Ludwig von Mises, “Inequality of Wealth and Incomes” — Summary

This file is an anthology excerpt rather than a monograph: its main body is Mises’s 1955 essay on inequality, followed by an editorial introduction to Part II, “Interventionism,” which situates Mises’s broader critique of state interference. The essay’s central thesis is that inequality is not a regrettable defect of capitalism but one of the mechanisms by which consumers direct production.

Inequality of wealth and incomes is an essential feature of the market economy.

Mises begins from consumer sovereignty. In a market economy, profits and losses transfer control over productive resources toward entrepreneurs who satisfy buyers and away from those who do not. Property is therefore presented less as static privilege than as a revocable mandate issued through purchasing decisions.

It is the consumers who make some people rich and other people penniless.

The essay’s first major contrast is between market inequality and feudal inequality. In a militaristic or feudal order, wealth may reflect conquest and exclusion; in capitalism, Mises argues, large fortunes arise by supplying the many with goods formerly unavailable to them. This yields the essay’s most provocative reversal: inequality is said to be a cause of mass prosperity, not evidence of mass deprivation.

Inequality of wealth and incomes is the cause of the masses' well-being, not the cause of anybody's distress.

In “Demand for ‘Distribution,’” Mises attacks redistribution by challenging the assumption that the rich merely consume surplus luxuries. Most large incomes, he argues, are saved and invested; confiscating them redirects capital from future production into present consumption or state expenditure. His appeal to Marx and Engels is strategic: they endorsed progressive taxation and inheritance abolition because such measures undermine capitalism. Mises therefore treats middle-of-the-road redistribution as incoherent if it claims to preserve the market.

For progressive taxes upon incomes and upon estates are incompatible with the preservation of the market economy.

The conceptual center of the essay appears in “Supremacy of the Consumers.” Mises insists that the issue is not whether entrepreneurs remain personally industrious after taxation, but whether consumers retain the power to allocate capital through profit and loss. If profits are expropriated, successful producers lose the means to expand in response to demand.

Then the market economy is deprived of its steering wheel.

This leads to his stark institutional alternative. Production cannot be partly directed by consumers and partly by paternal authority without displacing the market’s coordinating function.

If one decides in favor of the consumers, one chooses the market economy. If one decides in favor of the government, one chooses socialism. There is no third solution.

In “Demand for Equalization,” Mises turns against moderate egalitarianism. If inequality is treated as evil in itself, he argues, no principled stopping point exists short of complete leveling. Progressive taxation thus becomes a political slope toward socialism, driven by envy and electoral incentives rather than economic understanding.

Our present taxation policy is headed toward a complete equalization of wealth and incomes and thereby toward socialism.

The appended “Interventionism” introduction extends this logic to the collection’s next section. It presents Mises as a theorist of fallible human action, voluntary adjustment, and limited government. The state’s task is protective, not managerial or redistributive.

The role of government was to act as "night watchman."

The editorial frame connects inequality, taxation, inflation, privileges, and controls as versions of the same problem: government replacing dispersed market correction with coercive direction.

The articles in this section point out the unfortunate consequences when government goes beyond this limited role.

The file’s relevance lies in how sharply it states the Austrian-liberal defense of inequality. Mises does not chiefly defend unequal wealth as desert; he defends it as an institutional signal system. Profit, loss, inheritance, and accumulated capital are treated as instruments of consumer command and future production. To narrow inequality by confiscation is, for him, not a humane refinement of capitalism but a step away from the market order itself.