Igor Bubelov About Blog Photos

Human Action

September 12, 2019

I don’t usually keep more than two or three quotes when I read a good book. Some books offer new knowledge and others try to find new ways of explaining old and complex knowledge using simple words. In both cases, I really appreciate a book that can provide a few deep thoughts or to explain a complex thing in a way that makes it easier to understand. After I finished Human Action, I ended up with about 150 new quotes and notes. This book is amazing, to say the least!

Table of Contents

Core Ideas

The basic idea of this book is pretty simple: humans act. This is an obvious observation that may seem unimportant but Ludwig von Mises uses this insight as a core of his powerful theory that gives us a better understanding of economics. Our life is filled with economic calculation; by understanding economics we’re at a better position to understand the life itself. Reading Human Action is an interesting journey which starts from a single trivial observation.

Another core idea of Human Action is that economics is a social science and that the relations between things on a market are not fixed. That makes it inherently hard or even futile to infer any knowledge from the data alone. That’s also a big problem for the people who want to “conquer” economics in the same way as a natural science. For instance, physics benefits from the fact that the relationships between many things in its domain are constant and predictable; that’s not the case for economics.

Rejection of Intrinsic Value

The author fully rejects the idea that anything has an objective value so the value can’t be separated from subjective evaluations of each individual. Mises concludes that we value things according to their ability to satisfy our most urgent needs and that’s the only thing that matters. That sounds fair for consumers’ goods but what about raw materials? Their price can be inferred from the price of consumers’ goods as they are necessary to produce them. That lets the market to balance itself, it doesn’t allow us to waste raw materials on things that are of lesser importance to consumers.

Entrepreneurs: Playing Prophet

Mises argues that we owe the benefits of progress to our entrepreneurial activity: actions of entrepreneurs. He gives a rather broad definition of entrepreneurship which covers almost any of man’s actions. We’re all entrepreneurs in a sense that we try to anticipate the future and improve our conditions. People who better anticipate the future tend to reap profits and people who place wrong bets are doomed to suffer losses:

The ultimate source of profits is always the foresight of future conditions. Those who succeeded better than others in anticipating future events and in adjusting their activities to the future state of the market, reap profits because they are in a position to satisfy the most urgent needs of the public.


Human Action contains a lot of thoughts on inflation. This book puts an emphasis on the fact that we simply can’t print our way to prosperity and the fact that inflation is always discriminatory. It reminded me of the famous mental experiment which shows that counterfeiting money is not as bad as it seems: inflation is more tricky than it might look from the first glance.

Let’s say John lives in a small town in Spain and he found a way to print one billion Euros unnoticed. It might be tempting to argue that it’s bad because it causes inflation so John would force the society to pay the bill for his luxurious lifestyle in the form of inflation. How much inflation can one billion Euros cause? It would be barely noticeable and the people from John’s city would actually be better off because they can sell more goods and services to John and have their share of newly created money.

Is inflation good then? It’s good for John and his community, that’s for sure. Probably it’s also good for some neighboring towns his community has trade with and it can even be beneficial for the whole of Spain. That’s one of the most important things about inflation, it’s inherently discriminatory. It can be great for people who get new money first but everyone else ends up footing the bill.

Therefore, Mises concludes that inflation can’t be a good instrument if your goal is to make our society more prosperous but it can certainly make privileged elites more wealthy at the expense of everyone else.


Ludwig von Mises hates government bonds, that’s for sure:

It (government bond) opened a way to free the individual from the necessity of risking and acquiring his wealth and his income anew each day in the capitalist market. He who invested his funds in bonds issued by the government and its subdivisions was no longer subject to the inescapable laws of the market and to the sovereignty of the consumers.

Is this negative attitude justified? It very well may be, such bonds are often called “risk free” but it looks like that it’s just a way of profiteering from the coercive power of a state to extract money from its people in order to pay back the debts.

