Mises on rationality, calculation and collective choice: A reassessment.

This article examines an apparent tension in the writings of Ludwig von Mises, who claims that (1) all human actions are rational and that (2) rational economic activity in the socialist economy is impossible. It is argued that the tension dissolves once it is recognized that in the context (1), Mises employs a non-normative notion of rationality as the capacity for deliberation over choices, whereas in the context (2) he uses the normative notion of instrumental rationality as the efficient achievement of goals. It is also suggested that his notion of rational beliefs is consistent with that of logical empiricism, which helps to explain why he maintains that monetary calculation (grounded in intersubjectively graspable experience) is necessary for rational decision-making in social contexts. On this basis, the article contends that Mises's support for the market economy and the liberal social order is grounded in instrumental rationality and normative individualism: for businessmen, monetary prices provide a basis for rational decisions in complex social situations; for consumers, the market economy functions as a means of satisfying their preferences.