In the last century, every important economist aspired to write a complete treatise on economic thought. The idea was to build up an airtight theory, primarily by use of deductive logic, to explain how people overcome a central human predicament: Material desires always exceed resources, so what system should societies adopt in order to meet limitless needs and become prosperous? Building a theory from the ground up was the means of demonstrating a theory’s validity, allowing the reader to evaluate the merit of each step as the economist takes it.
These days, a systematic treatise such as Capitalism appears, at best, once every couple of generations. The last two on record are Ludwig von Mises’ Human Action (1949) and Murray Rothbard’s Man, Economy, and State (1962), both economists writing in the Austrian tradition. It’s a tradition distinguished in the modern profession because it still accepts the idea that economics is indeed a social (not a natural) science that requires deductive (not positivist) methods.
The merit of the treatise is that it shows that economics is a systematic science that has universal applicability. This insight has been forgotten as the profession has become every more mathematically inclined and specialized. I’m reminded of a homily given by Cardinal O’Connor from the pulpit on the question of whether New York City should retain rent control laws. He made some telling points but was at a loss to understand that the question he was dealing with required more than just specialized knowledge of the city’s real estate markets. He needed a framework for understanding how prices work in all markets; lacking that, he ultimately came down against changing the law until economists could do more studies.
Early in Mises’ own career as an economist, he undertook just such a study of Vienna’s housing market. Using the methods of the German historical school, he discovered that the accumulation of data alone could reveal nothing about how to proceed. What he needed was a theory of how prices and markets work, which he could then use to discover in what ways the market was being inhibited by legal restrictions.
It is highly significant, then, that George Reisman has dedicated his remarkable book to “Ludwig von Mises, my teacher….” Professor Reisman, who teaches economics at Pepperdine University, is the translator of Mises’ Epistemological Problems in Economics ( 1960), and spent many years in his weekly New York seminar.
He is not a thoroughgoing Austrian. Indeed, under the influence of novelist Ayn Rand–he describes his encounters with the philosopher of selfishness in the introduction–he has rejected crucial parts of Austrian value theory, including subjective value theory (unpersuasively so). Professor Reisman even attempts a fundamental reconstruction of the Austrian theory of price and cost (an aspect of the book thoroughly critiqued by Alexander Tabarrok in the Review of Austrian Economics, Vol. 10, no. 2). Even so, Reisman remains in the Austrian tradition of thinkers in most matters of theory, policy, and method.
The book does get technical at points, sometimes exceedingly so, but that should not deter the novice from tackling it. He provides solid theoretical grounding on a whole range of core issues involving the division of labor, private property, immutable economic laws (analogous to the natural law itself), the theory of the firm, competition and monopoly, money and banking, and economic growth. He applies this in a host of areas, from rent control, taxes, and inflation, to protectionism, economic regulation, education, and the welfare state. His conclusion is implied in the title: Capitalism, by which he means a completely unhampered market, serves individuals and societies better than any alternative system. Nearly every objection offered against the classically liberal economy is dealt with in the course of the narrative.
His treatment on oil shocks in the 1970s is as powerful as when it was first released in his book Government Against the Economy (1979). And perhaps the greatest contribution of this book is his section on the environment. The “all-encompassing doctrine of the environmental movement,” he writes, “is that the continuation of economic progress is both impossible and dangerous.” It is not a new view; Professor Reisman amasses evidence that gloom-and-doom environmental scenarios have always been with us. He concludes that this view profoundly misunderstands the nature of man and the world.
Back to Cardinal O’Connor. Could he benefit from reading this book? Certainly, but he would be struck less by the power of the economic logic than by the book’s profoundly anti-religious stance. Indeed, Professor Reisman adopts classically Randian ethics, viewing all human evil as an extension of “altruism” and all good flowing from “self interest.” And unlike the mainstream Austrian writers, who were always careful to separate positive economics from normative matters of ethics, our author sees them bound up with each other by necessity. This position seriously compromises the book’s value on all matters relating to ethics. The Randian perspective has also blinded our author to insights into the history of economic thought that he might have gleaned from the Christian tradition. For example, he makes the surprising and unsupported (and unsupportable) claim that “the scholastics contributed nothing to sound economics.”
No reviewer can resist commenting on this book’s most conspicuous trait: its sheer size. With its index, it comes in at a whopping 1046 oversized pages. What’s more, the publisher typeset it in a two-column format, so it may very well be a third to twice as lengthy as its page numbers alone indicate. This book may, in fact, be the biggest and longest book on economic theory ever written. Even with its failings, some of them serious, the appearance of this economic treatise should be an occasion for celebration. The scope and vision of Professor Reisman’s treatise in defense of economic freedom is as broad as any book published in decades.