Dimária Silva e Meirelles, The Six Lessons of Mises (2021)
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Article by Dimária Silva e Meirelles of Universidade Presbiteriana Mackenzie in MISES: Interdisciplinary Journal of Philosophy Law and Economics (São Paulo, 2021; 9), titled The Six Lessons of Mises: a reflection of Public Policies in Times of Pandemic. Drawing on Mises's principles of cooperation and economic calculation, it asks whether governments should intervene to keep markets working during social isolation or let them freeze. It concludes that credit, tax deferrals, emergency assistance and the paycheck protection program kept the market process going, and that economic calculation must be preserved across supply chains down to final customers. The paper warns that creating demand without matching supply tends to raise prices, and notes that inflation is one of the Six Lessons.
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MISES: Interdisciplinary Journal of Philosophy Law and Economics
São Paulo, 2021; 9
e-ISSN 2594-9187
I V F ÓR U M M A C K E N Z I E D E L I B E R DA D E E C O N ÔM I C A
The Six Lessons of Mises: a reflection of Public Policies
in Times of Pandemic
Dimária Silva e MeirellesI 0000-0002-2755-5570
Universidade Presbiteriana Mackenzie - São Paulo - São Paulo - Brazil
Abstract: From the perspective of the market as a process, it only exists to the extent that exchanges take place.
So, what is better in times of social isolation: intervene to ensure that the market works or let the market freeze
freely? Moreover, to what extent is it possible to intervene in the market in times of a pandemic, preserving
the principles of economic freedom? Based on Mises’s principles of cooperation and economic calculation,
this paper analyzes the use of public policy in a situation of social isolation. Among the primary public policy
devised in this pandemic, the following measures have provided the market process’s continuity: credit, tax
deferrals, emergency assistance, or paycheck protection program. The concern with the preservation of the
economic calculation extends to all supply chain linkages, including final customers, to continue to do their
economic calculation.
Keywords: public policies, pandemic, economic freedom principles.
I
Economista, Mestre e Doutora em Economia Industrial e da Tecnologia. Professora do Centro de Ciências Sociais e
Aplicadas, Universidade Presbiteriana Mackenzie, vinculada ao Programa de Pós-Graduação em Administração de
Empresas. Linha de Pesquisa: Criação, Configuração e Apropriação do Valor em Serviços Mediados pela Tecnologia.
E-mail: candmeirelles@gmail.com.
DOI: https://doi.org/10.30800/mises.2021.v9.1388
MISES: Interdisciplinary Journal of Philosophy Law and Economics, São Paulo, 2021; 9 | e202191388
THE SIX LESSONS OF MISES: A REFLECTION OF PUBLIC POLICIES IN TIMES OF PANDEMIC
As Seis lições de Mises: uma reflexão sobre políticas públicas
em tempos de pandemia
Resumo: Desde a perspectiva do mercado como processo, o mercado só existe na medida em que ocorrem
trocas. Então, qual é a melhor opção em tempos de isolamento social: intervir para garantir que o mercado
funcione ou deixar que o mercado se paralise livremente? Ademais, até que ponto é possível intervir no mercado
em tempos de pandemia, preservando, ao mesmo tempo, os princípios de liberdade econômica? Partindo dos
princípios de cooperação e cálculo econômico de Mises, o objetivo deste trabalho é analisar as possibilidades
das políticas públicas em situação de isolamento social. Entre as principais políticas públicas desenhadas neste
momento de pandemia, as medidas seguintes possibilitaram a continuidade do processo de mercado: crédito,
postergação de impostos e auxílio financeiro às famílias. A preocupação com a preservação do cálculo econômico
se estende a todos os elos da cadeia de suprimentos, incluindo os clientes finais, garantido a execução do cálculo
econômico pelas empresas.
Palavras-chave: políticas públicas, pandemia, princípios de liberdade econômica.
