Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

Bank Credit Expansion and Its Effects on the Economic System 283the cost involved in the production processes, neither wouldit be possible to direct in a coordinated way the efforts of peoplewho contribute to the different action processes. 18We have attempted elsewhere to demonstrate that all systematiccoercion which impedes the free exercise of entrepreneurshipprevents humans from discovering the informationthey need to carry out their actions. 19 It also keeps them fromspontaneously transmitting this information and coordinatingtheir behavior with respect to the needs of others. This meansthat the coercive intervention which is characteristic of socialism,of state interventionism in the economy, and of the grantingof privileges to certain groups against traditional legalprinciples, prevents to a greater or lesser extent the exercise ofentrepreneurship, and hence the coordinated action of humanbeings; it also tends to generate systematic maladjustments inthe framework of society. Systematic discoordination can beintratemporal; or, as in the case of human actions related to differentstages of production processes or capital goods, intertemporal,such that human beings who cannot act freely tend to adjusttheir present behavior poorly to their future behavior and needs.As we saw from Robinson Crusoe’s isolated productionprocess, intertemporal coordination is fundamental to allhuman action which takes time and especially to those actionsrelated to capital goods; thus the great importance of permittingthe free exercise of entrepreneurship in this area. In thisway entrepreneurs constantly discover profit opportunities inthe market, believing they see new possible combinations ofcapital goods, and considering these combinations to beundervalued with respect to the market price they estimatethey will be able to obtain in the future for the consumergoods they produce. In short we are referring to a process ofcontinual buying and selling, “recombination” and productionof new kinds of capital goods, a process which generates18 This is precisely the fundamental argument Mises raises concerningthe impossibility of economic calculation in a socialist economy. SeeHuerta de Soto, Socialism, Economic Calculation and Entrepreneurship,chaps. 3–7.19 Ibid., chaps. 2 and 3, pp. 41–155.