Here is another interesting observation regarding government debt:

The trumpery argument that the public debt is no burden because “we owe it to ourselves” is delusive. The Pauls of 1940 do not owe it to themselves. It is the Peters of 1970 who owe it to the Pauls of 1940. The whole system is the acme of the short-run principle. The statesmen of 1940 solve their problems by shifting them to the statesmen of 1970. On that date the statesmen of 1940 will be either dead or elder statesmen glorying in their wonderful achievement, social security.

It’s hard to disagree with that too: someone has to pay back the debts that our governments take today. Our over spending tends to be shifted to future generations and that will make their life harder.


The author is not an anarchist, and he leaves some space for state and taxes, but he takes an issue with how those taxes are usually collected:

Taxes are necessary. But the system of discriminatory taxation universally accepted under the misleading name of progressive taxation of income and inheritance is not a mode of taxation. It is rather a mode of disguised expropriation of the successful capitalists and entrepreneurs.

This is an unpopular opinion, who has any pity for billionaires? In my view, progressive taxation is morally wrong, but it’s worth remembering that it’s also counterproductive. Mises abstains from the moral arguments in this book. Instead, he attacks progressive taxation from a strictly utilitarian perspective.


Human Action is a masterpiece, and I think that it’s the book that everyone should read. Economics is not that hard and it can also be fun and interesting. Unfortunately, modern economics may look intimidating with all of those formulas and complex models which assume that people are perfectly rational. Its worth remembering that this “data driven” and “rational” orthodoxy is not universally accepted and there are competing and more intuitive ways to understand what’s going on and prepare for the future. This book is a great example of a simple and intuitive approach to understanding economics and that’s one of the reasons why this book can be a good read for everyone regardless of their prior knowledge of economics.

Appendix: Some Interesting Quotes

It was asserted that a rise or fall in the quantity of money in circulation must result in proportional changes of commodity prices. Modern economics has clearly and irrefutably exposed the fallaciousness of this statement.

It is a fact that in the armed conflicts fought in the past between Europeans and backward peoples of other races, one European soldier was usually a match for several native fighters.

Value is not intrinsic, it is not in things. It is within us; it is the way in which man reacts to the conditions of his environment.

It is generally believed by those unfamiliar with economic theory that credit expansion and an increase in the quantity of money in circulation are efficacious means for lowering the rate of interest permanently below the height it would attain on a nonmanipulated capital and loan market.

No other distinction is of greater significance, both for human life and for the study of human action, than that between calculable action and noncalculable action.

The entrepreneur, grown old and weary and no longer prepared to risk his hard-earned wealth by new attempts to meet the wants of consumers, and the heir of other people’s profits, lazy and fully conscious of his own inefficiency, preferred investment in bonds of the public debt because they wanted to be free from the law of the market.

The ultimate source from which entrepreneurial profit and loss are derived is the uncertainty of the future constellation of demand and supply.

There is no security and no such thing as a right to preserve any position acquired in the past. Nobody is exempt from the law of the market, the consumers’ sovereignty.

Against such statements it is necessary to emphasize that, so far as the operation of the market is not sabotaged by the interference of governments and other factors of coercion, success in business is the proof of services rendered to the consumers.

It is a widespread fallacy that skillful advertising can talk the consumers into buying everything that the advertiser wants them to buy. The consumer is, according to this legend, simply defenseless against “high-pressure” advertising. If this were true, success or failure in business would depend on the mode of advertising only. However, nobody believes that any kind of advertising would have succeeded in making the candlemakers hold the field against the electric bulb, the horsedrivers against the motorcars, the goose quill against the steel pen and later against the fountain pen.

Each individual, in buying or not buying and in selling or not selling, contributes his share to the formation of the market prices.

Their offers are limited on the one hand by their anticipation of future prices of the products and on the other hand by the necessity to snatch the factors of production away from the hands of other entrepreneurs competing with them.

It (competition) reflects in the external world the conflict which the inexorable scarcity of the factors of production brings about in the soul of each individual. It makes effective the subsumed decisions of the consumers as to what purpose the nonspecific factors should be used for and to what extent the specific factors of production should be used.