Las seis lecciones de Mises: un reflejo de las políticas públicas
en tiempos de pandemia
Resumen: Desde la perspectiva del mercado como proceso, el mercado solo existe en la medida en que se
realizan intercambios. Entonces, ¿qué es mejor en tiempos de aislamiento social: ¿intervenir para asegurar
que el mercado funcione o dejar que el mercado se congele libremente? Además, ¿hasta qué punto es posible
intervenir en el mercado en tiempos de pandemia, preservando los principios de libertad económica? Partiendo
de los principios de cooperación y cálculo económico propuestos por Mises, el objetivo de este trabajo es analizar
las posibilidades de las políticas públicas en una situación de aislamiento social. Entre las principales políticas
públicas diseñadas en este momento de la pandemia, las siguientes medidas han brindado la continuidad del
proceso de mercado: crédito, aplazamientos de impuestos y asistencia financiera a las familias. La preocupación
por la preservación del cálculo económico se extiende a todos los eslabones de la cadena de suministro, incluidos
los clientes finales, para que las empresas sigan haciendo su cálculo económico.
Palabras clave: políticas públicas, pandemia, principios de libertad económica.
MISES: Interdisciplinary Journal of Philosophy Law and Economics, São Paulo, 2021; 9 | e202191388
Dimária Silva e Meirelles
Introduction
The recent pandemic of COVID-19 leaves, in addition to the virus trail, an extensive set
of experiences of economic intervention that includes countries of the most varied levels of
economic development and nuances of public management, from countries with interventionist
tradition, as is the case of European Democratic Social Democratic countries, even countries
that have a less interventionist public management record, notably in the health field, as is
the case of the United States.
The forceful need for public policies at that time is expressed in the heartbreaking data
of the various economic indicators. The fall in Gross Domestic Product (GDP) in the second
quarter of 2020, compared to the first quarter of the year, is significant. In OECD countries
(Organization for Economic Co-operation and Development), the drop in GDP was 10.6%.
In some countries this drop exceeds 20%, such as India and England. The only exception is
China, which, as it was the first to do social isolation, is already in a recovery phase, showing
an increase of 11.5% in the same period. Brazil fell slightly below the average of the OECD
countries. According to data from IBGE (Brazilian Institute of Geography and Statistics) the
fall was 9.7%.
In Brazil in particular there is a paradox: the same proponents of a liberal agenda
are faced with the need, imposed by social isolation, to implement public policies with an
interventionist bias.
The question that arises in this article is, therefore: to what extent is it possible to intervene
in the market in times of pandemic, preserving the principles of economic freedom?
The answer to this question is the purpose of this article. Based on the principles
of operation of a market economy proposed by Mises, notably cooperation and economic
calculation, we seek to analyze the possibilities of public policy in a situation of social isolation.
Based on fundamental questions and answers proposed in Mises’ s work, this article
adapts these lessons as a reflection for the analysis of public policies in the context of social
isolation. The reference work used is “The six lessons”, original title in English: Economic
Policy: Thoughts For Today And Tomorrow. Written in 1979, public policy reflections for the
future have never been as current as they are today, in times of pandemic.
1. The Six Lessons
The Six Lessons of Mises is a compilation of the author’s reflections on capitalism,
socialism, interventionism, inflation, foreign investment, and, finally, politics. Each of these
aspects constitutes a chapter in the book and is guided by a set of questions.
The reflection developed here on public policy in times of pandemic is based on a set
of questions posed by Mises, and the respective answers lead to new questions. The initial
question that opens all the others is:
1) What is a free economy?
MISES: Interdisciplinary Journal of Philosophy Law and Economics, São Paulo, 2021; 9 | e202191388
THE SIX LESSONS OF MISES: A REFLECTION OF PUBLIC POLICIES IN TIMES OF PANDEMIC
The discussion of public policies in times of a pandemic requires, first of all, an analysis
of the characteristics of a free economy, as opposed to a regulated economy, directed by the
government. In the definition proposed by Mises (2009, p.55), “a free economy is the market
economy, it is the system in which the cooperation of individuals in the social division of labor
takes place through the market”.
The dimension of cooperation in a market economy is essential to understand even
our civilizing process. As Hayek (2017, p. 13) argues, the survival and preservation of our
civilization depends on the expanded order of human cooperation, born spontaneously “from
involuntary conformity to certain traditional and, above all, moral practices”.
