Ludwig von Mises

Ludwig von Mises
Ludwig Heinrich Edler von Mises
Austrian School
Ludwig von Mises.jpg
Born 29 September 1881(1881-09-29)
Lemberg, Galicia, Austria-Hungary (now Lviv, Ukraine)
Died 10 October 1973(1973-10-10) (aged 92)
New York City, New York, USA
Influences Bastiat, Böhm-Bawerk, Brentano, Husserl, Menger, Say, Turgot, Weber, Wieser
Influenced Allais, Anderson, Bauer, Block, Buchanan, Friedman, Hayek, Hazlitt, Hicks, Hoppe, Hutt, Kirzner, Lachmann, Lange, Paul, Raico, Rand, Reisman, Robbins, Rockwell, Rothbard, Salerno, Schiff, Schumpeter, Schutz, Sennholz, Simons, Smith

Ludwig Heinrich Edler von Mises (German pronunciation: [ˈluːtvɪç fɔn ˈmiːzəs]; September 29, 1881 – October 10, 1973) was an Austrian-American economist, historian, philosopher, author, and classical liberal who had a significant influence on the modern Libertarian movement and the Austrian School.

Contents

Biography

Coat of arms of Ludwig von Mises' great-grandfather, Mayer Rachmiel Mises, awarded upon his 1881 ennoblement by Franz Joseph I of Austria

Early life

Ludwig von Mises was born to wealthy Jewish parents in the city of Lemberg, in Galicia, Austria-Hungary (now Lviv in Ukraine). The family of his father Arthur Edler von Mises had been elevated to the Austrian nobility in the 19th century, and was involved in building and financing railroads. Ludwig's mother, Adele (née Landau), was a niece of Dr. Joachim Landau, a Liberal Party deputy to the Austrian Parliament.[1] Arthur was stationed there as a construction engineer with Czernowitz railway company. At the age of twelve Ludwig spoke fluent Yiddish, German, Polish, and French, read Latin, and could understand Ukrainian.[2] Mises was the older brother of the famous applied physicist Richard von Mises, a member of the Vienna Circle. Another brother, Karl von Mises, died as a child from scarlet fever.[citation needed] When Ludwig and Richard were children, his family moved back to their ancestral home of Vienna.

In 1900, he attended the University of Vienna,[3] becoming influenced by the works of Carl Menger. Mises' father died in 1903, and in 1906 Mises was awarded his doctorate from the school of law.

Professional life

In the years from 1904 to 1914, Mises attended lectures given by the prominent Austrian economist Eugen von Böhm-Bawerk. There, he developed friendships not only with Menger and Böhm-Bawerk, but also prominent sociologist Max Weber.[4] Mises taught as a Privatdozent at the Vienna University in the years from 1913 to 1934 while formally serving as secretary at the Vienna Chamber of Commerce from 1909 to 1934. In these roles, he became one of the closest economic advisers of Engelbert Dollfuss, the "austrofascist" but strongly anti-Nazi Austrian Chancellor,[5] and later to Otto von Habsburg, the Christian democratic politician and claimant to the throne of Austria (which had been legally abolished in 1918).[6] Friends and students of Mises in Europe included Wilhelm Röpke and Alfred Müller-Armack (influential advisors to German chancellor Ludwig Erhard), Jacques Rueff (monetary advisor to Charles de Gaulle), Lord Lionel Robbins (of the London School of Economics), and President of Italy, Luigi Einaudi.[7]

Economist and political theorist F. A. Hayek first came to know Mises while working as Mises' subordinate at a government office dealing with Austria's post-World War I debt. Hayek wrote, "there I came to know him mainly as a tremendously efficient executive, the kind of man who, as was said of John Stuart Mill, because he does a normal day's work in two hours, always has a clear desk and time to talk about anything. I came to know him as one of the best educated and informed men I have ever known..."[8] According to Mises' student Murray Rothbard, Hayek's development of Mises' theoretical work on the business cycle later earned Hayek the 1974 Nobel Memorial Prize in Economic Sciences (shared with Swedish economist Gunnar Myrdal).[9]

