Image: Ludwig von Mises – – Institut Deutschland Konferenz 2020
Ludwig von Mises: Influential Critic of Marxism
Ludwig von Mises remains one of the most influential critics of socialism and Marxism in twentieth-century economic thought. His effectively challenged Marxist claims about efficiency, historical inevitability, and moral superiority.
1. The Economic Calculation Problem (The Core Critique of Socialism)
As a central figure of the Austrian School, Ludwig von Mises developed a systematic critique grounded in economic theory, sociology, and philosophy, most notably in his book Socialism: An Economic and Sociological Analysis and his seminal 1920 essay on economic calculation [1]. His arguments directly challenged Marxist claims about efficiency, historical inevitability, and moral superiority.
At the heart of Mises’s critique, the economic calculation problem presents itself. He regarded that issue as decisive. He argued that by eliminating private ownership of the means of production, socialism eliminates genuine markets for goods, and thus it impairs the pricing system, which is vitally needed for coherent economic decision-making [2]. Without genuine, real prices created by voluntary exchange, planners lack a means and method for comparing the many and varied uses scarce resources.
In a market economy, prices arise from decentralized entrepreneurial bidding and thus reflect consumer preferences, relative scarcities, and opportunity costs. Profit and loss function to signal and guide production toward more valued uses of resources. Mises emphasized that this process is not mechanical but rooted in subjective human valuation.
Under socialism, collective ownership prevents the formation of market prices for goods. Prices imposed administratively remain arbitrary and cannot convey real information about trade-offs or consumer priorities. As a result, planners cannot determine whether resources should be allocated to one project rather than another, such as infrastructure versus consumer goods.
Mises concluded that socialist economies by their very nature generate inefficiency, waste, shortages, and systemic disorder. He famously described socialism as “planned chaos,” predicting economic retrogression rather than abundance. This conclusion directly contradicted Marxist claims that socialism would overcome capitalism’s alleged “anarchy of production.”
2. Critique of the Labor Theory of Value and Marxist Economics
In addition to his critique against calculation, Mises also argued against Marx’s labor theory of value, which held that labor time is the sole source of economic value. Drawing on the marginalist* revolution, Mises argued that value is subjective and arises from individual preferences and marginal utility, not from objective labor inputs [3]. This understanding clearly undermined the theoretical foundation of Marxist economics.
Without the labor theory of value, Marx’s theory of exploitation collapses. Mises argued that profits do not represent surplus value extracted from workers but instead reflect successful anticipation of consumer demand and the productive contribution of capital [1]. Capital accumulation, investment, and entrepreneurship are essential to rising productivity and wages.
*Marginalism is a theory of economics that explains the discrepancy in the value of goods and services by reference to their secondary, or marginal, utility. It states that the reason that the price of diamonds is higher than the price of water that there is greater additional satisfaction of the diamonds over twater. Thus, while the water has greater total utility, the diamond has greater marginal utility.
3. Critique of Historical Materialism and Class Struggle
Mises also challenged Marx’s materialist conception of history and the doctrine of inevitable class struggle. Mises rejected the claim that economic structures alone determine ideas, institutions, and culture, arguing instead that ideas themselves play a decisive causal role in social development [4]. Historical materialism, Mises contended, reduces complex human action to economic determinism.
Furthermore, Mises argued that Marxism is internally contradictory. If all ideas are merely expressions of class interest, then Marxism itself cannot claim scientific objectivity but must also be ideological. This self-refuting character, in Mises’s view, disqualifies Marxism as a coherent theory of history.
From a sociological and ethical perspective, Mises maintained that socialism necessarily undermines individual liberty. Centralized control over production requires coercive authority, which tends toward authoritarianism and political repression. Historical socialist regimes, he argued, confirmed this tendency rather than refuting it.
4. Sociological and Ethical Critiques
Mises contrasted socialism with classical liberalism, which he believed fosters cooperation, innovation, and social coordination through private property and free exchange. Markets enable what he described as a “spontaneous order,” aligning individual self-interest with social welfare without centralized control. Rising living standards under capitalism were, for Mises, empirical evidence of this process.
Mises argued that socialism is not merely inefficient but fundamentally impossible as a rational economic system. Attempts to implement it result in poverty, coercion, and institutional collapse rather than emancipation. His critique profoundly influenced later thinkers such as Friedrich Hayek and continues to shape contemporary debates over the feasibility and desirability of socialist economic arrangements.
Sources
[1] Ludwig von Mises, Socialism: An Economic and Sociological Analysis. Translated by J. Kahane, Liberty Fund, 1981 (orig. 1922).
[2] – – – . “Economic Calculation in the Socialist Commonwealth.” In Collectivist Economic Planning, edited by F. A. Hayek, Routledge, 1935 (orig. 1920).
[3] Eugen von Böhm-Bawerk. Karl Marx and the Close of His System. Ludwig von Mises Institute, 2007 (orig. 1896).
[4] Friedrich A. Hayek. The Fatal Conceit: The Errors of Socialism. University of Chicago Press, 1988.
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