This view of the role of cooperation in a market economy guides the analysis of public
policies in times of pandemic proposed here, but, after all:
2) What is cooperation in a liberal perspective?
From a counterpoint to the Marxist view that the entrepreneur is the exploiter of the
worker, the great villain of the capitalist economic system, Mises (2009) proposes a reflection
on the symbiotic relationship between consumers and entrepreneurs. In this sense, he asks:
“Does the entrepreneur exist without a client? What about the customer, does he exist without
the entrepreneur? ”.
The answer to this question is given by the very definition of economic freedom proposed
by Mises, a situation where one economic agent, be it the consumer or the product, depends
on the other:
Freedom in society means that a man depends as much on others as he depends on him.
The captains of industry, the businessmen, the entrepreneurs, would be the real bosses
of the economic system. But this is an illusion. Consumers are in charge of the economic
system (MISES, 2009, p. 58).
The sovereignty of consumers is present even in the large company, since Mises’ vision
is that the preference for the products of the large company can change.
This reflection is interesting, because it is precisely what we are experiencing today in a
situation of social isolation. As consumers isolate themselves in their homes, the entrepreneur’s
real dependence is revealed, anxious and apprehensive for the final return of consumers to
the streets.
This consumer sovereignty leads to a questioning of the effectiveness of their decisions,
considering that the consumer can make mistakes. In the specific context of a pandemic, the
economic calculation of the consumer may be imbued with apprehensions, notably regarding
the supply of products on the market, including medicines, which generates, as a rule, shortages.
When desperate consumers buy all the stock and store it in their homes, are they doing it right
from the point of view of economic cooperation? Mises’s answer is that our freedom includes
the freedom to make mistakes, to make wrong decisions.
Faced with the possibility of consumer error, the third question posed by Mises is:
MISES: Interdisciplinary Journal of Philosophy Law and Economics, São Paulo, 2021; 9 | e202191388
Dimária Silva e Meirelles
3) Is it possible to create a capitalist form of government to control what people consume?
This question is illustrated by Mises in the case of the control of milk consumption
in between wars. The same question arises today in the context of the pandemic, given the
control of the stock of some foods, and even medicines.
In other words, is it possible to have a market without economic freedom? The answer
to this question requires, first of all, an understanding of the market concept in the Austrian
school’s view (BARBIERI, 2001; SILVA; MEIRELLES, 2010). As defined by Mises (2009, p. 5): “the
market is not a place: it is a process, it is the way in which, in selling and buying, in producing
and consuming, people are contributing to the global functioning of society”.
The production of any good or service requires the articulation of countless actors
along the production chain, from local to international suppliers and manufacturers. This
interdependence has intensified as the global economy is increasingly structured around
global value chains, representing an increasing share of international trade as well as global
GDP and jobs (GEREFFI; FERNANDEZ-STARK, 2011).
The decision of consumption, as well as of production, is a long process that articulates
several markets, several stages of negotiation, where a series of information is gathered,
constructed and shared among the various market players. As Mises points out, “the knowledge
accumulated by humanity in its long history, however, is not something that only one person
can hold. Over the centuries, we have accumulated such an immeasurable amount of scientific
and technological knowledge that it is humanly impossible to an individual the domain of all
that leather, however extremely well endowed ”(MISES, p. 70).
In view of the complexity reached in the knowledge base accumulated by humanity,
notably with the expansion of the markets, it is impossible to have a supra-market entity
defining what to be produced and consumed, because it is a lot of knowledge necessary to
carry out a market transaction.
In the specific case of the pandemic, there is a global cooperation effort to develop,
manufacture and distribute vaccines and or treatment protocols, not only because of the
urgency but also because of the complexity of the knowledge. This Research and Development
effort leads us to the fourth question:
4) What is the best way to obtain knowledge and organize it?
According to Mises (2009), the role of the entrepreneur in the discovery of new paths,
changing the paths of knowledge, seeking to prove to other people the value of his finding, in
an even convincing endeavor, is what makes the economy move. As in the age of great sailing,
where the daring to explore lands overseas, resulted in the expansion of markets.
