Government Intervention

Intervention Begets Intervention

Ludwig von Mises and Sanford Ikeda on the perils of interventionism


Among the many valuable doctrines associated with the great Austrian economist Ludwig von Mises is his "critique of interventionism." Originally published in German in 1929, then published in English in 1977, Mises's book A Critique of Interventionism summed up his position this way:

In a private property order isolated intervention fails to achieve what its sponsors hoped to achieve. From their point of view, intervention is not only useless, but wholly unsuitable because it aggravates the "evil" it meant to alleviate….

If government is not inclined to alleviate the situation through removing its limited intervention and lifting its price control, its first step must be followed by others.

Two things to note here: First, Mises distinguished interventionism from state socialism, or central economic planning. Unlike central planning, Mises wrote,

Interventionism seeks to retain private property in the means of production, but authoritative commands, especially prohibitions, are to restrict the actions of private owners.… It does not seek to abolish private property in production; it merely wants to limit it.… [I]t seeks to create a third order: a social system that occupies the center between the private property order and the public property order. Thus, it seeks to avoid the "excesses" and evils of capitalism, but to retain the advantages of individual initiative and industry which socialism cannot bring forth.

With emphasis he wrote, "Intervention is a limited order by a social authority forcing the owners of the means of production and entrepreneurs to employ their means in a different manner than they otherwise would."

Mises pushed the distinction between interventionism and state socialism hard, as when he stated, "Ever since the Bolsheviks abandoned their attempt to realize the socialist ideal of a social order all at once in Russia and, instead, adopted the New Economic Policy, or NEP, the whole world has had only one real system of economic policy: interventionism." True, he said, some interventionists believe that system is temporary. Nevertheless, "all its followers and advocates fully agree that it is the correct policy for the coming decades, even the coming generations."

Good intentions

The other notable point is that Mises assumed that interventionists were public-spirited. This doesn't mean he necessarily thought every interventionist had good intentions, but he was willing to grant this for the sake of argument. If he could show the flaws in interventionism even with this assumption, so much the better for his case. To some extent this distinguishes Mises's argument from the Public Choice school's case against intervention, in that the latter builds on the assumption that government officials are as self-serving as people in the private sector.

For Mises, the classic case of intervention and the process it sets in motion is the price ceiling. Milk is expensive, and low-income families have trouble buying all they need. A public-spirited legislator sponsors a bill to set a maximum price with the intention of making milk more accessible. But rather than making it more accessible, it becomes less accessible. Why? If the legislated price ceiling is below the cost of production, producers will withhold supply or leave the market, leaving some demand unsatisfied.

By assumption, this is not what the interventionists wanted, so (unless they understand economics) they must do more. They might decree that all the supply be brought to market, impose rationing on consumers, or legislate price and wage controls for the milk producers' suppliers and workers. Eventually "the controls must encompass all branches of production, the prices of all goods and all wages, and the economic actions of all entrepreneurs, capitalists, landowners, and workers," Mises wrote. "If any industry should remain free, capital and labor will move to it and thus frustrate the purpose of the government's earlier intervention."

The upshot for Mises is the incoherence and intrinsic instability of interventionism. It is incoherent because it "contradicts economic logic." It is unstable because the third way can't be sustained. "Government either abstains from limited interference with the market forces, or it assumes total control over production and distribution. Either [laissez-faire] capitalism or socialism; there is no middle of the road."

No clear direction

It's a powerful thesis, yet something is lacking. We see interventionist economies all over the world—including our own—that do not seem to be moving definitively in either direction. Over the last several decades we have seen episodes of deregulation—such as the Carter-era elimination of trucking and airline rules, and the Clinton-era banking deregulation—and episodes of regulation—such as the environmental legislation of the Nixon and later administrations, and the recent round of new banking regulations. Much of the time the economy occupies a narrow range. There is no clear move toward either laissez-faire or state socialism.

Can we save Mises's doctrine? Enter Sandy Ikeda, the excellent Austrian economist at Purchase College, SUNY, and author of Dynamics of the Mixed Economy: Toward a Theory of Interventionism. This 1997 book has not gotten the attention it deserves. I can understand why interventionists would ignore it. Libertarians should be familiar with it.

