Ludwig von Mises

• 1. Introduction

  ›

  Ludwig von Mises was born on the 29th of September 1881 in Lemberg, then the capital of the Kingdom of Galicia and Lodomeria inside the Austro-Hungarian Empire. By the time he died on the 10th of October 1973, he had outlasted two world wars, a Nazi raid on his apartment, and decades of near-total rejection by the mainstream economics profession. He was 92 years old. The archive of his papers runs to 20,000 pages.

  What drives a man to keep writing, keep arguing, keep holding seminars in his own apartment when the universities will not pay him? The answer lies somewhere in a motto Mises chose in high school, a line from Virgil that would later become the slogan of an institution built in his name: do not give in to evil, but proceed ever more boldly against it.

  This is the story of a thinker who believed that rational individual action, not central planning, is the only mechanism capable of coordinating the preferences of millions of people. He called that study praxeology, and he spent his entire adult life defending it against positivists, socialists, fascists, and even the students who admired him most.

• 2. Galicia and Early Formation

  ›

  Lemberg in the early 1880s was a city where Polish landed nobility, Ukrainian peasants, and the Austro-Hungarian bureaucracy met in an uneasy arrangement. A few months before Mises arrived, his paternal great-grandfather Mayer Rachmiel Mises had been ennobled, granting the family the honorific Edler and the right to attach the particle von to their name. The Mises family had built that position through financing and constructing railroads.

  Mises's mother Adele was a niece of Joachim Landau, a Liberal Party deputy to the Imperial Council of Austria. His father Arthur, who died in 1903, worked in Lemberg as a construction engineer for the Czernowitz Railway Company. His younger brother Richard would go on to become a mathematician, probability theorist, and member of the Vienna Circle.

  By the age of 12, Mises spoke fluent German, Polish, and French, could read Latin, and could understand Ukrainian. From 1892 to 1900 he was educated at the Akademisches Gymnasium in Vienna. His first major scholarly publication, written in 1902 while still a young man, examined the transition from feudalism to a liberal land-tenure system in Galicia between 1772 and 1848. The region stayed with him intellectually. He praised the historical Polish-Lithuanian Commonwealth as a precursor to modern classical liberalism for its decentralized power and resistance to absolute monarchy. He specifically singled out the Polish victory over the Bolsheviks in the 1920 Battle of Warsaw as a defense of Western civilization against Eastern despotism.

  At the University of Vienna, a book by Carl Menger titled Principles of Economics reshaped the direction of his studies. In 1906, he was awarded his doctorate from the school of law, a credential that would anchor a career of more than six decades.

• 3. Vienna, War, and the Seminar

  ›

  From 1904 to 1914, Mises attended lectures by the Austrian economist Eugen von Böhm-Bawerk. He started a career in Austria's financial administration, then left for a Vienna law firm. By early 1909 he had joined the Austrian Chamber of Commerce and Industry, where he served as economic advisor to the Austrian government until he left Austria in 1934.

  When war came, the government drafted him despite his being ideologically and morally opposed to it. He served as a front officer in the Austro-Hungarian artillery. He wrote only two small essays during those years. His Memoirs, written in 1940-41, describes how he coped: he returned to the Virgil motto he had chosen in high school and held it against the darkest hours of the fighting.

  Human Action, published in 1949, contains the most direct account he ever gave of what combat felt like. He wrote that it is not just that John is killed and Mark crippled for the rest of his life, while Paul returns home safe and sound and enjoys all the privileges accorded to veterans. He did not elaborate further. The brevity itself is a kind of statement.

  By 1913 he was a professor at the University of Vienna, mentoring Friedrich Hayek among others. He held that position until 1938. Alongside the academic role, he ran a private seminar in Vienna that attracted established economists and visiting scholars who happened to be passing through the city. Students who attended included Wilhelm Röpke, Alfred Müller-Armack (both of whom later advised German chancellor Ludwig Erhard), Jacques Rueff (monetary advisor to Charles de Gaulle), and Gottfried Haberler, who later held a professorship at Harvard. Leonid Hurwicz, who would receive the Nobel Memorial Prize in Economic Sciences in 2007, was also among those who knew Mises in Europe.

  In 1927, alongside Friedrich August von Hayek, Mises established the Austrian Institute for Business-Cycle Research, modeled after Ernst Wagemann's Berlin-based institute. That same year he published Liberalism, which laid out a positive vision of free society rooted in individual liberty, private property, and limited government coercion.

• 4. The Economic Calculation Problem

  ›

  In 1920, Mises published an essay titled "Economic Calculation in the Socialist Commonwealth." Its central claim was direct: rational economic activity is impossible in a socialist commonwealth. The argument rested on what happens to prices when there is no market. Central planners, Mises wrote, are deprived of the information about opportunity costs that is essential for making rational decisions about resource allocation. Without prices generated by voluntary exchange, there is no mechanism to translate the incomparable subjective valuations of millions of individuals into numbers that can be compared.

  He expanded the argument into a full book in 1922 with Socialism: An Economic and Sociological Analysis. The market price system, he argued, is an expression of praxeology and cannot be replicated by any form of bureaucracy.

  Mises revived and developed the term catallactics, drawn from the Greek word katallasso meaning to exchange or to reconcile. Where conventional economic analysis often asked what prices ought to be, catallactics asked only why a price exists at a particular level based on the interplay of supply and demand. Mises quoted himself directly on the underlying principle: economics is not about what ought to be, but about what is. He added that the ultimate decisions, the valuations and the choosing of ends, are beyond the scope of any science.

