doctrine, however, we should first
look for an alternative interpretation before attributing such a view-
point to Mises. I believe that the key is to be found in a passage a few
pages later where he notes that under “the domination of the princi-
ple of violence,” which he contrasts with the principle of peace, there
can be “no peace; at best there [can be] a truce” (1922, p. 58). Here it
would seem he is explicitly rejecting the ad hoc, pragmatic doctrine
of property as a mere “truce.” The question, then, is what is the
difference between a “settlement” (of the earlier passage) and a
“truce”?

If we look at the context of Mises’s statement that “even robbers
and thieves, may claim protection for their possessions,” we see that
Mises is concerned to refute those who argue that since existing


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36 The Review of Austrian Economics Vol. 6, No. 2

property titles have “sprung illegally from arbitrary acquisition and
violent robbery” in the distant past, they are not legitimate (1922,
p. 34). Again it is illuminating to compare Mises’s argument with a
similar passage from Spencer. When faced with a related argument—
in this case the right of the poor to be maintained by the rich because
of the past transgressions of the rich—Spencer does not deny that
there were past transgressions, nor does he assert, in an ad hoc
fashion, that such transgressions are irrelevant. Instead, he insists
that the burden of proof is upon those who advocate the right to
maintenance (Spencer 1981, p. 201). In particular, “when it can be
shown that our poor are the children of the oppressed, and those who
have to pay poor rates are the children of the oppressors, then the
validity of the objection will be admitted; but that until this is shown
to be the truth, or an approach to the truth, the objection may be
disregarded” (1981, p. 192). The issue is one concerning on whom the
burden of proof falls. Spencer’s (and I believe, Mises’s) position is not
that existing property rights cannot be challenged, but that the
burden of proof must fall on the challenger of de facto property rights.
Only this position is praxeologically operational. Those who place the
burden of proof on the de facto owner, and demand that he justify his
right to use and dispose the object in question, implicitly assume that
we can somehow take a disembodied stance, hovering above the
physical world until all questions of rights have been satisfactorily
decided.”

As we have seen, any coherent, operational ethical theory that is
to apply to the world as it is, not as it is imagined to be in the dreams
of the philosophers, must take into account two facts—scarcity, in-
cluding scarcity of time, and diversity, including the diversity of
opinions. In particular, it needs to recognize that people are never
going to agree on how various resources ought to be used. Given that
consensual joint control is impossible, the only peaceful alternative
is divided control, i.e., private property rights. Furthermore, any
coherent, operational ethical theory needs to recognize that people

1Mises’s assertion that the notion of Justice “makes sense only when approving or
disapproving concrete conduct from the point of view of the valid laws of the country”
(1966, p. 721) might seem to imply that all rights, including property rights, are those
defined by the legal system. Such a legal positivist interpretation, however, conflicts
with what Mises says elsewhere. For example, when discussing the natural law, he is
critical of its “arbitrary prepossessions” but praises it for rejecting “legal positivism”
and substituting the “idea that every valid law of a country was open to critical
examination by reason” (1957, p. 48). I believe Mises’s statements to the effect that
there is “neither right nor wrong outside the social nexus” should be interpreted as
attacks upon intuitionist critiques that are not grounded in the realities of society
rather than appeals to the legal status quo.


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Eshelman: Ludwig von Mises on Principle 37

are never going to agree on how resources ought to be (optimally)
divided up, any more than they are going to agree on how they ought
to be used. Since man is a physical being who needs to use resources
to survive and who at the very least needs a place to stand, the only
peaceful alternative is to make a presumption in favor of current
property holdings. This does not mean that robbers have the right to
their plunder. The concept of a “presumption” in favor of current
property rights only makes sense if it is coupled with the right to have
restored property that has been taken.