Ikeda's book is a sweeping start toward a unified theory of the different varieties of interventionism. Part of the book is a friendly critique of Mises's critique of interventionism, aimed at resolving what Ikeda calls the Misesian Paradox—namely, that theoretically unstable mixed economies nevertheless predominate and persist in our world. As I understand him, Ikeda concludes that the mixed economy does have the features of instability that Mises attributed to it, but compared to its alternatives, it can appear stable. Ikeda writes,

The key to resolving this paradox is to realize that to claim the mixed economy is unstable is not the same thing as asserting that it is transitory.… The roads between the minimal and maximal states can thus be very long and winding, and state expansion very gradual.…

Somewhat paradoxically, therefore, it appears that the product of interventionism, the mixed economy, though unstable, is likely to be more enduring than the pure forms of either collectivism or capitalism, offering as it does a much wider range of (ultimately futile) adaptive forms than either of its rival systems. The inherent instability of interventionism thus drives the mixed economy through a variety of transformations that are denied to the other systems.

Relative Stability

Ironically, then, the unstable mixed economy is more stable than its alternatives. Mises wouldn't be surprised at Ikeda's claim that central planning is unstable. That was the conclusion of Mises's economic-calculation critique of state socialism. But why does Ikeda say laissez-faire is unstable? Because, he writes, it is "highly sensitive to governmental error and to changes in ideological preferences (as well as exogenous shocks)." In other words, even a limited government is subject to the calculation and knowledge problems that plague totalitarian governments. And, it hardly needs pointing out, limited governments don't stay limited.

Is there a lesson to be drawn from Mises's critique? I think so. Intervention tends to beget intervention. Therefore, when you see a public problem, don't look to government intervention for a solution. Instead, look for the previous intervention that created it—and work to have the offending legislation repealed.

This article was originally published at the Future of Freedom Foundation.

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  1. “Good intentions”
    Always. Results? Never.

    1. The reason why our economy is doomed is because government has managed to convince the people that intentions matter more than results. So if you oppose bailouts, you must oppose the working man. If you oppose raising taxes on the rich, you must oppose fairness. If you oppose gun control, you must oppose public safety and the safety of children.

    2. Where is it that road paved with good intentions leads…

      1. Poughkeepsie, I think.

        1. Detroit.

          1. buybuydandavis| 12.25.12 @ 5:07PM |#

            ‘Way worse than hell; that place has a better government.

            1. Watched the Vice episode on the warlords of Monrovia last night, by comparison Detroit looks like the Hamptons.

              1. “Watched the Vice episode on the warlords of Monrovia last night, by comparison Detroit looks like the Hamptons.”

                Don’t let Detroit’s semi functional indoor plumbing and somewhat superior cell phone reception fool you; it’s an equivalent shithole with a slightly more sophisticated group of warlords running the show.

  2. Therefore, when you see a public problem, don’t look to government intervention for a solution. Instead, look for the previous intervention that created it?and work to have the offending legislation repealed.

    I believe this is the libertarian argument against RTW laws. But of course the sad truth is that the NLRA and other labor laws aren’t going anywhere, so where does that leave us with regard to trying to make statism less oppressive?

    1. This was also robc’s argument against government licensing of same-sex marriage.

      I’m inclined to believe that eventually the weight of the system will cause it to implode, and thus the problem of band-aids adding to the problem is a feature and not a bug.

      1. Yep. On both. Also on things like immigration/welfare that interact.

        Merry Christmas everyone.

      2. I’m inclined to believe that eventually the weight of the system will cause it to implode…

        When has anything like that happened with the result of increasing liberty?

        I can think of a number of government collapses that quickly lead to tyranny, none that led to increased liberty.

        1. Exactly.

          Liberty is impossible without a stable government.

          1. Freedom is impossible without slavery! Hurrrrrrr durrrrrrrrrrrrrrrrrrrrr

  3. OT: Merry Christmas everyone!

    But especially Merry Christmas to tOSU fans. Fuck Michigan!

    1. Only one week until all of us see our taxes go up out the wazoo. “Merry” fucking Christmas indeed.

    2. Anybody else hate using a .gif as a substitute for video? It’s always bloated, and rarely funny.

      1. I have an awesome collection of sketch comedy .gifs on an old drive from the late nineties. When I get around to digging it out of the closet again I’ll share. And convert to a useful video format before doing so;)

    3. It is customary in polite company to switch the first sounds of the swear words, so that the more objectionable starts with an f, and the less objectionable is muck.