First, valuing that results in action always means preferring and setting aside; it never means equivalence. Second, there is no means of comparing the valuations of different individuals or the valuations of the same individuals at different instants other than by establishing whether or not they arrange the alternatives in question in the same order of preference.

The mere existence of monopoly does not mean anything. The publisher of a copyright book is a monopolist. But he may not be able to sell a single copy, no matter how low the price he asks. Not every price at which a monopolist sells a monopolized commodity is a monopoly price.

Even if this were true, it would still be faulty to explain the purchasing power—the price— of the monetary unit on the basis of its services. The services rendered by water, whisky, and coffee do not explain the prices paid for these things. What they explain is only why people, as far as they recognize these services, under certain further conditions demand definite quantities of these things. It is always demand that influences the price structure, not the objective value in use.

It is demand, a subjective element whose intensity is entirely determined by value judgments, and not any objective fact, any power to bring about a certain effect, that plays a role in the formation of the market’s exchange ratios.

It is these differences in the marketability of the various commodities and services which created indirect exchange. A man who at the instant cannot acquire what he wants to get for the conduct of his own household or business, or who does not yet know what kind of goods he will need in the uncertain future, comes nearer to his ultimate goal if he exchanges a less marketable good he wants to trade against a more marketable one. It may also happen that the physical properties of the merchandise he wants to give away (as, for instance, its perishability or the costs incurred by its storage or similar circumstances) impel him not to wait longer. Sometimes he may be prompted to hurry in giving away the good concerned because he is afraid of a deterioration of its market value. In all such cases he improves his own situation in acquiring a more marketable good, even if this good is not suitable to satisfy directly any of his own needs.

The insight that the exchange ratio between money on the one hand and the vendible commodities and services on the other is determined, in the same way as the mutual exchange ratios between the various vendible goods, by demand and supply was the essence of the quantity theory of money. This theory is essentially an application of the general theory of supply and demand to the special instance of money. Its merit was the endeavor to explain the determination of money’s purchasing power by resorting to the same reasoning which is employed for the explanation of all other exchange ratios. Its shortcoming was that it resorted to a holistic interpretation. It looked at the total supply of money in the Volkswirtschaft and not at the actions of the individual men and firms. An outgrowth of this erroneous point of view was the idea that there prevails a proportionality in the changes of the—total—quantity of money and of money prices.

As soon as an economic good is demanded not only by those who want to use it for consumption or production, but also by people who want to keep it as a medium of exchange and to give it away at need in a later act of exchange, the demand for it increases.

No good can be employed for the function of a medium of exchange which at the very beginning of its use for this purpose did not have exchange value on account of other employments.

The absence of action is not only the result of full satisfaction; it can no less be the corollary of the inability to render things more satisfactory. It can mean hopelessness as well as contentment.

As money can never be neutral and stable in purchasing power, a government’s plans concerning the determination of the quantity of money can never be impartial and fair to all members of society. Whatever a government does in the pursuit of aims to influence the height of purchasing power depends necessarily upon the rulers’ personal value judgments. It always furthers the interests of some groups of people at the expense of other groups. It never serves what is called the commonweal or the public welfare. In the field of monetary policies too there is no such thing as a scientific ought.

For two hundred years the governments have interfered with the market’s choice of the money medium. Even the most bigoted étatists do not venture to assert that this interference has proved beneficial.

The course of a progressing inflation is this: At the beginning the inflow of additional money makes the prices of some commodities and services rise; other prices rise later. The price rise affects the various commodities and services, as has been shown, at different dates and to a different extent.

This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy. But then finally the masses wake up. They become suddenly awareof the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against “real” goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.

Fiat money is a money consisting of mere tokens which can neither be employed for any industrial purposes nor convey a claim against anybody.

First: Inflationary or expansionist policy must result in overconsumption on the one hand and in malinvestment on the other. It thus squanders capital and impairs the future state of want-satisfaction. Second: The inflationary process does not remove the necessity of adjusting production and reallocating resources. It merely postpones it and thereby makes it more troublesome. Third: Inflation cannot be employed as a permanent policy because it must, when continued, finally result in a breakdown of the monetary system.

