Israel Kirzner, a former student of Ludwig von Mises, looks at the influences of the economic debates in Europe on von Mises' thought, traces his theories as they developed in his writings, and discusses both critical and supportive commentators on von Mises.
Ludwig von Mises
The Man and His EconomicsBy Israel M. KiznerISI Books
Copyright © 2007 Israel M. Kizner
All right reserved.ISBN: 978-1-882926-68-8Chapter One
LUDWIG VON MISES, 1881-1973
The purpose of this short work is to provide a picture of Ludwig von Mises, the economist and social thinker. Such a picture must consist primarily of lines and brush strokes representing Mises' ideas, and explaining how these ideas differed importantly from those of his contemporaries. The subsequent chapters offer such accounts and explanations. But a picture consists of more than lines and strokes; it includes the canvas upon which these are imposed. The story of Mises, the intellectual and the scholar, cannot be appreciated unless it also includes brief attention to the human and historical context within which Mises' intellectual contributions emerged. This chapter seeks to give a brief survey of this human and historical context, a survey that will be brief not only because of space limitations, but also because many of the details of Mises' life, interesting though they may be for a full-length biography, are not, in fact, directly relevant to an appreciation of his intellectual stature. Iinclude in this chapter only those salient features of his biography (and of its historical background) which seem necessary in order for the development of Mises' economic and social ideas to be rendered coherent and understandable.
Vienna: The Early Years
Ludwig von Mises was born on September 29, 1881, in the city of Lemberg in the Austro-Hungarian empire. His mother was Adele (Landau) von Mises; his father, Arthur Edler von Mises, a construction engineer in government service to the Ministry of Railroads, died at the age of forty-six (after a gall bladder operation) when Ludwig was a twenty-two-year-old university student. (Ludwig's only sibling to survive into adulthood was his younger brother Richard, who was to become a noted mathematician, Harvard professor, and probability theorist.) Although his birthplace was hundreds of miles away from the imperial capital, Mises was to spend some forty years of his life in Vienna. From the age of eleven he spent about eight years attending the Academic Gymnasium in Vienna, after which he became a student in the Faculty of Law and Political Sciences at the University of Vienna. With an interruption of about one year's military service (at the conclusion of which he received his commission as lieutenant in a reserve artillery regiment), Mises spent about five years at the university, winning high university honors in the areas of juridical studies, social sciences, and history of law, and being awarded the degree of Doctor of Laws in 1906.
The bulk of Mises' work in economics up to this time was under the influence of teachers imbued directly or indirectly with the ideas of the German Historical School (about which more will be said in subsequent chapters), and Mises had, by the time he received his doctorate, already published several scholarly works in historical economics research. Mises was, however, already Beginning to rebel against the methodological and ideological tenets of that school, presumably partly as a result of his reading Carl Menger's Grundstze at the end of 1903-an experience which, he later described, made an "economist" of him (NR, 33). It was apparently after receiving his doctorate that Mises came under the powerful personal influence of Eugen von Bhm-Bawerk (who, after retiring from prestigious service as Minister of Finance of the Austro-Hungarian empire, began to conduct his famous seminar at the University of Vienna in 1905.) Mises attended Bhm-Bawerk's seminar for a number of years until he was himself admitted to the (unsalaried) rank of privatdozent, permitting him to lecture at the university, in 1913. It was during this period that his own systematic understanding of economics developed, along the lines pioneered by Menger (with whom he had extensive personal discussions (NR, 35) and Bhm-Bawerk, culminating in Mises' own pathbreaking 1912 work on monetary theory. This book established Mises as an important economic theorist in his own right, and was the foundation of his subsequent fame as a leading exponent of the "Austrian School."
After several years of engagement in various professional economic responsibilities, Mises obtained a position in 1909 at the Austrian Chamber of Commerce (a quasi-governmental body directly concerned with national commercial and industrial policy). It was his work in this capacity which, especially after the end of World War I, thrust Mises squarely into the controversial public issues of his time and brought him into contact with many of the leading Austrian political, industrial, and financial personalities. Mises' career as economist thus developed, from the very beginning, as one combining academic research and university teaching with the very practical work of an economic public policy specialist at the center of ferocious political and policy debates.
The state of academic economics in Austria (and the rest of the continent) will be outlined in the chapter following this one. And it is not difficult to recognize the obvious relevance of Mises' earlier work in monetary economics for the public policy issues which reached the crisis point in the hyperinflations of the early twenties. Here we simply note the fact that Mises' early years as doctoral student, university lecturer, and public policy economist were years of social and political change and turmoil. The old courtly world of Imperial Vienna, center of the vast but crumbling Austro-Hungarian Empire, was giving way to a postwar milieu in which entirely new economic and political winds were to blow with an unprecedented ferocity.
