Mises argued that without private ownership of the means of production, there are no market prices for capital goods. Prices serve as information signals that tell producers what resources are relatively scarce and where they are most valued. Under socialism, a central planner would have to make millions of production decisions without these signals, relying instead on arbitrary units of measurement. Mises contended this would lead to inefficiency, misallocation, and ultimately chaos. His 1920 article forced socialists to confront a question they had largely ignored: how would their system actually work in practice?

Mises made the foundational argument: without market prices for capital goods, rational economic calculation is impossible. Hayek, his former student, extended the argument by emphasizing the dispersion and tacit nature of knowledge in society. For Hayek, the problem was not just the absence of prices but the absence of any mechanism to aggregate fragmented, contextual information that no central planner could ever possess. Mises focused on the logical impossibility of calculation; Hayek focused on the epistemic impossibility of central planning. Together they defined the Austrian critique of socialism.

Mises presented it as an a priori proof based on the logical requirements of economic calculation. He argued that rational allocation of resources under the social division of labour necessarily requires exchange ratios expressed in a common medium—money—and that these can only emerge from actual market exchanges. Critics like Oskar Lange and Abba Lerner claimed socialist planners could simulate markets, but Mises and Hayek countered that without genuine private ownership and profit-and-loss, such simulations lack the essential feedback mechanisms that make real markets work.

Praxeology is Mises's term for the science of human action, which he considered more fundamental than economics itself. He argued that economics should be deduced logically from the axiom that individuals act purposively to achieve chosen ends with scarce means. This deductive method, which he laid out fully in Human Action (1949), set him apart from the empirical, positivist trends in mainstream economics. Mises believed economic laws are apodictic—necessarily true—because they follow from the nature of action itself, not from historical observation or statistical inference.

Mises held teaching positions at the University of Vienna and later New York University, but he never secured a prestigious endowed chair or a permanent salaried professorship in the United States. His uncompromising classical liberalism and his methodological opposition to mathematical economics and positivism alienated him from the mid-century mainstream. His influence operated largely through his students—especially Hayek—and through his voluminous writings rather than through institutional power. The Mises Institute, founded in 1982, later became the primary vehicle for propagating his intellectual legacy.

Mises's ideas are regularly invoked in contemporary debates over central banking, regulation, and economic planning. His critique of monetary expansion and his Austrian theory of the business cycle—developed from his 1912 Theory of Money and Credit—inform arguments against discretionary central banking and for commodity-backed currencies. His calculation argument is deployed against proposals for centralised economic planning, including certain versions of state-led industrial policy and environmental regulation. The Mises Institute in Auburn, Alabama, actively promotes this intellectual tradition through publications, conferences, and educational programs.