    4. Haha. Michigan sucks:)

  4. what Ikeda calls the Misesian Paradox?namely, that theoretically unstable mixed economies nevertheless predominate and persist in our world.

    It’s not a paradox if someone is wrong in an obvious way. Intervention fucks things up, but people live with the damage or route around it. There always have been thugs trying to rule us, and we keep finding ways to deal with them.

    1. Money and power will always find each other.

      It’s a neon law or something.

      1. Cole’s law…

        1. Bzzt. Iron Law via RC Dean.

  5. Feliz Natal, meus amigos.

    I need to find an open liquor store, I think that I dranked all of the beer yesterday…

    1. He’s speaking Mexican. He’s taking our jobs!

      Stay thirsty, my friend.

      1. Actually, he isn’t.

        Mix a Brazilian up with a Mexican and I’ll show just how rank and file the “latin” vote really is(n’t).

        1. Yerp, obrigado MLG, I see that FOE can’t tell Espanol de Portuguese…


            1. and how!

  6. Over the last several decades we have seen episodes of deregulation?such as the Carter-era elimination of trucking and airline rules, and the Clinton-era banking deregulation

    It is sad when these two are widely regarded as the two most libertarian Presidents since Coolidge.

    1. Widely regarded? Are you drunk on eggnog?

      1. Compared to FDR, the Bush’s, and Obama, I’d say it’s a valid assertion.

        1. Nixon and LBJ were Big Gov lovers. I was too young to remember wage and price controls, SSDI, EPA, and the Controlled Substances Act but would have to say they were among the worst.

          LBJ escalating the Vietnam War and Medicare puts him in rare territory.

          1. Yeah, I’d definitely take Bill or Bush over LBJ or Nixon.

          2. Nixon was worse.

            1. Want something to ruin your life?

              1. It’s fucking Christmas!

                Why oh why did I sort by aggregate? I think I’m going to be sick.

          3. Don’t overrate the badness of the Controlled Substances Act. Practically it was just a recodif’n of existing federal law and xfer of responsibilities between depts.

        2. anon| 12.25.12 @ 4:25PM |#
          “Compared to FDR, the Bush’s, and Obama, I’d say it’s a valid assertion.”

          Compared to your average piece of granite, shreek is pretty smart.

          1. Ahh, a bona fide Team Red party member shows up.

            Who is the most libertarian POTUS since Coolidge then?

            1. Palin’s Buttplug| 12.25.12 @ 7:15PM |#
              “Ahh, a bona fide Team Red party member shows up.”

              You lying piece of shit, find once where I defended your fave villain.
              Sorry, I’m not alone in finding your idiotic cheerleading for Team Blue tiresome.
              Yea! Obama! He can do no wrong! Right, dipshit?

            2. Most libertarian presidents since Coolidge (and correct me if I’m wrong):

              1. Reagan
              2. Eisenhower
              3. H.W. Bush
              4. Carter
              5. W. Bush
              6. Clinton
              7. Ford
              8. Kennedy
              9. Truman
              10. Obama
              11. LBJ
              12. Nixon
              13. Roosevelt

              1-6, I’m fairly confident in my opinion. I’m not too sure of 7-13.

              1. Dang, I forgot about Hoover. Worse than Kennedy, but better than Truman.

              2. HW Bush raised taxes, expanded environmental regulations and pushed the ADA, which has metastasized into a bureaucratic-regulatory nightmare. Also signed the first assault weapons ban as an executive order.

                Like his foreign policy but he was big on expanding the state.

                GWB – You’re kidding right.
                DHS, No Child Left Behind, Medicare Part D, Patriot Act, Wars of Choice. He never saw a government program that he didn’t like.

                Clinton was relatively liberty friendly by default since the Republican congress checked him after 94 and he was tied up with the impeachment nonsense for 12-18 months.

                1. Dude, the list pretty much sucks without qualification. But if I had to rank them, I’d rank George W. ahead of Clinton because everything great about the Clinton administration was brought to us by the Republican Congress.