The entrepreneur is precisely the one who assumes the risk and costs of this process of
identifying new opportunities. He is the one who discovers new paths, changes the course of
knowledge, and sometimes the absence of many people. For this reason, as Hayek (1973) points
out, in his book “Fatal errors of socialism”, regarding the role of knowledge in the organization
of the economy, the best way to enhance knowledge is through the action of the entrepreneur.
MISES: Interdisciplinary Journal of Philosophy Law and Economics, São Paulo, 2021; 9 | e202191388
THE SIX LESSONS OF MISES: A REFLECTION OF PUBLIC POLICIES IN TIMES OF PANDEMIC
However, in times of pandemic and social isolation, the most diverse pressures and
initiatives are noted to exercise this role of “market engineering”, there is a belief that it is
possible to reinvent a new economy, an artificial market, through a calculation performed by
government agents. This belief is strengthened, above all, because we have recent examples
of economic growth promoted by socialist countries, such as China. That said, there is a fifth
important question for this pandemic moment:
5) Is it possible to create a market artificially?
In the identification of the most advantageous project, from an economic point of view,
market-based calculations are indispensable. In this sense, there is no Market Economy
without the cash price to be able to perform the economic calculation, says Mises (2009, p. 74):
“Cash prices not only inform the consumer, but also provide the trader with vitally important
information about the factors of production (raw materials, machinery and equipment) “.
According to Mises (2009, p. 75), “economic calculation - and, therefore, all technological
planning - is only possible when there are cash prices, not only for consumer goods, but also
for factors of production. It means that there must be a market for all raw materials, all semi-
finished items, all instruments and machines, and all types of human work and service”.
For this reason, continues Mises, socialist countries take as a parameter the prices set in the
capitalist world.
However, the capitalist world also does selective controls in some market segments,
artificially controlling some prices and stocks, as is the case with subsidies and import quotas.
In this sense, Mises proposes another reflection:
6) Is it possible to restrict government actions to a specific market segment and ensure
that in the other segments the market works?
The experiences of price control, such as the tabulation of milk in the interwar period, is
highly criticized by Mises, because the freezing of the price of a certain commodity locks the
entire production chain related to it. Here again he brings up the discussion of the role of the
entrepreneur and economic calculation. The government can even table, but the entrepreneur,
the businessman when he looks at this table, reacts to that table by looking for more profitable
investment alternatives.
However, assessing the recent context of the pandemic, in view of the urgent demand for
vital products, such as medicines and protective equipment (PPE), countries have effectively
carried out selective controls. According to OECD data, the export control of medical products
increased significantly between the months of March and May 2020, the peak period of the
pandemic for several European countries.
Considering that the economic agent can make mistakes, and he is free to make mistakes,
as Mises points out, how to implement public policies in times of pandemic that preserve the
principle of economic calculation and, at the same time, guarantee the supply of vital products?
MISES: Interdisciplinary Journal of Philosophy Law and Economics, São Paulo, 2021; 9 | e202191388
Dimária Silva e Meirelles
2. Public Policies in Pandemia
The fundamental assumption defended in this article is that public policies in times of a
pandemic are not only necessary but must be fundamental to preserve the basis of functioning
of a market economy, which is cooperation. For this, the solution is to guarantee the economic
calculation.
On the one hand, it is impossible to control parts of the economy, without affecting
everything else, because it is interconnected. This is the aspect of cooperation highlighted by
Mises. On the other hand, people make calculations, people look for ways out of restrictions.
In this sense, how to guarantee the functioning of a Market Economy in times of a pandemic?
How to preserve the economic calculation?
The analysis of public policies implemented by the main countries affected during the
pandemic will be made from this perspective: to what extent have they preserved the economic
calculation?
According to the OECD Economic report (OECD, 2020), guidelines at this time of pandemic
for public policies mainly include:
• Support for employment fluctuations, but strengthen income protection
• Facilitate the rapid restructuring of firms and assist them in digitization, especially SMEs
• Support for liquidity and availability to face financial crises
• Provide resilience to supply chains and a green transition
• Maintain supportive fiscal and monetary policies
• Public finance: investing and focusing on progressivity and justice
As can be seen in Table 1, public policies commonly applied in OECD countries involved
a combination of credit support (whether providing guarantees or direct financing) and tax
deferral.
