Mises, Luxury Goods, and DiLorenzo

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famous yet not sufficiently rewarded economist – leader of
the Austrian School to which Nobel Laureate F. A. Hayek belonged
– Ludwig von Mises once noted that "Every advance first
comes into being as the luxury of a few rich people, only to become,
after a time, the indispensable necessity taken for granted by everyone.
Luxury consumption provides industry with the stimulus to discover
and introduce new things."

noticed, when I recently watched the original Sabrina
– with Humphrey Bogart, William Holden and, of course, the
incomparable Audrey Hepburn – that the rich and nice guy played
by Bogart had a car phone in his chauffeur driven limo. That was
back in the mid-50s. Today what Mises noted is nearly absolutely
true: Car phones have become an indispensable necessity for everyone.
The same with warm water, the automobile itself, nice vacations,
computers, television sets – you name it and at first the rich
alone would have it but in time nearly all of us do, at least in
the relatively free market economy such as that of the USA.

but I will be told with righteous indignation, that this is just
what is wrong with free market capitalism – it requires that
there be some kind of incentive for people to create neat stuff.
How sad, even degrading that is: "What should in fact happen,
and would in a really good society, is that all these ambitions
would come from everyone's love for everyone else. Shame on anyone
who is willing to settle for the idea that obtaining what one wants
is a strong motivation for doing something others want."

critic is a silly and dangerous dreamer, actually. Adam Smith had
the answer to this good and hard:

In civilized
society [a human being] stands at all times in need of the cooperation
and assistance of great multitudes, while his whole life is scarce
sufficient to gain the friendship of a few persons….Man has
almost constant occasion for the help of his brethren, and it
is in vain for him to expect it from their benevolence only. He
will be more likely to prevail if he can interest their self-love
in his favour, and show them that it is for their own advantage
to do for him what he requires of them….

so called ideal – for me a nightmare, actually – of us
all loving everyone equally assumes that we could in fact have everyone
in the world as our friend and relative. Can you imagine? Everyone
who dies would deserve our deepest sorrow and extended mourning,
while everyone who is born would deserve our most sublime delight
and celebration, all at once. Given the multitudes in each group,
how on earth could this happen?

for human beings must of necessity remain selective and small in
numbers. Otherwise shallowness sets in. With a communist society
one aims for the impossible and that is why such societies must
degenerate into something perverse, unnatural, anti-human.

we hear endless complaints from intellectuals and their followers
about how evil it is to love oneself and those close to one –
it's selfish, greedy, mean. Unlike some economists, I do not deny
that people can try to be and even succeed at being selfless, in
certain regions of their lives, although even here generosity, different
from altruism, is better, even more helpful. But acting so as to
further one's well being, to thrive in life, is a good thing and
capitalism rests largely on that idea.

what about all that damage that capitalism has caused all over the
world, including in the history of the USA, damage from which countries
recovered with the aid of extensive government intervention, especially
Franklin Delaware Roosevelt's New Deal in America? That is exactly
what erudite University of Chicago legal scholar Cass R. Sunstein
maintains in this The
Second Bill of Rights, FDR's Unfinished Revolution and why We Need
it More than Ever
(New York: Basic Books, 2004).

I am not going to attempt to refute such works – my only reply
here is that freedom is generally much better for people than regimentation.
For the details, though, one should consult a very fine book by
Professor Thomas J. DiLorenzo, How
Capitalism Saved America: The Untold History of Our Country, from
the Pilgrims to the Present
(New York: Crown Forum, 2004).

then, please heed the notion that the "perfect" is the
enemy of the good – the pursuit of the dream of a society wherein
everyone loves everyone else defeats the real possibility for a
just, free, and prosperous community.

25, 2004

Machan [send
him mail
] is
R. C. Hoiles Professor of Free Enterprise & Business Ethics at the
Argyros School of Business & Economics, Chapman University, CA.
A Research Fellow at the Hoover Institution, Stanford University,
he is author of 20+ books, most recently, Putting
Humans First: Why We Are Nature's Favorite

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