Ludwig von Mises, Observations on Professor Hayek’s Plan

Published in Libertarian Papers in 2009, this brief memorandum dated December 31, 1946 responds to Hayek’s proposals for what became the Mont Pèlerin Society. Written at Henry Hazlitt’s request, it combines a diagnosis of failed movements for liberty with a warning about the proposed organization’s intellectual foundations. Mises’s central claim is that a defense of freedom cannot succeed while accepting the interventionist premises he attributes to its opponents.

They did not realize that freedom is inextricably linked with the market economy.

Mises explains earlier movements’ failure through their commitment to a middle course between socialism and economic freedom. His argument proceeds from the asserted self-defeating character of intervention: measures intended to improve market outcomes produce conditions their advocates find still less satisfactory. Unless governments abandon intervention, these results prompt further controls, culminating in comprehensive economic regimentation. Credit expansion and minimum wages serve as examples, which Mises associates respectively with boom and crash, and prolonged mass unemployment.

The memorandum then recasts laissez faire as a principle of consumer decision rather than indifference to social harm. Buying and abstaining from buying determine production; governmental direction displaces that authority.

There is no middle way. Either the consumers are supreme or the government.

This stark alternative grounds Mises’s rejection of intervention intended to restore competition. He attributes monopolization to protectionism, international commodity agreements, and similar government measures, rather than to the unhampered market. His positive program therefore joins domestic and foreign free trade to the gold standard and the restoration of the state’s exclusive right to use coercion, specifically including the abolition of union privileges to punish strikebreakers.

Mises acknowledges that this program is unpopular, but distinguishes electoral compromise from intellectual leadership.

But the intellectual pioneer of a better world is not restricted by the concerns of Realpolitik. His program must be sound. It is only a sound program that triumphs in the long run.

The distinction prepares the memorandum’s closing objection: an intellectual association should establish its principles before assembling a coalition. Mises does not treat agreement against totalitarianism as a sufficient basis for cooperation.

The weak point in Professor Hayek's plan is that it relies upon the cooperation of many men who are known for their endorsement of interventionism.

He consequently asks for clarification before the meeting begins, rejecting the prospect of reopening there the question whether government decrees or union dictates can raise mass living standards. The memorandum’s significance lies in its translation of an economic argument into an organizational criterion: for Mises, a durable movement for liberty requires prior commitment to the market economy, not merely shared opposition to authoritarian rule.