                  H.W. Bush sucked, but inspired the raw cynicism while presiding over a much more robust economy. He’s Carter without the malaise.

                  1. There’s no doubt that Clinton would have been horrible if the dems had retained control of congress in 94. Still, as it turned out his presidency was pretty good in libertarian terms.

                    I think HW was better than Carter based on his foreign policy. Domestically, he expanded government power more than Carter did. And carter did start the price deregulation of a lot of industries. Reagan saw it through to fruition. It’s possible that Carter would have reversed course if he had been re elected, especially in the face of the 82 recession.

                    1. I was surprised to learn in the 1980s that the deregul’n that came to fruition under Carter & Reagan had actually started in the Nixon admin. Nixon did something clever, politically: He inaugurated a bunch of commissions on deregul’n whose reports would come out some years later and would by then appear to be nonpartisan.

                      Also, does how libertarian a president is depend solely on his behavior in office, or can it depend partly on how libertarian he acted in other offices before he became POTUS? In Nixon’s case, I’d like to know whether he was productive or counter-productive overall in his previous role as a Congressional Red hunter.

                    2. I don’t understand the libertarian wood for Clinton. The assault weapons ban and militarization of federal law enforcement wasn’t exactly a small thing. Say what you will about GWB (and there’s plenty to be said), but no unarmed civilians got their brains blown out on their own land by Marshall Service snipers for the crime of standing in their backwoods cabin, nor was anyone set on fire and bulldozed with tanks and APCs, or kidnapped by night by men with machine guns to be deported to a communist shithole. I guess the hookers and blow provided in such abundance by the booming stock market made it easy to forget little trivialities like that, but it’s something you might want to think about when the “mostest libertarianest president of all time!” arguments come up.

              3. In other words, why don’t we all just give up already?

  7. I need to find an open liquor store, I think that I dranked all of the beer yesterday…




      I really want that sign strapped on my freaking forehead. Should be my business motto.

    2. Doesn’t work for medical, Brooksie.-))))

      1. Doesn’t work in about any business that deals with customers.

        1. Some more than others, Sevo. Depends on how close to death your customers are.

          When one is late to a restaurant or bar and barely misses closing time, it is extremely unlikely that will kill them. Same for when late to a movie or a store is out of stock of something and the customer is trying to place a last-minute order or reservation.

          Ruptured appendix, MI, aneurism, and various other infarcts, to say nothing of MVA’s and GSW’s OTOH…

          1. All of that is of no doubt, and all is *extremely* important to the customer, and I’m sure to an ethical supplier (and I’m including you).
            While the importance is less threatening to my clients, I promise you it is every bit as important to me; they pay my bills.

            1. Absotively, mah bruthah! We all gotta eat, no?-D

              I have found that the three most important things to the customer is:

              1) Their time.

              2) Their money.

              3) Their satisfaction (for me, literally, their lives).

              People find those things very important and don’t like those things impeded (especially breathing).

              However, the phrase, “The customer is always right,” is untrue. I go by the motto: “The customer has the right!” Such as, making requests, expecting deadlines met, and if I’m unable to do so, let them know why if something cannot be fulfilled and attempt to rectify as quickly and satisfactorily as possible.

              Reconciling a demand can be quite…challenging at times. Especially if the expectation is unrealistic.

  8. Some crazy bastard sets his house on fire and shoots the firemen when they show up.

    Whose hands is the blood on?

    The NRA, of course.

    (Impressively hysterical ranting editorial at NY Daily news)

    1. *Convicted murderer* murders two (more) people and injures two others, has three firearms on him at time of death despite strict laws preventing him from owning said weapons.

      The solution, natch, is to gun control harder and make sure those of us without so much as a speeding ticket can’t own these weapons legally. Could there possibly be a better example of the progressive mind at work?

  9. I read Interventionism along with Bureaucracy and Omnipotent Government in the late 70s when I was also lucky enough to hear a pre-Nobel Laureate James Buchanan give a lecture to my high school econ class at Buchanan’s alma mater, Middle Tennessee State University (arranged by my very handsome Freidmanite libertarianish stats/Econ teacher, Marion Marks). I actually have since filled in, in my memory, a public choice-y aspect to the book that I guess wasn’t there.