Today even the most bigoted étatists cannot deny that all the alleged evils of free banking count little when compared with the disastrous effects of the tremendous inflations which the privileged and government-controlled banks have brought about.

Only free banking would have rendered the market economy secure against crises and depressions.

They adopted the superstition that lowering the rate of interest is beneficial and that credit expansion is the right means of attaining such cheap money. Nothing harmed the cause of liberalism more than the almost regular return of feverish booms and of the dramatic breakdown of bull markets followed by lingering slumps. Public opinion has become convinced that such happenings are inevitable in the unhampered market economy. People did not conceive that what they lamented was the necessary outcome of policies directed toward a lowering of the rate of interest by means of credit expansion.

Government interference with the present state of banking affairs could be justified if its aim were to liquidate the unsatisfactory conditions by preventing or at least seriously restricting any further credit expansion. In fact, the chief objective of present-day government interference is to intensify further credit expansion. This policy is doomed to failure. Sooner or later it must result in a catastrophe.

The difference between the trade in money and that in the vendible commodities is this: As a rule commodities move on a one-way road, viz., from the places of surplus production to those of surplus consumption. Consequently the price of a certain commodity in the places of surplus production is as a rule lower by the amount of shipping costs than in the places of surplus consumption. Things are different with money if we do not take into account the conditions of the gold-mining countries and of those countries whose residents deliberately aim at altering the size of their cash holdings. Money moves now this way, now that. At one time a country exports money, at another time it imports money. Every exporting country very soon becomes an importing country precisely on account of its previous exports. For this reason alone it is possible to save the costs of shipping money by the interplay of the market for foreign exchange.

The use of money does not remove the differences which exist between the various nonmonetary goods with regard to their marketability. In the money economy there is a very substantial difference between the marketability of money and that of the vendible goods. But there remain differences between the various specimens of this latter group. For some of them it is easier to find without delay a buyer ready to pay the highest price which, under the state of the market, can possibly be attained. With others it is more difficult. A first-class bond is more marketable than a house in a city’s main street, and an old fur coat is more marketable than an autograph of an eighteenth-century statesman. One no longer compares the marketability of the various vendible goods with the perfect marketability of money. One merely compares the degree of marketability of the various commodities. One may speak of the secondary marketability of the vendible goods.

The only cautious method of dealing with hot money would have been to keep a reserve of gold and foreign exchange big enough to pay back the whole amount in case of a sudden withdrawal. Of course, this method would have required the banks to charge the customers a commission for keeping their funds safe.

The gold standard removes the determination of cash-induced changes in purchasing power from the political arena. Its general acceptance requires the acknowledgment of the truth that one cannot make all people richer by printing money. The abhorrence of the gold standard is inspired by the superstition that omnipotent governments can create wealth out of little scraps of paper.

People fight the gold standard because they want to substitute national autarky for free trade, war for peace, totalitarian government omnipotence for liberty.

Other things being equal, satisfaction in a nearer period of the future is preferred to satisfaction in a more distant period; disutility is seen in waiting.

The theorem of time preference must be demonstrated in a double way. First for the case of plain saving in which people must choose between the immediate consumption of a quantity of goods and the later consumption of the same quantity. Second for the case of capitalist saving in which the choice is to be made between the immediate consumption of a quantity of goods and the later consumption either of a greater quantity or of goods which are fit to provide a satisfaction which—except for the difference in time—is valued more highly. The proof has been given for both cases. No other case is thinkable.

Saving is the first step on the way toward improvement of material well-being and toward every further progress on this way.

These nations of Eastern Europe, Asia, and Africa have been able, thanks to the foreign capital imported, to reap the fruits of modern industry at an earlier date. They were to some extent relieved from the necessity of restricting their consumption in order to accumulate a sufficient stock of capital goods. This was the true nature of the alleged exploitation of the backward nations on the part of Western capitalism about which their nationalists and the Marxians lament.