This theory of rights, combining a presumption in favor of the de
facto owner with the principle of restitution, might be appropriately
labeled a concrete theory of rights. I believe that it is equivalent, at
least in most essentials, to the Lockean abstract theory of rights. In
particular, the libertarian homesteading axiom can be directly de-
rived. Any ethic, if it is to be praxeologically operational—if it is to
recognize the facts of scarcity and diversity—must start with the
existing property distribution. Furthermore, if it is to really qualify
as an ethical principle, providing a basis for conflict-free interaction
and not be equivalent, for all practical purposes, to might is right, it
must also provide for a principle of restitution. The de facto owner’s
presumptive right can only be challenged by showing that a prior
right is being restored. By chaining this argument backwards until
we reach the first user, the homesteading principle is established—
the first user of something cannot have his possession challenged
since there is no prior right to be restored. We are far removed from
the Lockean state of nature, and there is little doubt that the chain
of transfers from there to our current set of property titles has been
broken by a large number of illicit acts. This often gives the (false)
impression that according to the Lockean view we do not have any
grounds to stand on. By starting with a presumption in favor of the
current, de facto owner, and shifting the burden of proof to the
challenger, hypothetical but unprovable past acts of usurpation are
clearly seen as irrelevant. Although the passage of time does not turn
crimes into venerable institutions, the passage of time does make the
burden of proof for the challenger more and more difficult.

Finally, in passing, it should be noted that the right of the first
user can be said to be an eternal right. Although Mises rejects all
theories of eternal rights, what he is mainly concerned with attacking
is the view that rights were somehow self-evident to everyone from
the beginning of time. Property rights, however, are eternal in a
different sense—they are not conventional. At no point in time did,
or can, someone establish property rights willy-nilly. I cannot take
your property, for example, and then declare that we will from now


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38 | The Review of Austrian Economics Vol. 6, No. 2

on observe property rights. If I am serious about property rights, then
I must make restitution. Even if the concept of property rights has
not previously occurred to either of us, once it does, in order for us to
observe these rights, we must be willing to make restitution for
(recognized) past wrongs. Otherwise, our professed belief in property
rights cannot be taken seriously. It is in this sense that property
rights can be said to be eternal—they extend backward indefinitely
in time.

Conclusion

Mises’s utilitarianism is the exception that proves (i.e., tests) the
rule, in this case, Rothbard’s rule that utilitarianism cannot provide
a principled defense of laissez-faire liberalism. Of course, Mises, like
almost all defenders of laissez faire, used utilitarian (i.e., nonmoral
functionalist) arguments to defend the unhampered market. But he
also used moral arguments. My main purpose throughout this paper
has been to show that Mises’s moral “utilitarianism,” in spite of his
repeated attacks on natural law and natural rights, owes more to the
principled, categorical moral framework of Spencer and Herbert, than
to the maximizing, comparative moral framework of Bentham and Mill
Mises equated natural law and natural rights with intuitionism, and for
this reason rejected them, but he did not reject the categorical moral
framework that underlies much of that tradition. On the contrary, it was
the comparative moral framework of utilitarianism that he rejected.
Furthermore, the essential premises for his moral defense of laissez
faire is not the arbitrariness of all values, but the facts of scarcity
(including scarcity of time) and diversity (including diversity of opinion
concerning values and means)—two facts that play an essential role in
his praxeological methodology. Any coherent moral theory concerning
the conditions for social harmony, as well as any coherent theory of
economics, must take these two facts into account. It is this insight,
articulated by Locke, that Mises turns into a powerful moral argu-
ment against socialism and in favor of laissez faire.

20Mises’s arguments for laissez faire and against socialism can be usefully divided
into three classes: (1) nonmoral functionalist arguments concerning the best policies
for promoting prosperity; (2) the economic calculation argument that socialism leads
to social chaos; and (3) moral arguments concerning the conditions for social harmony.
There is an interesting parallel with St. Thomas Aquinas’s three arguments for
preferring private property to communal property: (1) communal property undermines
the incentive to work; (2) communal property leads to social confusion; and (3) commu-
nal property undermines social peace (Aquinas 1959, p. 169 [Summa Theologica II-II
66 2]). In his book on the economics of the late-scholastics Alejandro A. Chafuen notes
that Mises’s defense of property is similar to that of the late-scholastics (1986, p. 155).


===== PAGE 37 =====

Eshelman: Ludwig von Mises on Principle 39

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