In 1934, Mises left Austria for Geneva, Switzerland, where he was a professor at the Graduate Institute of International and Development Studies until 1940. Fearing the prospect of Germany taking control over Switzerland, in 1940 along with other Jewish refugees Mises left Europe and emigrated to New York City.[10] There he became a visiting professor at New York University. He held this position from 1945 until his retirement in 1969, though he was not salaried by the university. Instead, businessmen such as Lawrence Fertig funded him and his work. For part of this period, Mises worked on currency issues for the Pan-Europa movement led by a fellow NYU faculty member and Austrian exile, Richard Coudenhove-Kalergi.[11] In 1947, Mises became one of the founding members of the Mont Pelerin Society. Despite fleeing Europe, Mises is credited for having a highly influential role in the economic reconstruction of Europe after World War II through his professional relationships with Ludwig Erhard, Charles de Gaulle and Luigi Einaudi.[12]

In America, Mises' work first influenced that of economists such as Benjamin Anderson, Leonard Read and Henry Hazlitt, but writers such as former radical Max Eastman, legal scholar Sylvester J. Petro, and novelist Ayn Rand were also among his friends and admirers. His American students included Israel Kirzner, Hans Sennholz, Ralph Raico, Leonard Liggio, George Reisman and Murray Rothbard.[13] Mises later received an honorary doctorate from Grove City College.

Despite his growing fame, Mises listed himself plainly in the New York phone directory and welcomed students into his home.[14] He retired from teaching at the age of 87, then the oldest active professor in America.[15] Mises died at the age of 92 at St. Vincent's hospital in New York. His body is buried at Ferncliff Cemetery, in Hartsdale, New York. Following his death, his entire library (and his personal desk) was donated to Hillsdale College where it is available for student and public use.

Contributions to the field of economics

Mises wrote and lectured extensively on behalf of classical liberalism and is seen as one of the leaders of the Austrian School of economics.[16] In his treatise on economics, Human Action, Mises introduced praxeology as a more general conceptual foundation of the social sciences and established that economic laws were only arrived at through the means of methodological individualism firmly rejecting positivism and materialism as a foundation for the social sciences. Many of his works, including Human Action, were on two related economic themes:

  1. monetary economics and inflation;
  2. the differences between government controlled economies and free markets.
Mises in his library

Mises argued that money is demanded for its usefulness in purchasing other goods, rather than for its own sake and that any unsound credit expansion causes business cycles. His other notable contribution was his argument that socialism must fail economically because of the economic calculation problem – the impossibility of a socialist government being able to make the economic calculations required to organize a complex economy. Mises projected that without a market economy there would be no functional price system, which he held essential for achieving rational and efficient allocation of capital goods to their most productive uses. If capital goods are the subject of neither rent nor exchange, as per private ownership of those means of production, then no barter terms or money prices can arise for them. Without the common nominal index of money pricing that allows comparison of costs of production to likely revenues, there can be no rational allocation of diverse capital goods in the production of diverse consumer goods whose production requires some use of scarce capital. In a socialist society, capital is not distributed according to the more efficient—thus profitable—capital structures, but rather to any use a theoretical socialist planner sees fit without the aid of monetary price signals to compare the profitability in a given use of capital.

According to Mises, socialism must fail, as demand cannot be known without prices. Therefore, socialist waste of capital goods is as chronic as the incentives for production and retention of capital are low, while capital goods are coercively monopolised by a dysfunctional State operating with only the data pertaining to interpersonal comparisons of utility, as per democratic production. These data are not sufficient for economic calculation, and therefore are not sufficient for efficient use and allocation of capital. Capital's place in a free market is ordained by the prices set by private owners of the means of production, who keep capital where its production is remunerated best by consumers, and who liquidate it and pass it to other uses if production is bankrupt. In socialism, such means for liquidation of capital goods, and the passage or maintenance of the means of production across extremely diverse applications throughout the divisions of labour according to the expense or cheapness of bidding capital away from vital production, is simply not present.

Mises' criticism of socialist paths of economic development is well-known, such as in his 1922 work Socialism: An Economic and Sociological Analysis:

The only certain fact about Russian affairs under the Soviet regime with regard to which all people agree is: that the standard of living of the Russian masses is much lower than that of the masses in the country which is universally considered as the paragon of capitalism, the United States of America. If we were to regard the Soviet regime as an experiment, we would have to say that the experiment has clearly demonstrated the superiority of capitalism and the inferiority of socialism.[17]

These arguments were elaborated on by subsequent Austrian economists such as Nobel laureate Friedrich Hayek[18] and students such as Hans Sennholz.

