Hello Pat, Below I have tried to responsed to a few of your concerns.   
  
Pat Gunning wrote:  
In his evaluations of systems from the viewpoint of what actors aim to   
achieve, Mises ordinarily neglects the possibility that actors would   
want to avoid being affected by "the system." (The system he had in mind   
contained with institutions -- private property, free enterprise, the   
use of money -- and individuals acting in markets.) So it seems to me   
that the thrust of your criticism should be that Mises neglects what you   
believe may be important goals, not that he is systematically biased. I   
suspect that you are right about this neglect. But one would do well, I   
believe, to think more deeply, as perhaps you have. (I am referring to   
your use of the phrase "social circumstances and psychological   
interactions.")  
  
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Reply:   
The thrust of my criticism would be that Mises' system of thought [1] misses important
elements of economic interaction, regardless of the economic system being discussed.
Following Veblen, I would argue that human action and deliberation depend on prior habits;
that "habits have temporal and ontological primacy over intention and reason;" and that
habituation is a social mechanism that involves the imitation of others. Geoff Hodgson's
writings are quite good on the role of habit. Consequently, categories like "private
property, free enterprise, the use of money -- and individuals acting in markets" are, in
my view, too abstract to be useful descriptions of modern institutions.
  
In "Capital" Marx criticizes Bentham, and his principle of utility, for turning a
historically specific observation into a universal category. Marx suggests that instead
one should deal first with a category in general, then deal with that category as modified
in each historical epoch.[2] Although I would not self-identify my views as Marxist, I do
find insights in Marx's writings. The notion that we should be mindful that our concepts
are modified by historical circumstances is one insight that I find useful.
  
The use of money is one instance where ambiguity between means and ends may be observed.
Most economists hold that the essential value of money is as a means, yet, as Georg Simmel
observes, "the inner polarity of the essence of money lines in its being the absolute
means and thereby becoming psychologically the absolute purpose for most people." My
students certainly give money a meaning different than the one they find in the textbooks.
A tendency to accumulate money for its own sack has rather profound affects on economic
calculations and economic interactions. Dudley Dillard's 1987 piece on "Money as an
Institution of Capitalism" is very good on this issue.
  
Steve Horowitz provides a useful summary of the Misian chain of relationships. He notes
that for Mises the role of monetary calculation is central to making the link between
intentional human action and the unintended order of the marketplace. "The money price
represents a sort of social consensus about the value of the good, and that is what is
necessary for rational resource allocation. As Mises emphasized, one can only get such
money prices where there are markets, which in turn require money and monetary exchange,
which in turn require the fundamental institution of private property."
  
I suppose I don't share the same faith that money prices will represent a sort of social
consensus about the value of goods. When we make goods in order to make money we change
the role of expectation and beliefs in ways that may not otherwise occur. Yes, monetary
calculations are central in a monetary economy. But a monetary economy may also make these
calculations unstable and unreliable, causing us to devise numerous non-market
institutions to deal with these conditions, including supply contracts, debt contracts,
wage agreements and administered prices.
  
Private property might be another example of an institution molding ends and shaping
purpose. "Capitalist" private property includes, among other things, a residual claimant
right to own the outputs of a production process. This situation may well shape both the
means and the ends of decisions regarding work and leisure. Productive activity as an end
may diminish in the absence of the employee's ownership in the product, and work, thereby,
becomes a means to an end, viz., leisure. I wonder whether free enterprise in the form of
self-employment firms and partnerships have the same affects on the means and ends of work
and leisure.
  
So I think I still want to maintain that Mises' argument is systematically biased. Mises
defends the capitalist "principle of private ownership of the means of production" in his
"Anti-Capitalist Mentality" and makes the following conclusion: "The characteristic
feature of the market economy is the fact that it allots the greater part of the
improvements brought about by the endeavors of the three progressive classes--those
saving, those investing the capital goods, and those elaborating new methods for the
employment of capital goods--to the nonprogressive majority of people.... The market
process provides the common man with the opportunity to enjoy the fruits of other peoples'
achievements. It forces the three progressive classes to serve the nonprogressive majority
in the best possible way."
  
We are asked to accept this state of affairs as the inevitable byproduct of the action
principle. Yet, even if Mises is correct about the role of the progressive classes (I
believe Marx also saw the bourgeois as historically  progressive), is the class structure
that he describes the only outcome of intentional human action? Is the "nonprogressive
majority" a universal truth or is it "nonprogressive" because its members lack an
ownership stake in the society?
  
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Pat Gunning further wrote:  
One who seeks to evaluate the capitalist system must contrast that   
system with alternatives with respect to a particular goal or set of   
goals. Thus, to pursue your apparent aim of evaluating the capitalist   
system on the basis partly of its effects on the molding of ends, it   
would be necessary to describe an alternative system that would   
presumably be a competitor with the capitalist system. To Mises, there   
were two competing systems: socialism and interventionism. It would seem   
to follow that to properly criticize Mises from his point of view, you   
would want to compare the effects of these system with capitalism   
regarding the molding of ends. Do the other systems "mold ends" more   
favorably, in some sense, than capitalism?  
  
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Reply:  
I'm not sure that this approach is the only way to support a criticism. Suppose Ernst
Fehr, Herb Gintis and others are correct that most individuals are "strong reciprocators."
That they "are a combination of conditional cooperators, who prefer to sacrifice
personally on behalf of other group members, and altruistic punishers, who prefer to
punish other group members who violate the group's cooperative norms." If this is the
case, than free markets might be seen as an intervention into the human economy and the
Misian argument supporting free markets would be an argument for interventionism in
economic evolution.
  
This forum is not the place to make out a defense of the strong recicrocator hypothesis.
The point I would like to emphasis is this: it remains an open question as to whether the
institutions of a free market system are the only institutions compatible with intentional
human action.
  
Michael Nuwer  
  
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[1] Mises writes in "Epistemological Problems of Economics:"  
Our science, on the other hand, disregarding the accidental, considers only the essential.
Its goal is the comprehension of the universal, and its procedure is formal and axiomatic.
It views action and the conditions under which action takes place not in their concrete
form, as we encounter them in everyday life, nor in their actual setting, as we view them
in each of the sciences of nature and of history, but as formal constructions that enable
us to grasp the patterns of human action in their purity.
  
[2] To know what is useful for a dog, one must study dog-nature. This nature itself is not
to be deduced from the principle of utility. Applying this to man, he that would criticise
all human acts, movements, relations, etc., by the principle of utility, must first deal
with human nature in general, and then with human nature as modified in each historical
epoch. Bentham makes short work of it. With the driest naivete he takes the modern
shopkeeper, especially the English shopkeeper, as the normal man. Whatever is useful to
this queer normal man, and to his world, is absolutely useful. This yard-measure, then, he
applies to past, present, and future.