    I just remember Mises elaborating the thesis that every intervention causes problems that are used to call for further intervention (minimum wage causes unemployment which then require jobs programs etc). Perhaps because I did my own public choice rewrite where corporatist interest profit from the ever expanding intervention, I’ve always thought Naomi Klein is just stolen Mises. She claims capitalist failures are used to justify austerity programs and de-regulation etc. that seems to be a theft of Mises description of interventionism.

    1. She claims capitalist failures are used to justify

      And yet I’ve failed to ever see a capitalist failure, either imagined or real.

      1. And yet I’ve failed to ever see a capitalist failure, either imagined or real.


        Even if a business venture fails in a free market/capitalist system, that is a success of the system. It’s dead weight being removed from the economy to allow for something else.

  10. We see interventionist economies all over the world?including our own?that do not seem to be moving definitively in either direction.

    May I please have some of that shit that you’re smoking?

  11. OT: You know you’re a capitalist when you find yourself hating Christmas because everything’s closed and you can’t finish a job.

    1. Or get an order shipped, dammit!

  12. Therefore, when you see a public problem, don’t look to government intervention for a solution. Instead, look for the previous intervention that created it?and work to have the offending legislation repealed.

    Great theory.

    Got any examples of this being done to a positive effect?

    1. Uh… Prohibition?

      1. Yeah, as soon as I hit enter I though of that. It’s the only one that I can think of. Trucking and Airline deregulation in the 70s were more laws on top of existing ones.

        1. Yeah, I assumed it was a pretty rhetorical question.

          Although I’d point out that every instance that immediately comes to mind, removing the initial transgression has turned out wildly more successful than the patchwork bullshit.

          1. The problem is that interventions happen though webs of dozens to hundreds of laws and even regulatory agency rulings. Repealing one, or a few doesn’t really do anything other than create a deregulatory strawman that can be used to blame future failure and justify even more intervention.

            the Clinton-era banking deregulation mentioned by Richman is a classic example. There wasn’t any deregulation. Glass-Steagall was mostly dead by the time GLB was signed into law. And, if anything, there was more intervention when Clinton left office than when he entered. And the same thing with Bush, no deregulation and more intervention in 2007 than in 2001.

            But everybody “knows” that deregulation caused the credit bubble and crash and that Glass-Steagall would have prevented all of that.

            Ironically, the only effect that I can see from GLB was to enable, or legitimize, part of the bailouts in 2008 when investment banks become commercial banks to get direct access to the FedRes.

            1. I’m not disagreeing in any way.

              I’m just saying… Imagine if we woke up one day and -all- federal banking regulations were immediately repealed. It’d be far far far more successful than bailing out companies that (ironically) figure out how to invest money for a profit.

              1. I agree. But I’d repeal the national banking acts of 1863-64 and everything passed since then.

                But it’s not going to happen.
                Maybe, at some point we could get an automatic sunset provision constitutional amendment passed. Short of that, the best that can realistically be done is eliminating bailouts and passing ad hoc reforms when we’re able to.

            2. Although Glass-Steagall is a red herring the rest of GLB was very deregulatory.

              Derivatives had nothing to do with the Credit Crash. That is left wing myth. They are more prevalent today in fact.

              1. Palin’s Buttplug| 12.25.12 @ 5:01PM |#
                “Although Glass-Steagall is a red herring the rest of GLB was very deregulatory”

                Yeah, dipshit, I’ll bet not requiring rest-room attendants really makes you cringe.
                Some ‘dereg’; you’re an idiot.

        2. When we speak of 70’s deregulation, no one ever mentions the wildly successful railroad deregulation. But I think it was Reagan who cut the railroads loose early in his first term.

          The US railroad industry was a disaster zone in the 70’s. There were some 30 or 40 lines trying to do business in America, and they were all bankrupt or hanging on by a thread. RR infrastructure was junk, accidents abounded, it turned into Atlas Shrugged. The government had all but taken over the RR industry, and they had regulated these railroads be kept so small that none of them could make any money, maintain their infrastructure, or deliver freight.

          Since RR deregulation, there has been mass consolidation in RRing, and now four big players dominate the vast majority of the industry: Norfolk Southern, CSX, BNSF, and the biggest and baddest of them all, Union Pacific. Deregulation saved what was historically the most regulated and cronified industry, railroading.

