MISES AND THE (UN)RESOLVABLE PUZZLE

The dawning of the twentieth century saw the beginning of many radical socialist movements, which, inspired by Marx, awaited the coming of a communal paradise and an end to exploitative capitalism. It also saw publication of Mises’s extremely important essay Die Wirtschaftsrechnung im sozialistischen Gemeinwesen (1920), later considered his greatest achievement (Mises 1990). This diminutive book (as published today) was also one of the most important publications by the author, who only later established his own economic model. Therefore we are able to demonstrate the argumentation in light of his further works being in a much more advantageous position than the opponents of Mises in the 1920s, who had only a single article, however extensive, to lean on.

Mises argues that there are no units to calculate personal utility. If Robinson Crusoe means to light a fire on his island, he must consider his goals and available means. Because he wants to be warm, he must find a way to make it so. Getting warm is a goal more important than others in that moment, and the gathered brushwood has more value than anything else, because it is needed to make a fire. Elementary theses from the theory of utility speak of two of its aspects: ordinal and qualitative. Means that gain value due to the goal they serve are worth less than the goal (or more precisely: the goal is worth more than an alternative goal that the means can be used towards). And so utility cannot be measured, but only manifests itself in a person’s actions. Managing resources does not mean that Robinson assigns units of utility (like, say, ten utils) to the lighting of a fire, then checks how many utils are needed to perform the task (eight, perhaps), and finally calculates the profitability of the venture with mathematical precision. Utility does not bend to mathematics, because it is ordinal, not cardinal. Mises widely draws upon the theories of Franz Čuhel, an outstanding Czech economist, the author of the theory of the immeasurable nature of economic utility (Čuhel 1907).