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IT IS THE PURPOSE of this essay to analyze the problems of government interference in business from the economic standpoint. The political and social consequences of the policy of interventionism can only be understood and judged on the basis of an understanding of its economic implications and effects.
Ever since the European governments in the last decades of the nineteenth century embarked on this policy, which today frequently is called “progressive” but which actually represents a return to the mercantilist policy of the seventeenth and early eighteenth centuries, economists have persistently pointed out the inconsistency and futility of these measures and have predicted their political and social consequences. Governments, political parties, and public opinion have just as persistently ignored their warnings. They ridiculed the alleged doctrinarism of “orthodox” economics and boasted of their “victories” over economic theory. But these were Pyrrhic victories.
The inevitable sequence of events which followed upon the application of interventionist measures fully proved the correctness of the economists’ predictions. The predicted political effects, social unrest, dictatorship, and war, also did not fail to appear.

Ludwig von Mises, November 1941

Written in 1940 as part of Nationaloekonomie, the German predecessor to Human Action.

INTRODUCTION

1. The Problem
WE CALL CAPITALISM OR market economy that form of social cooperation which is based on private ownership of the means of production.
Socialism, communism, or planned economy, on the other hand, is the form of social cooperation which is based on public ownership of the means of production. The terms state capitalism and authoritarian economy have essentially the same meaning.
It is frequently asserted that a third form of social cooperation is feasible as a permanent form of economic organization, namely a system of private ownership of the means of production in which the government intervenes, by orders and prohibitions, in the exercise of ownership. This third system is called interventionism. All governments which do not openly profess socialism tend to be interventionist nowadays, and all political parties recommend at least some degree of interventionism. It is claimed that this system of interventionism is as far from socialism as it is from capitalism, that as a third solution to the social problem it stands midway between the two systems, and that while retaining the advantages of both it avoids the disadvantages inherent in both.
In this study the question will be analyzed whether we are justified in considering interventionism as a possible and viable system of social cooperation. We shall attempt to answer the question whether interventionism is able to accomplish what its advocates expect, and whether, perhaps, it does not produce consequences diametrically opposed to those sought by its application.

Ludwig von Mises

Ludwig Heinrich Edler von Mises (1881-1973) was the acknowledged leader of the Austrian School of economic thought, a prodigious originator in economic theory, and a prolific author. Mises’ writings and lectures encompassed economic theory, history, epistemology, government, and political philosophy. His contributions to economic theory include important clarifications on the quantity theory of money, the theory of the trade cycle, the integration of monetary theory with economic theory in general, and a demonstration that socialism must fail because it cannot solve the problem of economic calculation. Mises was the first scholar to recognize that economics is part of a larger science in human action, a science which Mises called “praxeology”. He taught at the University of Vienna and later at New York University. Mises wrote many works on two related economic themes: 1. monetary economics, inflation, and the role of government, and 2. the differences between government-controlled economies and free trade. His influential work on economic freedoms, their causes and consequences, brought him to highlight the interrelationships between economic and non-economic freedoms in societies, and the appropriate role for government.