Capitalism versus Socialism: The Confusion of Knight, the Clarity of Mises

Ludwig von Mises and Frank Knight were the two towering intellectual leaders in the mid 20th century of economic liberalism. As teachers and scholars they shaped the discourse on economic liberalism for the remainder of the 20th century and to this day continue to do so. They both made major contributions to methodology and economic theory. Despite their close affinity on several issues, they had fundamental disagreements. To highlight those I focus on their respective positions on the economic analysis of socialism. I argue that Mises’s analysis clarified the fundamental challenge that socialist economic theory would have to address, while Knight’s led to confusion of the fundamental challenges that a socialist economic system would face.

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