The answer that socialism provided to the age-old question of the proper balance between the public and the private can now, from our current historical perspective, be seen to have been wrong. But if it was based on wrong, or at least incomplete, economic theories, theories that are quickly passing into history, it was also based on ideals and values many of which are eternal. It represented a quest for a more humane and a more egalitarian society.

Marx, although a man of broad knowledge, had one blind spot: he was ignorant of the true character of economics. He did not realize that economics can only be understood in close relationship to the other humanities (and certain sciences), and therefore should not be studied in vacuo. Ironically, this very weakness was largely instrumental in making Marxism successful. Marxist economics—yet another instance of a false but clear idea—can be explained to the merest child in a matter of minutes. (Conversely, to explain the workings of the free market economy to an adult would take weeks of hard work.) Because it was easily grasped, Marxism flooded the world within a few decades, as had other simplistic ideologies and religions, such as Islam and the Enlightenment; this same sort of simplicity gave rise to the French Revolution and national socialism. Christianity, on the other hand, took three centuries to triumph.

No heresy has ever been so wholly and hopelessly false that it did not reflect at least some broken lights of truth. This we may rightly say of Socialism where truth and error, fact and fiction are forever blended in an indistinguishable confusion. What is good we must keep and perfect, what is wrong and evil we must relentlessly reject.

Almost the only persons who may be said to comprehend even approximately the significance, principles, and purposes of Socialism are the chief leaders of the extreme wings of the Socialistic forces, and perhaps a few of the money kings themselves. It is a subject of which it has lately become quite the fashion for preacher, professor, and penny-a-liner to treat, and, for the most part, woeful work they have made with it, exciting the derision and pity of those competent to judge. That those prominent in the intermediate Socialistic divisions do not fully understand what they are about is evident from the positions they occupy.

Years ago, I noticed one thing about economics, and that is that economists didn't get anything right.

We faced difficulties created by the ravages of 40 years of war. Afterward, we made costly mistakes in our effort to rebuild the country. Now we know the mistakes and their price. We were too hasty, too simplistic, too subjective. We tried to build socialism without going through the necessary period of capitalist development. Today we are correcting those mistakes with a profound and thorough renovation. A policy has already begun that wipes out a centralized bureaucracy based on state subsidies that caused our people suffering.

Socialism is young and has made errors. Many times revolutionaries lack the knowledge and intellectual courage needed to meet the task of developing the new man with methods different from the conventional ones — and the conventional methods suffer from the influences of the society, which created them.

This branch of economics has suffered from several intellectual mistakes. The major mistake has been the presumption that standard economic theory is inadequate for understanding low income countries and that a separate economic theory is needed. Models developed for this purpose were widely acclaimed until it became evident that they were at best intellectual curiosities.

The fundamental error of socialism is anthropological in nature. Socialism considers the individual person simply as an element, a molecule within the social organism, so that the good of the individual is completely subordinated to the functioning of the socio-economic mechanism. Socialism likewise maintains that the good of the individual can be realized without reference to his free choice, to the unique and exclusive responsibility which he exercises in the face of good or evil. Man is thus reduced to a series of social relationships, and the concept of the person as the autonomous subject of moral decision disappears, the very subject whose decisions build the social order. From this mistaken conception of the person there arise both a distortion of law, which defines the sphere of the exercise of freedom, and an opposition to private property. A person who is deprived of something he can call “his own,” and of the possibility of earning a living through his own initiative, comes to depend on the social machine and on those who control it. This makes it much more difficult for him to recognize his dignity as a person, and hinders progress towards the building up of an authentic human community.

It is my guiding confession that I believe the greatest error in economics is in seeing the economy as a stable, immutable structure.

The appeal to the intellectually insecure is also more important than it might seem. Because economics touches so much of life, everyone wants to have an opinion. Yet the kind of economics covered in the textbooks is a technical subject that many people find hard to follow. How reassuring, then, to be told that it is all irrelevant -- that all you really need to know are a few simple ideas! Quite a few supply-siders have created for themselves a wonderful alternative intellectual history in which John Maynard Keynes was a fraud, Paul Samuelson and even Milton Friedman are fools, and the true line of deep economic thought runs from Adam Smith through obscure turn-of-the-century Austrians straight to them.

The great mistake of the socialists and their fatal handicap in comparison with traditional religions (as Ernest Gellner used to enjoy pointing out) was to promise that salvation could be achieved in this world.