If action is primarily directed toward the improvement of other people’s conditions and is therefore commonly called altruistic, the uneasiness the actor wants to remove is his own present dissatisfaction with the expected state of other people’s affairs in various periods of the future. In taking care of other people he aims at alleviating his own dissatisfaction.

War is the alternative to freedom of foreign investment as realized by the international capital market.

It would be more realistic to blame capitalism for its propensity to over-value useless innovations than for its alleged suppression of useful innovations. It is a fact that large sums have been wasted for the purchase of quite useless patent rights and for fruitless ventures to apply them in practice.

It is true, we would be still better off if our ancestors and we ourselves in our past actions had succeeded in better anticipating the conditions under which we must act today. The cognizance of this fact explains many phenomena of our time. But it does not cast any blame upon the past nor does it show any imperfection inherent in the market economy.

The act of saving always has its counterpart in a supply of goods produced and not consumed, of goods available for further production activities. A man’s savings are always embodied in concrete capital goods.

If future goods were not bought and sold at a discount as against present goods, the buyer of land would have to pay a price which equals the sum of all future net revenues and which would leave nothing for a current reiterated income.

People do not save and accumulate capital because there is interest. Interest is neither the impetus to saving nor the reward or the compensation granted for abstaining from immediate consumption. It is the ratio in the mutual valuation of present goods as against future goods.

Calculating the prospects of the profitability of the investment, he comes to the conclusion that the expected proceeds are not great enough to cover the costs of material and labor to be expended and interest on the capital to be invested. He renounces the execution of project A and embarks instead upon the realization of another plan, B. According to plan B the hotel is to be erected in a more easily accessible location which does not offer all the advantages of the picturesque landscape which plan A had selected, but in which it can be built either with lower costs of construction or finished in a shorter time. If no interest on the capital invested were to enter into the calculation, the illusion could arise that the state of the market data—supply of capital goods and the valuations of the public—allows for the execution of plan A. However, the realization of plan A would withdraw scarce factors of production from employments in which they could satisfy wants considered more urgent by the consumers. It would mean a manifest malinvestment, a squandering of the means available.

Therefore there cannot be any question of abolishing interest by any institutions, laws, and devices of bank manipulation. He who wants to “abolish” interest will have to induce people to value an apple available in a hundred years no less than a present apple. What can be abolished by laws and decrees is merely the right of the capitalists to receive interest. But such laws would bring about capital consumption and would very soon throw mankind back into the original state of natural poverty.

The increase or decrease in the supply of money (in the broader sense) can increase or decrease the supply of money offered on the loan market and thereby lower or raise the gross market rate of interest although no change in the rate of original interest has taken place. If this happens, the market rate deviates from the height which the state of originary interest and the supply of capital goods available for production would require. Then the market rate of interest fails to fulfill the function it plays in guiding entrepreneurial decisions. It frustrates the entrepreneur’s calculation and diverts his actions from those lines in which they would in the best possible way satisfy the most urgent needs of the consumers.

The individual is always ready to ascribe his good luck to his own efficiency and to take it as a well-deserved reward for his talent, application, and probity. But reverses of fortune he always charges to other people, and most of all to the absurdity of social and political institutions. He does not blame the authorities for having fostered the boom. He reviles them for the necessary collapse.

What distinguishes the successful entrepreneur and promoter from other people is precisely the fact that he does not let himself be guided by what was and is, but arranges his affairs on the ground of his opinion about the future.

On the other hand a worker eager to earn more must either shift to piecework or seek a job in which pay is higher because the minimum of achievement expected is greater.

Slavery and serfdom were abolished by political action dictated by the spirit of the much-abused laissez faire, laissez passer ideology.

The produced factors of production perish sooner or later entirely in the pursuit of production processes, and piecemeal are transformed into consumers’ goods which are eventually consumed. If one does not want to make the results of past saving and capital accumulation disappear, one must, apart from consumers’ goods, also produce that amount of capital goods which is needed for the replacement of those worn out.

It is vain to search for coefficients of correlation if one does not start from a theoretical insight acquired beforehand. The co efficient may have a high numerical value without indicating any significant and relevant connection between the two groups.

