Mises, Ludwig von (1881-1972)

Ludwig von Mises was the leading Austrian economist of his generation. He received several honorary doctorates and the distinction of a ceremonial 50th-​anniversary renewal of his earned doctorate. The same occasion produced a Festschrift in his honor; another, in two volumes, celebrated his 90th birthday. The American Economic Association named him a Distinguished Fellow in 1969. The editors of Liberty magazine chose him in their January 2000 issue as “Libertarian of the Century.”

Mises was born in Lemberg in Austrian-​ruled Poland (now Lviv, Ukraine) and died in New York City. His father was a railroad engineer in the civil service; his younger brother, Richard, became an eminent professor of applied mathematics and related fields. Mises entered the University of Vienna in 1900, where he earned a doctorate in law and economics in 1906. He attended the seminar of the eminent economist Eugen von Böhm-​Bawerk until qualifying in 1913 as a university lecturer. From 1913 to 1934, he taught as a Privatdozent, paid by the students rather than by the university, and in 1918, he attained the title of Ausserordentlicher Universitätsprofessor (sometimes translated as associate professor). From 1909 to 1938, he was economic advisor at the Vienna Chamber of Commerce, a quasi-​governmental organization. During World War I, he served as an artillery officer, and at war’s end, he briefly held the post of director of the Austrian Reparations Commission at the League of Nations. After returning from a 1926 tour of the United States on a Rockefeller fellowship, he founded the Austrian Institute for Business Cycle Research. While at the Chamber of Commerce, he conducted a biweekly seminar, many of whose participants subsequently became prominent economists or legal and political philosophers in their own right, among them Friedrich A. Hayek, Fritz Machlup, Gottfried Haberler, Oskar Morgenstern, Alfred Schütz, Felix Kaufmann, Erich Voegelin, Georg Halm, and Paul Rosenstein-​Rodan.

In 1934, Mises accepted a teaching position at the Graduate Institute of International Studies in Geneva. He kept his position at the Chamber of Commerce in Vienna, occasionally returning to work there and accepting only a partial salary. He was summarily dismissed after Hitler occupied Austria in 1938. In the summer of 1940, with Hitler’s victory over France, Mises and his wife Margit (whom he had married in 1938) settled in New York City, where they lived until their deaths. He became a U.S. citizen in January 1946. After Leonard Read established the Foundation for Economic Education at Irvington-​on-​Hudson in 1946, Mises also became one of its staff members, lecturing there until 1972. In his early years in New York, Mises managed to get by on a fellowship at the National Bureau of Economic Research, small foundation grants, consulting for the National Association of Manufacturers, and occasional lecturing positions (including a visiting professorship at the National University of Mexico in 1942). From 1945 until retiring in May 1969, he served as Visiting Professor at New York University (NYU). Three years later, he revived his famous Vienna seminar at NYU, which met for 2 hours each Thursday evening, first at the graduate school in lower Manhattan and later at Washington Square. Prominent participants included Murray Rothbard, Israel Kirzner, Henry Hazlitt, Bettina Bien Greaves, George Reisman, Ralph Raico, Laurence Moss, and Hans Sennholz.

Mises’s teaching at NYU was paid for almost entirely from foundation grants, rather than by the university. The fact that Mises never attained a regular full-​time professorship, either in Austria or the United States, has aroused conjectures. One, advanced by himself, involves a bias against classical free-​market liberals. Another involves anti-​Semitism. Reluctance to leave New York restricted his options. Although some have reported that he could be difficult to get along with, intolerant of peers whom he thought to be compromising with error, those who heard him lecture and conduct seminars note that he was gentle in encouraging students to speak out without worry over possible mistakes because all serious errors in the field had already been committed by famous economists.

In 1947, under the leadership of F. A. Hayek, Mises joined in founding the Mont Pelerin Society, along with Wilhelm Röpke, Walter Eucken, Frank Knight, Milton Friedman, Frank D. Graham, Henry Hazlitt, Karl Popper, Michael Polanyi, and other eminent scholars. Named for its original meeting place in Switzerland, the Society is an international association of classical liberals and economic conservatives. In its early years, it was a focus of mutual moral support for adherents of a then-​misunderstood and rather rare philosophy.

Mises’s earliest academic writings include two works of economic history. He published The Theory of Money and Credit in 1912. The book sought to apply supply-​and-​demand theory (i.e., a cash-​balance approach) to money. The work deepened economists’ understanding of the quantity theory of money and the purchasing-​power-​parity theory of exchange rates, and it explained the wasteful consequences of inflationary policies.

Nation, State, and Economy (1919) warned against an excessively harsh peace after World War I, as well as against revanchism on the part of the vanquished. It examined the background of the war, including linguistic-​ethnic conditions in Austria-​Hungary and Germany that had hampered the flourishing of democracy in those empires. The book reveals Mises as a true classical liberal and democrat, not a conservative: He lauded the ideals of the French Revolution and of the ultimately frustrated German national assembly that convened in Frankfurt in 1848–1849; he scorned hereditary rule and privilege.

In 1922, Mises published Socialism (not translated until 1936), an expansion of a 1920 article on “Economic Calculation in the Socialist Commonwealth.” He explained why central planners would be unable to meaningfully estimate the values of inputs and outputs and so could not allocate resources rationally. Although F. A. Hayek later joined in elaborating this analysis, most economists who discussed it seemed to misunderstand it as if with willful stubbornness until the collapse of the Soviet Union finally made them recognize that Mises had been right.

