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

650 Money, Bank Credit, and Economic CyclesTHE THEORY OF THE IMPOSSIBILITY OF COORDINATINGSOCIETY BASED ON INSTITUTIONAL COERCION OR THEVIOLATION OF TRADITIONAL LEGAL PRINCIPLESElsewhere we have defended the thesis that socialismshould be redefined as any system of institutional aggressionon the free exercise of entrepreneurship. 74 This aggressionmay take the form of direct physical violence (or the threat ofit) perpetrated by government authorities or of privilegesgranted to certain social groups (unions, bankers, etc.) so thatthey may violate traditional legal principles with state support.To attempt to coordinate society via institutional coercionis an intellectual error, because it is theoretically impossiblefor an agency in charge of committing this type ofaggression (a central planning board) to obtain the informationit would need to establish social coordination with itsdecrees. 75 The above is true for the following four reasons:first, it is impossible for the agency to constantly assimilate theenormous volume of practical information stored in the mindsof different human beings; second, the subjective, practical,tacit, and nonverbal nature of most of the necessary informationprecludes its transmission to the central organ; third,information which actors have not yet discovered or createdand which simply arises from the free market process, itself aproduct of entrepreneurship subject to the law, cannot betransmitted; and fourth, coercion keeps entrepreneurs fromdiscovering or creating the information necessary to coordinatesociety.This is precisely the essence of the argument Mises originallyraised in 1920 on the impossibility of socialism and, ingeneral, of state intervention in the economy. The argumenttheoretically explains the failure of economies of the formerEastern bloc, as well as the growing tensions, maladjustments74 Huerta de Soto, Socialism, Economic Calculation and Entrepreneurship, p.49. See also Jesús Huerta de Soto, “The Economic Analysis of Socialism,”in Gerrit Meijer, ed., New Perspectives on Austrian Economics(London and New York: Routledge, 1995), chap. 14.75 Huerta de Soto, Socialism, Economic Calculation and Entrepreneurship,pp. 52–62.