Mises was himself, in his old age, to write about the political and ideological currents already at work in continental Europe around the turn of the century. There is no doubt that the views he expressed reflect his youthful impressions of the social context within which his lifelong convictions were forged. Mises saw the controversies that raged between the dominant German intellectuals in social science and the Austrian economists led by Menger, and subsequently Bhm-Bawerk, as having a significance extending far beyond the substance or methodology of economic theory. Most of the German professors, Mises wrote, "more or less eagerly made propaganda in their writings and in their courses for the policies of the Imperial Government: authoritarian conservatism, Sozialpolitik, protectionism, huge armaments, and aggressive nationalism" (HSAS, 23 f). Mises saw the Mengerian School as the champion of liberalism, as the last intellectual source of hope for the preservation of freedom and civilization in the face of the dangers posed by statism and by Marxism. From his perspective at the outset of the last third of the twentieth century, Mises saw, in fact, a "straight line that leads from the work of the Historical School to Nazism," from "Schmoller's glorification of the Hohenzollern Electors and Kings, to Sombart's canonization of Adolf Hitler" (HSAS, 33-34). In memoirs written several decades earlier (1940), Mises also traced the cataclysmic twentieth-century events for which Marxism and Nazism have been responsible to the teachings of the German Historical School. He reports that Menger had (apparently well before the turn of the century) foreseen that the policies pursued by the European powers would "lead to a horrible war that will end with gruesome revolutions, with the extinction of European culture and the destruction of prosperity of all nations" (NR, 35). It was in this charged ideological atmosphere that Mises' own ideas developed and crystallized.
Mises himself experienced the hardships of war. During World War I he saw active service at the front in the Carpathians as a first lieutenant, but after getting typhoid in 1917 he was called back to Vienna to work in the economics division of the Department of War (MYWM, 25 f). It was his work in that capacity, together with his reflections on the political turmoil which was to follow the conclusion of hostilities, which led him to publish his second book, Nation, Staat und Wirtschaft, in 1919. (The book was translated into English many years later by Professor Leland Yeager under the title Nation, State and Economy). Mises was later to describe that work as "a scientific book with political design. It was an attempt at alienating the affections of the German and Austrian public from National-Socialist (Nazi) ideas which then had no special name, and recommending reconstruction by democratic-liberal policy" (NR, 66). This tone of the work captured the passion which was to characterize Mises' writings throughout his life. He saw the results of his scientific work as enormously significant for practical policy, if a civilized society was to be created and preserved.
Vienna After World War I
During the years immediately following the war's end, Mises' stature as a Viennese intellectual came to be well established. Several aspects of his work during these years contributed to his prominence in the Vienna of the twenties. His 1919 book did not receive extensive attention. But his 1922 work Die Gemeinwirtschaft (published in English in 1936 as Socialism: An Economic and Sociological Analysis)-a work thoroughly out of step with both the strong political momentum toward socialism in Austria immediately after the war and the generally favorable attitude of intellectuals at that time toward socialism-placed Mises squarely in the eye of the storm of public debate. Expanding on a seminal 1920 article on the pure economics of socialist central planning, Mises laid out in this book not only his now-famous critique of the possibility of socialist economic calculation, but also his extensive economic and sociological critique of socialism in general. This work made Mises the archenemy of all those who saw Mises' ideal of a liberal (free-market) society as an old-fashioned reactionary ideology discredited by twentieth-century intellectual-progressive developments.
At the same time, Mises' rapidly expanding responsibilities at the Chamber of Commerce during these years of postwar turmoil involved him directly in the central political and policy issues of the day. Although formally only a staff member at the Chamber, in fact Mises' influence became national in scope. In Mises' own words (written some two decades later): "In the Chamber I created a position for myself.... My position was incomparably greater than that of any...Austrian who did not preside over one of the big political parties. I was the economist of the country" (NR, 73 f). In his memoirs Mises describes how he persuaded the Marxist Otto Bauer to refrain from installing a Bolshevist regime in Vienna during the winter of 1918-19 (NR, 18 f). But Mises' success was severely limited. "Supported only by a few friends I waged a hopeless fight. All I achieved was to delay the catastrophe. The fact that in the winter of 1918-19 Bolshevism did not take over and that the collapse of industry and banks did not occur in 1921, but in 1931, was in large part the result of my efforts"(NR, 74).
It was during these early postwar years that Mises acquired the reputation of obstinacy and intransigence-character traits which more friendly observers would later interpret as the expression of Mises' consistency, incorruptibility, and intellectual (and political) courage. Mises himself recognized and defended his "intransigence," seeing himself as intransigent only in matters of science. "I always drew a sharp distinction between my scientific and political activity. In science, compromises are treason to truth. In politics, compromises are unavoidable.... In the Austria of the postwar period I was the economic conscience" (NR, 75).
Mises was able to use his prestige as a specialist in monetary economics to help stem, to some extent, the threat of disastrous inflation in Austria during the early twenties. "If it had not been for our passionate agitation against the continuation of the deficit and inflation policy, the crown in early 1922 would have fallen to one-millionth or one-billionth of its gold parity of 1892.... This catastrophe was avoided.... The Austrian currency did not collapse like the German currency in 1923.... Nevertheless, the country for many years had to suffer from the destructive consequences of continuous inflation."