In Interventionism, An Economic Analysis (1940), Ludwig von Mises wrote:

The usual terminology of political language is stupid. What is 'left' and what is 'right'? Why should Hitler be 'right' and Stalin, his temporary friend, be 'left'? Who is 'reactionary' and who is 'progressive'? Reaction against an unwise policy is not to be condemned. And progress towards chaos is not to be commended. Nothing should find acceptance just because it is new, radical, and fashionable. 'Orthodoxy' is not an evil if the doctrine on which the 'orthodox' stand is sound. Who is anti-labor, those who want to lower labor to the Russian level, or those who want for labor the capitalistic standard of the United States? Who is 'nationalist,' those who want to bring their nation under the heel of the Nazis, or those who want to preserve its independence?

After the fall of the Soviet Union Robert Heilbroner, a lifelong advocate of socialism, said that "It turns out, of course, that Mises was right" about the impossibility of socialism. "Capitalism has been as unmistakable a success as socialism has been a failure. Here is the part that's hard to swallow. It has been the Friedmans, Hayeks, and von Miseses who have maintained that capitalism would flourish and that socialism would develop incurable ailments."[19]

Mises developed the theory of the 'sovereignty of the consumer' in a free-market economy; in his view, the consumer ultimately dictates everything that happens. This argument was set out in Human Action:

The captain is the consumer…the consumers determine precisely what should be produced, in what quality, and in what quantities…They are merciless egoistic bosses, full of whims and fancies, changeable and unpredictable. For them nothing counts other than their own satisfaction…In their capacity as buyers and consumers they are hard-hearted and callous, without consideration for other people…Capitalists…can only preserve and increase their wealth by filling best the orders of the consumers… In the conduct of their business affairs they must be unfeeling and stony-hearted because the consumers, their bosses, are themselves unfeeling and stony-hearted.[20]

The context does not suggest that Mises is trying here to denigrate the consumer society. On the contrary, he is describing the free-market economy as he believes that it naturally is and should be.

Criticism

Milton Friedman considered Mises inflexible in his thinking:

The story I remember best happened at the initial Mont Pelerin meeting when he got up and said, "You're all a bunch of socialists." We were discussing the distribution of income, and whether you should have progressive income taxes. Some of the people there were expressing the view that there could be a justification for it.

Another occasion which is equally telling: Fritz Machlup was a student of Mises's, one of his most faithful disciples. At one of the Mont Pelerin meetings, Fritz gave a talk in which I think he questioned the idea of a gold standard; he came out in favor of floating exchange rates. Mises was so mad he wouldn't speak to him for three years. Some people had to come around and bring them together again. It's hard to understand; you can get some understanding of it by taking into account how people like Mises were persecuted in their lives.[21]

Within the post-WW2, mainstream economics establishment, Mises suffered severe personal rejection: for example, in a 1957 review of his book The Anti-Capitalistic Mentality, The Economist said of von Mises: "Professor von Mises has a splendid analytical mind and an admirable passion for liberty; but as a student of human nature he is worse than null and as a debater he is of Hyde Park standard."[22] Conservative commentator Whittaker Chambers published a similarly negative review of that book in the National Review, stating that Mises's thesis that anti-capitalist sentiment was rooted in "envy" epitomized "know-nothing conservatism" at its "know-nothingest."[23] Economic historian Bruce Caldwell described Ludwig von Mises as the mid-20th century's "archetypal 'unscientific' economist."[24]

In a 1978 interview, Friedrich Hayek said about his book Socialism: "At first we all felt he was frightfully exaggerating and even offensive in tone. You see, he hurt all our deepest feelings, but gradually he won us around, although for a long time I had to -- I just learned he was usually right in his conclusions, but I was not completely satisfied with his argument." (Hayek's critique of Central Planning never incorporated Mises' fundamental insight that prices as an indicator of scarcity can only arise in monetary exchanges among responsible owners, a particular case of the universal economic law that value judgements are utterly dependent on property rights constraints)[25]

After his death, his wife quoted a passage that Mises had written about Benjamin Anderson, and said that it best described Mises' own personality: "His most eminent qualities were his inflexible honesty, his unhesitating sincerity. He never yielded. He always freely enunciated what he considered to be true. If he had been prepared to suppress or only to soften his criticisms of popular, but irresponsible, policies, the most influential positions and offices would have been offered him. But he never compromised."[26]