Liberalism appeared in 1927, A Critique of Interventionism in 1929. Three books followed on the methodology of economics: Epistemological Problems of Economics in 1933, whose arguments were elaborated in Theory and History (1957), and The Ultimate Foundation of Economic Science: An Essay on Method(1962). Mises there explored the rationale of what is sometimes scorned as “armchair theory.” These works attempt to lay bare the differences between economic theory, on the one hand, and historical and statistical research, on the other hand. Bureaucracy, which came out in 1944, is no mere condemnation of bureaucracy, but rather a trenchant analysis of the unavoidably bureaucratic character of governmental and some other organizations. Mises here explained how the managements of nonprofit and profit-​oriented organizations necessarily differ. This short book is, in fact, a capsule presentation of the logic of a market economy. Omnipotent Government: The Rise of the Total State and Total War, also from 1944, warns of the dangers in its title and demonstrates that Nazism and fascism, far from being creatures of capitalism, are variants of socialism.

Mises expanded his 1940 Nationalökonomie into his English-​language magnum opus, Human Action (1949, revised in 1963 and 1966). Extending his treatment of the epistemology and methods of the social sciences, this massive work covers the whole range of economics and beyond. The Anti-​Capitalistic Mentality (1956) explores the psychological sources of hostility to markets and the profit motive. Although a complete survey of Mises’s writings and collections of articles is not possible here, one also should mention Profit and Loss (1951), Planning for Freedom (1952), The Historical Setting of the Austrian School of Economics (1969), and Money, Method, and the Market Process (1990). German and translated versions of Mises’s Notes and Recollections, not published until 1978, reflect the globally and personally stressful time when he actually wrote them—1940.

One need not agree with every detail of Mises’s economic teachings to be awed by his accomplishment. He presented economic theory in a comprehensive and integrated way as but one aspect, although the major aspect, of the broader science of human action that he called praxeology. Mises championed reason against mere intuition and emotion and unmasked the absurdity of polylogism, which is the notion that different brands of logic and rationality and truth exist for different nations, races, and classes (and genders, as we might nowadays add). He resisted the trivialization of academic economics into mathematical descriptions of imaginary static equilibria or optimal positions corresponding to the maximization of known functions subject to known restraints. He recognized that economics for the real world deals with uncertainty, change, saving, capital formation, entrepreneurial discovery and the creation of opportunities, and the constructive discipline of profit and loss. Economics explains the harmonious coordination of radically decentralized decisions and actions taken by individuals pursuing their own diverse goals. Social cooperation is Mises’s term for the framework of peaceful and productive interaction that enables individuals to reap gains from trade in the broadest sense of the term. Its requirements serve as the basis of Mises’s ethical theory, which is a version of utilitarianism immune to standard criticisms.

In policy, Mises championed laissez-​faire and hard money. He showed that misconceived, but perennially popular, economic interventions tend to work against their avowed purposes, creating disorders that seem to call for still further interventions. He warned against excessive government power and imperialistic nationalism. But he was no anarchist: He recognized the necessity of government, properly restrained. Nor was he an apologist for big business or the wealthy and the privileged. On the contrary, the sincerity of his overriding concern for the interests of ordinary people shines through his writings.

Mises continues to inspire new generations of Austrian economists and scholars associated with several institutes and journals. He would be appalled by the efforts of some of his disciples—fortunately, only a small minority—to drive a posthumous wedge between him and F. A. Hayek, who, after all, had learned much from him, respected him, and worked creatively in the same tradition.

Finally, Mises deserves honor for his courage, even at heavy cost to his own career, in pursuing research, teaching, and writing with uncompromising concern that correct understanding should prevail in the long run. Although he did not live to fully see the outcome of his efforts, he and his ideas are beginning to win the recognition they deserve.

Further Readings

Ebeling, Richard M. “‘Editor’s Introduction’ to Ludwig von Mises.” Money, Method, and the Market Process. Essays selected by Margit von Mises. Auburn, AL: Ludwig von Mises Institute and Norwell, MA: Kluwer, 1990. ix–xxvi.

Hartwell, R. M. A History of the Mont Pelerin Society. Indianapolis, IN: Liberty Fund, 1995.

Hayek, F. A., Henry Hazlitt, Leonrad R. Read, Gustavo Velasco, and Floyd Arthur Harper. Toward Liberty. Festschrift for Ludwig von Mises. 2 vols. Menlo Park, CA: Institute for Humane Studies, 1971.

Herbener, Jeffrey M., ed. The Meaning of Ludwig von Mises. Auburn, AL: Ludwig von Mises Institute; Norwell, MA: Kluwer, 1993.

Mises, Margit von. My Years with Ludwig von Mises. New Rochelle, NY: Arlington House, 1976.

Moss, Laurence S., ed. The Economics of Ludwig von Mises: Toward a Critical Reappraisal. Kansas City, MO: Sheed & Ward, 1976.

Sennholz, Hans F. “Postscript.” Notes ad Recollections. Hans F. Sennholz, trans. South Holland, IL: Libertarian Press, 1978. 145–176.

Sennholz, Mary, ed. On Freedom and Free Enterprise. Festschrift for Ludwig von Mises. Princeton, NJ: Van Nostrand, 1956.