What the government spends more, the public spends less. Public works are not accomplished by the miraculous power of a magic wand. They are paid for by funds taken away from the citizens. If the government had not interfered, the citizens would have employed them for the realization of profit promising projects the realization of which they must omit because their means have been curtailed by the government.

The changes in the data whose reiterated emergence prevents the economic system from turning into an evenly rotating economy and produces again and again entrepreneurial profit and loss are favorable to some members of society and unfavorable to others. Hence, people concluded, the gain of one man is the damage of another; no man profits but by the loss of others. This dogma was already advanced by certain ancient authors. Among modern writers Montaigne was the first to restate it; we may fairly call it the Montaigne dogma. It was the quintessence of the doctrines of Mercantilism, old and new. It is at the bottom of all modern doctrines teaching that there prevails, within the frame of the market economy, an irreconcilable conflict among the interests of various social classes within a nation and furthermore between the interests of any nation and those of all other nations.

What produces a man’s profit in the course of affairs within an unhampered market society is not his fellow citizen’s plight and distress, but the fact that he alleviates or entirely removes what causes his fellow citizen’s feeling of uneasiness.

The transition to capitalism—i.e., the removal of the obstacles which in former days had fettered the functioning of private initiative and enterprise—has consequently deeply influenced sexual customs. It is not the practice of birth control that is new, but merely the fact that it is more frequently resorted to.

The transition to capitalism is thus accompanied by two phenomena: a decline both in fertility rates and in mortality rates. The average duration of life is prolonged.

Socialism is not an alternative to capitalism; it is an alternative to any system under which men can live as human beings. To stress this point is the task of economics as it is the task of biology and chemistry to teach that potassium cyanide is not a nutriment but a deadly poison.

What the naïve mind calls reason is nothing but the absolutization of its own value judgments. The individual simply identifies the products of his own reasoning with the shaky notion of an absolute reason. No socialist ever gave a thought to the possibility that the abstract entity which he wants to vest with unlimited power—whether it is called humanity, society, nation, state, or government—could act in a way of which he himself disapproves. A socialist advocates socialism because he is fully convinced that the supreme director 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.

To the farmer no price of wheat, however high, appears unjust. To the wage earner no wage rates, however high, appear unfair. But the farmer is quick to denounce every drop in the price of wheat as a violation of divine and human laws, and the wage earners rise in rebellion when their wages drop.

The alternative is not plan or no plan. The question is whose planning? Should each member of society plan for himself, or should a benevolent government alone plan for them all? The issue is not automatism versus conscious action; it is autonomous action of each individual versus the exclusive action of the government. It is freedom versus government omnipotence.

The fundamental error of the interventionists consists in the fact that they ignore the shortage of capital goods. In their eyes the depression is merely caused by a mysterious lack of the people’s propensity both to consume and to invest. While the only real problem is to produce more and to consume less in order to increase the stock of capital goods available, the interventionists want to increase both consumption and investment. They want the government to embark upon projects which are unprofitable precisely because the factors of production needed for their execution must be withdrawn from other lines of employment in which they would fulfill wants the satisfaction of which the consumers consider more urgent. They do not realize that such public works must considerably intensify the real evil, the shortage of capital goods.

In the unhampered market the behavior of consumers, their buying or abstention from buying, ultimately determines each individual’s income and wealth. Should one vest in the government the power to overrule the consumers’ choices?

What is needed to make peace durable is to dethrone the despots. This, of course, cannot be achieved peacefully. It is necessary to crush the mercenaries of the kings. But this revolutionary war of the peoples against the tyrants will be the last war, the war to abolish war forever.

The entrepreneurial idea that carries on and brings profit is precisely that idea which did not occur to the majority. It is not correct foresight as such that yields profits, but foresight better than that of the rest. The prize goes only to those dissenters who do not let themselves be misled by the errors accepted by the multitude. What makes profits emerge is the provision for future needs for which others have neglected to make adequate provision.

Those ignorant people who operate on the stock and commodity exchanges according to tips are destined to lose their money, from whatever source they may have got their inspiration and “inside” information.