Ludwig von Mises

Ludwig Elder von Mises’ life was testament to the saying that one man with courage makes a majority.

Mises was born in 1881 in Lemberg, Austria-Hungary. He enrolled in the University of Vienna in 1900 and received his doctorate in law and economics in 1906. A student of Eugen von Böhm-Bawerk—himself an admirer of Carl Menger, father of the Austrian school of economics—Mises became one of the university’s most prominent figures. After graduating, Mises worked for the Vienna Chamber of Commerce as an economist and economic advisor to the Austrian government.

In 1926 he founded the first entity dedicated solely to the study of macroeconomic fluctuations, the Austrian Institute for Trade Cycle Research.[1] While pursuing this interest, he taught an economic theory course at the University of Vienna without pay and ran a semimonthly seminar at the chamber offices that drew some of the most notable names in economics and the social sciences, including F. A. Hayek, Gottfried Haberler, Wilhelm Röpke, Alfred Shutz, Erich Voegelin, Paul Rosenstein-Rodan, Fritz Machlup, Oskar Morgenstern and Lionel Robbins.

Between his departure from Vienna in 1934 and his decision to go to America after the Germans breached the Maginot Line in June 1940, Mises taught in Geneva at the Graduate Institute of International Studies. He flourished in the Swiss city and was very reluctant to leave, especially as his English was much weaker than his French. But the fall of France, the antipathy of the Nazi government—which blacklisted him—and his wife Margit’s pleadings made his departure a near certainty. Since the early 1930s, Mises had warned those close to him of impending political disaster in Austria and urged them to emigrate. American economist Benjamin Anderson, then with Chase Manhattan Bank, supported the couple’s bid for nonquota visas, which allowed them immediate entry into the United States, provided they could get there. It proved to be a difficult, harrowing journey, but when it ended, Mises at last stood on American soil.[2]

The early years in his new country were not easy ones for Mises. He had abandoned his research notes and library, as well as a well-paid position in Geneva, for uncertain circumstances in the New York of 1940. Although Mises had a temporary appointment as lecturer and research associate professor at the University of California–Berkeley, he remained in New York because he thought it the country’s cultural center. As Mises never did hold a full-time teaching position at any American university, this decision had large consequences for his career and, therefore, for his prestige in U.S. academic circles. It also meant years of frugality and dissaving for him and his wife.

The Rockefeller Foundation, through the National Bureau of Economic Research, provided some support in the form of a once-renewed, two-year research grant that ended in early 1945, just as Mises began his long association with the Graduate School of Administration at New York University. He was hired to teach a one-semester course but remained as a visiting professor until his retirement in 1969. In 1948 he began his famous Thursday evening seminar. He also formed a relationship with the Foundation for Economic Education, writing for its publication The Freeman and conducting seminars.

Another fortuitous relationship for Mises was the friendship of Henry Hazlitt.[3] Hazlitt saw to it that Mises’ works were reviewed in major national media and promoted him among those in a position to help support Mises’ research and writing over the next three decades.

During this time—between 1944 and 1960—Mises wrote prolifically, finishing several books, among them Omnipotent Government, Bureaucracy, Theory and History and his masterpiece, Human Action: A Treatise on Economics. [4] Although often difficult for those without formal training in economics to fully comprehend, these books have been in print continuously and sold well. Mises’ influence has grown with every person who has discovered and read him.

His NYU seminars were the other main avenue by which Mises helped shape political and economic events. Many of the influential and talented individuals who gathered for the weekly seminars became university professors themselves, further spreading the core ideas of Austrian economic theory. Throughout this period, however, Mises remained an outcast professionally, and unlike colleagues such as Hayek, he never secured a conventional full-time teaching position despite his reputation, knowledge and publication record.[5] This was due, said his critics, to his “intransigence,” a word used as a synonym for Mises’ inability to compromise with the socialist, proplanning policies that dominated domestic economic agendas in most nations after World War II.[6]

And there was, for prospective employers and his political opponents, even more. In 1920 Mises wrote the article that triggered the so-called socialist calculation debate, in which he (and later, other Austrian theorists—notably Hayek) claimed socialism was doomed because of its inability to rationally allocate resources. This made him well-known not only as an opponent of planning in all its rhetorical forms but also as the person who first questioned its very possibility.[7]

This was a large ideological load to carry between 1945 and 1970, a period characterized by a growing enthusiasm for government intervention and central economic fine-tuning. Mises and the small group around him stood mostly alone in their advocacy of laissez-faire and disavowal of government attempts to manipulate free market outcomes, whether for purely economic reasons or to meet the growing demand for “social justice.” But Mises never wavered in his conviction that only free markets could help people achieve prosperity and dignity.

The disintegration of the Soviet Union, and the sea change toward global capitalism that caused it, bore out Mises’ prediction that socialism could not work. He adhered to that belief in the face of claims by most economists that he was wrong, that he had lost the intellectual debate on this point to Oscar Lange and that not only could socialism work but it might even outperform marketbased economies.[8] It is unfortunate that Nobel awards in economics can only be given to the living, for Mises’ analysis of the inevitable, long-run failing of collectivist schemes stands empirically verified as one of the greatest achievements in economic theory.

Mises died in October 1973 in New York City. His legacy—in the form of voluminous writing on many important subjects, rich in theoretical innovation and wrinkles from his fertile mind—continues to attract new adherents, both to Austrian economics and to the profession of economics more generally. An institute at Auburn University that bears his name continues to spread his ideas and make many of his writings publicly available. In 1974 his favorite student—F. A. Hayek—won a joint Nobel Prize in economics for monetary theory work clearly based on Mises’ insights in The Theory of Money and Credit and his formation of Austrian business cycle theory. Mises has been dead for three decades, but his intellectual influence still surrounds us and always will.

Notes

[1] Mises, Ludwig von—(1969a), The Historical Setting of the Austrian School of Economics (New Rochelle, N.Y.: Arlington House).

[2] Mises, Margit von (1976), My Years with Ludwig von Mises (New Rochelle, N.Y.: Arlington House).

[3] Formaini, Robert L.—(vol. 6), “Henry Hazlitt: Journalist Advocate of Free Enterprise,” Federal Reserve Bank of Dallas Economic Insights, No. 1.

[4] Until a badly handled reprinting of Human Action in 1963, Mises had an ongoing relationship with Yale University Press, which brought out Omnipotent Government and Bureaucracy in 1944 and reprinted Socialism (1951), The Theory of Money and Credit (1953) and Theory and History (1957).

[5] Formaini, Robert L. (vol. 4), “Hayek: Social Theorist of the Century,” Federal Reserve Bank of Dallas Economic Insights, No. 1.

[6] Rueff, Jacques (1956), “The Intransigence of Ludwig von Mises,” in On Freedom and Free Enterprise, ed. Mary Sennholz (Princeton, N.J.: D. van Nostrand), 13–16.

[7] Mises, Ludwig von—(1975), “Economic Calculation in the Socialist Commonwealth,” in Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism, ed. F. A. Hayek (Clifton, N.J.: Augustus Kelley), 87–132.

[8] Schumpeter, Joseph A. (1976), Capitalism, Socialism, and Democracy (New York: Harper Torchbooks), 172–73.