Bibliography

See also

Further reading

Notes

  • Note regarding personal names: Edler is a title, (<G, meaning 'noble'), in rank similar to that of a baronet, not a first or middle name. The female form is Edle. Similarly, below, Ritter is German for 'knight'; Graf is German for 'count'.
  1. ^ Hulsmann, Jörg Guido (2007). Mises: The Last Knight of Liberalism. Ludwig von Mises Institute. pp. 3–9. ISBN 193355018X. 
  2. ^ Erik Ritter von Kuehnelt-Leddihn, "The Cultural Background of Ludwig von Mises", The Ludwig von Mises Institute, page 1
  3. ^ Von Mises, Ludwig; Goddard, Arthur (1979). Liberalism: a socio-economic exposition (2 ed.). ISBN 0836251067. 
  4. ^ Mises, Ludwig von, The Historical Setting of the Austrian School of Economics, Arlington Houise, 1969, reprinted by the Ludwig von Mises Institute, 1984, p. 10, Rothbard, Murray, The Essential Ludwig von Mises, 2nd printing, Ludwig von Mises Institute, 1983, p. 30.
  5. ^ "The Free Market: Meaning of the Mises Papers, The". Mises.org. http://mises.org/freemarket_detail.aspx?control=137. Retrieved 2009-11-26. 
  6. ^ Mises, Margit von, My Years with Ludwig von Mises, Arlington House, 1976, 2nd enlarged edit., Center for Future Education, 1984.
  7. ^ Rothbard, Murray, Ludwig von Mises: Scholar, Creator, Hero, the Ludwig von Mises Institute, 1988, p. 67.
  8. ^ Mises, Margit von, My Years with Ludwig von Mises, Arlington House, 1976, 2nd enlarged edit., Center for Future Education, 1984, pp. 219-220.
  9. ^ Rothbard, Murray, Ludwig von Mises: Scholar, Creator, Hero, the Ludwig von Mises Institute, 1988, p. 68.
  10. ^ Hulsmann, Jorg Guido (2007). Mises: The Last Knight of Liberalism. Ludwig von Mises Institute. p. xi. ISBN 193355018X. 
  11. ^ Coudenhove-Kalergi, Richard Nikolaus, Graf von (1953). An idea conquers the world. London: Hutchinson. p. 247. 
  12. ^ Doherty, Brian, "Radicals for Capitalism", PublicAffairs, 2007, p.10.
  13. ^ On Mises' influence, see Rothbard, Murray, The Essential Ludwig von Mises, 2nd printing, the Ludwig von Mises Institute, 1983; on Eastman's conversion "from Marx to Mises," see Diggins, John P., Up From Communism Harper & Row, 1975, pp. 201-233; on Mises's students and seminar attendees, see Mises, Margit von, My Years with Ludwig von Mises, Arlington House, 1976, 2nd enlarged edit., Center for Future Education, 1984.
  14. ^ Reisman, George, Capitalism: a Treatise on Economics, "Introduction," Jameson Books, 1996; and Mises, Margit von, My Years with Ludwig von Mises, 2nd enlarged edit., Center for Future Education, 1984, pp. 136-137.
  15. ^ Rothbard, Murray, Ludwig von Mises: Scholar, Creator, Hero, the Ludwig von Mises Institute, 1988, p.61.
  16. ^ For example, Murray Rothbard, a leading Austrian school economist, has written that, by the 1920s, "Mises was clearly the outstanding bearer of the great Austrian tradition." Ludwig von Mises: Scholar, Creator, Hero, the Ludwig von Mises Institute, 1988, p. 25.
  17. ^ Socialism: An Economic and Sociological Analysis by Ludwig von Mises.
  18. ^ F. A. Hayek, (1935) who also wrote the introduction to "Socialism" and went on to author "The Nature and History of the Problem" and "The Present State of the Debate," in F. A. Hayek, ed. Collectivist Economic Planning, pp. 1-40, 201-43.
  19. ^ Reason.com, "The Man Who Told the Truth" Reason, 1990. Retrieved on April 4, 2009.
  20. ^ 'Human Action' chap. 15, sect. 4
  21. ^ "Best of Both Worlds (Interview with Milton Friedman)". Reason. June 1995. http://www.reason.com/news/show/29691.html. 
  22. ^ "Liberalism in Caricature", The Economist
  23. ^ Quoted in Sam Tanenhaus, Whittaker Chambers: A Biography, (Random House, New York, 1997), p. 500. ISBN 978-0-375-75145-5.
  24. ^ Caldwell, Bruce (2004). Hayek's Challenge. The University of Chicago Press. ISBN 978-0-226-09191-4. 
  25. ^ UCLA Oral History (Interview with Friedrich Hayek), American Libraries/Internet Archive, 1978. Retrieved on April 4, 2009 (Blog.Mises.org), source with quotes
  26. ^ Ludwig von Mises, Israel M. Kirzner, (Library of Modern Thinkers, 2001), page 31

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