          1. IIRC, a large part of the problem was over-staffing caused by union rules. What happened there?

            1. The unions enforced alot of ridiculous rules (like mandatory excessive hours for worthless positions, like broom pusher), but I mean to say the government was literally strangling the railroads to death. Regulators were setting hours, routes and departure times, and as you can probably guess it was a colossal clustermuck.

              But the sword of Damocles for the RR business was Antitrust. Capital was prevented from combining and forming efficiently, so the entire RR industry was reduced to a bunch of poor neighbors who couldn’t get their shit together. Couldn’t maintain their property, couldn’t fire workers, couldn’t contain costs, couldn’t combine in order to stay alive (let alone profit), they couldn’t do shit.

              RR deregulation brought that dinosaur industry roaring back to life. I imagine Ending the Fed would have the same effect on banking.

              1. “But the sword of Damocles for the RR business was Antitrust.”

                First: have you read Shermer’s definition of anti-trust law?
                1) If you charge more than you’re competitor, you’re gouging.
                2) If you charge less, you’re engaged in unfair competition.
                3) If you charge the same, you’re colluding.
                4) If you don’t have a competitor, you’re a monopoly!
                So how did the RRs bail out of anti-trust law?

                1. A number of the Class I railroads went belly up and were acquired or divided up among others. Those liquidations tended to move more quickly and to be approved in comparison to mergers of non-bankrupt roads.

                  The Staggers Act took quite a lot of authority away from the Interstate Commerce Commission. So did creation of US DOT.

                  The change in union work rules and terms was underway for some time over multiple contract negotiations and were also influenced by the bankruptcies to come to a more reasonable state.

                2. Uh, I never said they did. I wrote that Antitrust was used to keep them from combining and forming bigger, more efficient combinations.

      2. Even prohibition isnt absolute.

        Afterwords, they left the intervention up to the states, who have preceded to fuck it all up.

        Still, as good an example is can be had.

        1. Prior to the Volstead Act it was left up to the states.

  13. I really want that sign strapped on my freaking forehead. Should be my business motto.

    The first time I saw that (many many moons ago), it was on the wall behind the counter at my friendly neighborhood automotive machine shop.

    1. Are men with gynecomastia smarter?

      1. Chuck Schumer did score a perfect 1600 on the SAT…

  14. Happy Festivus! I hope you all had an awesome sharing of grievances.

  15. Jack Klugman won’t be keeping you from your colchicine any longer.

    1. lol

      I remember that episode!

    2. I first read that as “cloaca”, and wondered why Jack would have felt the need to keep me from a chicken’s business hole to begin with.

      1. The technical term is “assgina”.

  16. Well, we got Baby Reason Sophia Spicer home from the hospital today. what a lovely Christmas present.

    Pic of the lovely baby girl at home for the first time.

    Thanks to all of you for your thoughts and prayers. You all mean a lot to Kara and I and we want to share a little bit of our joy with you. Merry Christmas, Happy Hanukkah or just plain Happy Tuesday to you all, whatever (if anything) you are celebrating today.

    1. Awesome!

    2. That is fantastic! Merry Christmas to the three of you and may she continue to grow healthy and firmly rooted in the tradition of liberty.

    3. There’s a Christmas present you won’t forget! L’chaim!

    4. Merry Christmas, I can’t imagine anyone could receive a better gift.

    5. Good morning, sloop and Banjos! So very happy for you both and lil’ Baby Reason. She needs to be with Mama and Papa Bear.

      Almost brings a tear to this cynical man’s eye…-)))

      Merry Christmas Spicers one and all!

    6. Congrats! Great news.

  17. Time for my annual Christmas viewing of The Great Escape

    1. I hope you have your ball and glove on hand…

      One cannot watch TGE without their mitt and ball handy.-D

      1. and moonshine.

  18. Wow, I am so drunk. All is good, the world didn’t end and there is still beer!

  19. Sometimes man you jsut gotta roll with it!

  20. Tonight on Monster Chiller Horror Theatre 3d house of Royalty! Scary stuff boys and girls.

  21. “Ruh-peel? What does that mean?”

    /typical politician

  22. This is really funny, what cause this happened?

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