Why is credit important at this point? Credit at this moment ensures that cooperation
relations are not broken in the short term, during the period of social isolation. These
cooperative relationships include not only the relationship between banks and borrowers, but
also between entrepreneurs and employees. For this reason, one of the common measures
adopted by countries is payroll financing.
Tax deferral is also an important way to preserve the economic calculation. Given the
fact that the entrepreneur is not producing and, therefore, is not receiving, why charge him
taxes and further stifle his financing capacity?
The concern with the preservation of the economic calculation extends to all supply chain
linkages, encompassing the relationship with final consumers, hence the USA’s “paycheck”
protection program. The same occurs in the Brazilian case with emergency assistance.
MISES: Interdisciplinary Journal of Philosophy Law and Economics, São Paulo, 2021; 9 | e202191388
THE SIX LESSONS OF MISES: A REFLECTION OF PUBLIC POLICIES IN TIMES OF PANDEMIC
Table 1. OECD - Public Policy Measures adopted during the pandemic period
COUNTRY MEASURES ADOPTED
Austria Deferral of taxes
Public finance and credit for recapitalization of large companies: EUR 100 bi
(2.9% of GDP)
Germany
- Financing for SMEs and Economic stabilization fund for relevant start-ups
- Extension of the credit limit by public banks: EUR 357 bi (10.4% of GDP)
- Funds to stabilize financial markets (corporate bond market stabilization fund,
short-term money market stabilization fund, stock market stabilization fund and a
South Korea scheme of primary collateralized bonds): WON 75 tri (about 3.9% of GDP)
- Special Purpose Vehicle for the purchase of corporate debt: WON 10 trillion
(0.5% of GDP)
- Credit support: public guarantee of EUR 104 billion and private guarantee of
Spain
EUR 80 billion
- Payment Check Protection Program
United States - Loan for small business (<500 employees), can be transformed into donations
(loan forgiveness) if used for labor costs
Great Britain - Loans and guarantees for businesses in dificulty (GBP 330 billion - 14.9% of GDP)
- State loans and credit guarantee (EUR 220 billion)
- Extra liquidity (moratorium on debt and interest payment, until the end of
Italy
September, including for vulnerable families
- Deferral of taxes
Netherlands - Deferral of taxes (EUR 45-60 billion)
Switzerland - Deferral of taxes
Source: OCDE (2020).
As can be seen in Table 2, in the Brazilian case, additional measures are also highlighted
to ensure that cooperative relations between consumers and entrepreneurs are maintained,
such as transfers to the energy development account, allowing electric energy concessionaires
to continue receiving the energy sold.
Although challenging from the liberal point of view, it is possible, in the face of a
situation of isolation, to provide the functioning of the market process respecting two basic
principles of a free economy: cooperation and economic calculation. When the government
pays the electricity bill for the most vulnerable population, it is guaranteeing the economic
calculation, it is ensuring that companies that sell energy, for example, will continue to do
their calculation, contracting at a price to sell at another value.
MISES: Interdisciplinary Journal of Philosophy Law and Economics, São Paulo, 2021; 9 | e202191388
Dimária Silva e Meirelles
Table 2. BRAZIL - Public Policy Measures adopted during the pandemic period
Expected Spend Effective Expenditure*
MEASURE Provisional Decree
(R$ billion) (R$ billion)
Emergency aid for vulnerable people MPs no. 937, 956,
254.40 212.75
(60 million people): R$600 over 5 months * 970 and 988/2020
Expansion of the Bolsa Familia Program MPs no. 929/2020 3.04 0.37
MPs no. 939, 978 e
Financial aid to States and Municipalities 79.19 55.17
990/2020
Granting of Payroll Financing MP no. 943/2020 34.00 17.00
Transfer to the Energy
MP no. 950/2020 0.90 0.90
Development Account
Quotas of Operations and MPs no. 977 and
35.90 25.90
Credit Guarantee Funds 972/2020
Additional expenses from Ministry
- 52.91 32.48
of Health and other Ministries
TOTAL 511.98 366.90
* Until September 2020
Source: Ministry of Economy.