Looking back at Mises' activities during these early years of the twenties, it seems altogether remarkable that, at the same time as he was involved in such dramatic political and policy activity, he should have been able to find the time, the patience, and the peace of mind to write the scholarly works which poured from his pen. Moreover, Mises maintained his university affiliation during these years, lecturing and leading his university seminar. In addition he led his own famed Privatseminar, which met every two weeks in his Chamber office. (This seminar, to which we shall refer again in chapter 2, attracted some of the finest young Viennese intellectuals. Some of these were to become world famous economists, historians, sociologists, or philosophers. They included F. A. Hayek, G. Haberler, F. Machlup, E. Voegelin, Alfred Schutz, Felix Kaufmann.) It is no surprise to read that, at least to his friends, Mises was seen, already in those years, as "the greatest living mind in Austria" (MYWM, 22).
The truth is that, although Mises would have much preferred a full professorship at the university-a position that would have permitted him to engage entirely in research and teaching-this opportunity was consistently denied him. Mises, admitted to the university as lecturer ("Privatdozent") in 1913, received the title of Associate Professor ("ausserordentliche Professor") in 1918, but never did obtain a full university professorship. Hayek tells us that Mises blamed this on anti-Semitism; but in his memoirs Mises makes no mention of any such "explanation." Instead, Mises writes: "I recognized rather early that as a classical liberal a full professorship at a university in German-speaking countries would always be denied me" (NR, 93). "A university professorship was closed to me inasmuch as the universities were searching for interventionists and socialists" (NR, 73). One of Mises' Vienna students, Dr. Fritz Kaufmann, referred to Mises' often being treated, in those years, with hostility. "This hostility was apparently the reason for the fact, otherwise hardly understandable, that he never became a full professor at the Vienna University, which he certainly would have deserved on the basis of his scientific and scholarly importance" (MYWM, 2nd ed., 202). Mises' influence at the university was limited, in particular, by the hostility of Hans Mayer (successor to the full professorship occupied earlier by Mayer's teacher, Friedrich von Wieser), who, at least in Mises' recollection, "occupied his time with ... mischievous intrigues against me."
It was in late 1925 that Mises first met Margit Sereny-Herzfeld, whom he was to marry some thirteen years later. She had been widowed several years previously, had earlier pursued a successful career as an actress in Germany, and was the mother of two young children. In her published recollections of her life with Mises, Margit von Mises included several letters which Ludwig von Mises sent to her in the years after they met. Clearly Mises had fallen deeply in love, and in fact proposed marriage to her in 1926. Mrs. Mises explained that soon after their engagement, Mises "grew afraid of marriage, the bond it would mean, the change that children would bring to a quiet home, and the responsibilities that might distract him from his work." "Lu thought of the task he had set himself, the tremendous work that was ahead of him, all the writing he wanted to do." He faced "the choice between his work and duty to his intellectual ideals on the one hand, and a life of love and affection on the other"(MYWM, 27).
The Years in Geneva
In her recollections (which she wrote in order "to reveal Ludwig von Mises as he really was: a great thinker, a great scholar, a great teacher-but still a lonely man with a great need for love and affection" [MYWM, 7]), Margit vividly describes the tense years in Vienna both prior and subsequent to the almost cataclysmic 1931 bankruptcy of the Credit Anstalt (a crash and the consequences of which Mises had predicted). She also opens up a window into Mises' human character and personality. These were turbulent years; Hitler's 1933 rise to power in Germany was to fatally endanger the independence of Austria. Mises was fully aware of the near inevitability of an eventual Nazi takeover. He had no illusions concerning the danger to his own safety. And indeed, later, on the very night in 1938 when the Germans marched into Vienna, they entered the apartment where Mises had lived with his mother and drove away with his library, writings, and documents in thirty-eight cases(MYWM, 35). No doubt this awareness was partly the explanation for the circumstance that, when in 1934 he was offered an opportunity to join the faculty of the Graduate Institute of International Studies in Geneva, Switzerland, he immediately accepted the offer. His departure for Geneva in October 1934 ended a major chapter (or several chapters) in his life and career, but was to open an entirely new series. By all accounts Mises' six years at the "Institut" (as he often referred to it) in Geneva brought him satisfaction and peace. "For me," he would write in his memoirs, "it was a liberation to be removed from the political tasks I could not have escaped in Vienna.... Finally, I could devote myself completely and almost exclusively to scientific problems" (NR, 137). In his preface to Human Action (1949), Mises would describe the "serene atmosphere of this seat of learning," in which he was able to write a major treatise on economics. It is not difficult to understand why, in Margit von Mises' assessment, "[he] never had been so happy as he was in Geneva"(MYWM, 54).
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