On Freedom and Free Enterprise

On Freedom and Free Enterprise collects twenty essays, two of them by Henry Hazlitt, from nineteen economists and social philosophers, presented to Ludwig von Mises on February 20, 1956, the fiftieth anniversary of his doctorate. Mary Sennholz edited it; Mises is the honoree and contributes no essay of his own. Six parts run from critical readings of Mises through government, scientific method, the market economy, the hampered market and socialism. The Mises Institute's 2008 reprint keeps the 1956 dedication, contributor notes and index.

The book is worth reading because several contributors ask how far an economic argument can carry a policy conclusion. Their answers differ in mechanism, and sometimes they disagree with the honoree. The voices are separate and the precision is uneven, yet the collection holds together well when read for that shared question.

William E. Rappard, Mises's friend and co-director of the Geneva institute where Mises taught, opens with a puzzle and closes with an affectionate dissent. Mises held that science cannot choose ultimate ends, yet he argued for liberal policy without compromise. Rappard resolves this with passages from Human Action: an economist who shows that a measure defeats its supporters' own goal passes no value judgment, and Mises's liberalism adds the premise that nearly everyone wants material well-being first. Then Rappard doubts that premise. He vouches that Switzerland's urban majority, voting in referendums after long public campaigns, has repeatedly protected a small farm minority at a cost it understood, because it wanted a more agricultural country. He reads anti-colonialism at Bandung as a preference for national freedom over wealth. Whatever one makes of these readings, his logical point holds: economic analysis can tell each side whether a measure serves its goal, but cannot by itself choose between ends that differ.

Two essays in other parts examine a related error, which is trusting an arrangement because its rule is easy to see. In "Order vs. Organization," Bertrand de Jouvenel separates an arrangement that pleases the eye from one suited to its purpose. His thought experiment is an author's working library. Reference books sit within reach and volumes used together share a shelf, until a well-meaning daughter re-sorts everything by format and alphabet while he is away. It looks better and serves him worse. De Jouvenel grants that the old library was imperfect and that someone who understood its use could have improved it. His target is reform judged by appearance from outside the work. A reader comes away with a usable question for any reorganization: who judged it, and from what vantage?

Louis M. Spadaro carries the same suspicion into statistics. In his example, ten families with the lower average income include one wealthy household and nine poor ones, while ten with the higher average include four comfortable households and six poor ones. Neither average can recover these arrangements, and the discarded differences may be where economic causes operate. Spadaro accepts aggregates as rough summaries of past outcomes and objects to reading them as interacting forces or as grounds for central control. His broader claims about probability and causation outrun this example and read best as 1956 methodological polemic.

Ludwig Lachmann gives readers a test for redistribution arguments that treat the distribution of wealth as a datum: do they mean a fact observed at one moment, or an independent condition that determines equilibrium? He argues that only the first holds, because the market keeps reshaping the distribution. Capital goods serve a limited range of uses and produce only with complementary resources. When conditions change unexpectedly, entrepreneurs regroup those combinations, bidding up some assets and marking down others, so ownership guarantees no future income. Buying shares is a less concrete version of a workshop manager's specifying decision, and Lachmann's reply to the charge of owner passivity is that shareholders who cannot persuade their directors still have one recourse, selling. Bondholders are partly cushioned by equity, less so in a highly geared company, and remain exposed to interest rates and inflation. He concedes that the present distribution shapes the market's near future, and his leveling argument describes a mechanism without measuring how fast particular fortunes change.

F. A. Hayek's "Progressive Taxation Reconsidered" brings the concern with capital into tax policy. Under a progressive annual income tax, the net reward for a particular service depends on what else its provider earned that year. Two surgeons paid the same fee for the same operation can keep different amounts. The distortion grows where reward arrives long after effort, as with an inventor or author paid in a few years for decades of work. Hayek also asks where new capital forms. Large temporary profits once let a successful innovator back the next venture with his own means. Heavy taxation of those gains, he argues, favors the retained savings of established corporations over newcomers and narrows the route into the wealthy class. His conclusion stops short of abolishing progression. He accepts a progressive personal income tax that offsets regressive indirect taxes, and he allows relief for an economically weak minority. He also proposes capping the top marginal direct rate at the share of national income that government takes in taxes, and he admits this would still leave a slight overall progression.

The collection is uneven. Louis Baudin's closing essay on French socialism, translated from the French by Stephen DiBari, attacks the 1950s SFIO and figures such as André Philip and Jules Moch. Its sweeping classifications belong to that polemic and say little about the democratic left today. Praise of Mises and predictions made in 1956 run through the book, and readers should check them against later events.

For a reader with some economic background, start with Rappard on ends and policy, then read Lachmann and Hayek together on how capital values shift and where new capital forms; de Jouvenel and Spadaro address what an outside reorganizer or a statistical average can see. The book was never designed as a neutral survey of modern evidence or a step-by-step introduction. The Mises Institute publishes the 2008 reprint as On Freedom and Free Enterprise, Mises Institute PDF, and the edition details are on the Mises Institute book page.