Conclusion
From the perspective of the market as a process, the market only exists to the extent that
exchanges take place. So, what is better in times of social isolation: intervene to ensure that
the market works or let the market freeze freely? Moreover, to what extent is it possible to
intervene in the market in times of pandemic, preserving the principles of economic freedom?
The conclusion of this reflection of Mises’ six lessons for this pandemic period constitutes
the fundamental assumption defended in this article, namely: public policies in times of
pandemic are not only necessary but must be guided by the principle of cooperation, the basis
for sustaining a market economy, in order to preserve the economic calculation.
Among the main public policy devised in this time of the pandemic, the following
measures have provided the continuity of the market process: credit, tax deferrals, and financial
assistance to families. Credit endures relations of cooperation not only between banks and
borrowers but also between entrepreneurs and employees, such as payroll financing. Tax
deferral preserves the economic calculation since the entrepreneur is not producing and
therefore not receiving. The concern with the preservation of the economic calculation extends
to all supply chain linkages, including final customers, in order to companies continue to do
their calculation, contracting at a price and selling at another value.
The big question that now arises is, once cooperative relations are maintained, what will
be the future impacts of excess spending promoted by public policies to keep the economic
system functioning?
MISES: Interdisciplinary Journal of Philosophy Law and Economics, São Paulo, 2021; 9 | e202191388
THE SIX LESSONS OF MISES: A REFLECTION OF PUBLIC POLICIES IN TIMES OF PANDEMIC
OECD recommendations for post-pandemic economic recovery include: strengthening
supply chains, with greater stocks and greater supplier diversification; maintaining low interest
rates; public spending and tax policies to support economic activity; promotion of social justice.
The equation of these various aspects is not simple. To the extent that we preserve
monetary prices, which is fundamental in economic calculation, we maintain cooperative
relations. In the long run, the effort to maintain cooperative relations may impact monetary
prices, or not. At the moment, in the specific case of Brazil, there are price increases in sectors
such as food. However, this increase may be temporary. Everything is a matter of adjusting
the economic system to the new conditions of production and consumption. This rebalancing
of the production chains can also express new relations of cooperation, especially when
considering the inclusion of new agents in the system, through financial assistance programs
for the vulnerable population.
The question that arises is: will governments have the breath to keep this economy
running without resorting to the issue of currency?
Since what guarantees the functioning of the Market Economy is the monetary price,
then we could print currency and guarantee the completion of transactions. Right? Now, but
do cooperative relations not require compensation between consumers and producers? The
issue of currency only provides the creation of demand artificially, without an immediate
correspondent in terms of supply, which tends to be reflected in higher prices. It should be
noted that one of the Six Lessons is precisely inflation.
References
BARBIERI, F. O processo de mercado na escola austríaca moderna. Dissertação (Mestrado em Economia) –
Pós-Graduação em Economia, Universidade de São Paulo, São Paulo, 2001.
GEREFFI, G.; FERNANDEZ-STARK, K. Global Value Chain Analysis: a primer. Center on Globalization,
Governance & Competitiveness (CGGC). Durham, Noth Carolina: Duke University, 2011.
HAYEK, F. A. Os erros fatais do Socialismo – Por que a teoria não funciona na prática. Faro Editora, 2019.
MEIRELLES, E. Teorias de mercado e regulação: por que os mercados e o governo falham? CADERNOS EBAPE.
BR, v. 8, n. 4, 2010.
MISES, Ludwig von. As seis lições. São Paulo: Instituto Ludwig von Mises Brasil, 2009. Available at: https://
mises.org.br/Ebook.aspx?id=16. Acessed: Dec 1 2020.
OECD. Economic Outlook, v. 2020, Issue 1, p. 1-336, Paris: OECD, 2020.
Recebido: 9 de fevereiro de 2021.
Aprovado: 21 de fevereiro de 2021.
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