  He was also, by his own reckoning and by the account of later historians, a forerunner in the movement to connect microeconomics and macroeconomics by arguing that macroeconomic phenomena have microeconomic foundations. This perspective became widely adopted in mainstream economics nearly fifty years after he first advanced it.

  Friedrich Hayek, in a 1978 interview, described his first encounter with Mises's critique of 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 just learn he was usually right in his conclusions, but I was not completely satisfied with his argument. Tyler Cowen of George Mason University later described Socialism as still the best and also historically most important critique of socialism, ever.

• 5. Exile and New York

  ›

  On the day German forces entered Vienna during the Anschluss, they raided Mises's apartment, taking his papers and library. He was already in Geneva, where he had been a professor at the Graduate Institute of International Studies since 1934. The papers were believed lost or destroyed until Richard Ebeling and his wife Anna rediscovered them decades later in the Soviet archives in Moscow.

  With Nazi occupation threatening to isolate Switzerland within Axis-controlled territory, Mises and his wife Margit fled through France and reached the United States via Spain and Portugal. Margit had been a former actress and was the widow of Ferdinand Serény; she was also the mother of Gitta Sereny.

  They arrived in New York City in 1940. He came under a grant from the Rockefeller Foundation and received additional support from the William Volker Fund. He became a visiting professor at New York University, a position he held from 1945 until his retirement in 1969. The university did not pay him a salary. Lawrence Fertig, a businessman and libertarian commentator who sat on the New York University Board of Trustees, funded Mises and his work directly.

  At his New York University seminar and at informal meetings at his apartment, Mises attracted college and high school students who had heard of his European reputation. He gave carefully prepared lectures from notes. Murray Rothbard, who studied under him, rejected accounts of Mises as difficult or harsh. In Rothbard's words, Mises was unbelievably sweet, constantly finding research projects for students to do, unfailingly courteous, and never bitter about the discrimination he received at the hands of the economic establishment of his time.

  In 1949, he published Human Action: A Treatise on Economics. It laid out praxeology as the foundational methodology for the social sciences and restated his comprehensive critique of socialism, this time arguing that socialist economics treats a fundamentally open-ended coordination problem as if it were a solvable, static challenge akin to mathematics or engineering.

  He also studied currency issues for the Pan-Europa movement during this period, working alongside Richard von Coudenhove-Kalergi, the movement's leader and a fellow New York University faculty member and Austrian exile. In 1947, he became one of the founding members of the Mont Pelerin Society. He retired from teaching at the age of 87 and is buried at Ferncliff Cemetery in Hartsdale, New York.

• 6. Fascism and the Limits of Good Intentions

  ›

  In his 1927 book Liberalism, Mises wrote a passage about Italian fascism that has generated argument ever since. The passage reads: it cannot be denied that Fascism and similar movements aiming at the establishment of dictatorships are full of the best intentions and that their intervention has, for the moment, saved European civilization. The merit that Fascism has thereby won for itself will live on eternally in history. But though its policy has brought salvation for the moment, it is not of the kind which could promise continued success. Fascism was an emergency makeshift. To view it as something more would be a fatal error.

  Marxist scholars Herbert Marcuse and Perry Anderson, along with the German writer Claus-Dieter Krohn, accused Mises of writing approvingly of Italian fascism for its suppression of leftist elements. In 2009, economist J. Bradford DeLong and sociologist Richard Seymour repeated the accusation. Mises biographer Jörg Guido Hülsmann called such readings absurd, pointing to the full passage's insistence that fascism was a fatal error if treated as more than a temporary measure against Bolshevism.

  The same book continued: repression by brute force is always a confession of the inability to make use of the better weapons of the intellect. And in his 1922 book Socialism, Mises had already described Benito Mussolini as one of the most wretched figures of history.

  In 1944, in Omnipotent Government, Mises explicitly called on the Allies to smash Nazism and to fight desperately until the Nazi power is completely broken. His Notes and Recollections describe the personal dimension directly: the Nazis looted his library and collections, chased him out of his home country and off the continent, and left him with lost manuscripts from his Vienna years.

  A pattern runs through his writing that helps explain the passage's framing. Mises consistently refused to impute bad intentions to those he disagreed with, regardless of what their policies produced. He wrote at one point that many socialists are inspired by noble motives and most certainly believe they are serving the cause of moral progress. This was a rhetorical strategy as much as a philosophical position: he wanted to show that even well-intentioned central planning fails on its own terms, not because planners are corrupt but because the information problem is insurmountable. The same logic, applied to fascism, produced a sentence that reads as endorsement when lifted from the paragraph but reads as condemnation when held in full.

• 7. Praxeology and Its Critics

  ›

  Human Action built its entire analytical structure on a single axiom: humans engage in purposeful behavior to achieve desired ends. From that premise, Mises argued, economic laws could be derived through logic alone, without recourse to empirical data or mathematical modeling. He distinguished this from the natural sciences by pointing to what he saw as a fundamental asymmetry. Objects in nature react to stimuli according to regular patterns. Human beings, he wrote, do not: different individuals, and the same individual at various periods of his life, react to the same stimulus in a different way.

  He elaborated the argument across three books: Epistemological Problems of Economics in 1933, Theory and History in 1957, and The Ultimate Foundation of Economic Science in 1962. In the last of these, he wrote: man alone has the faculty to build a purpose and to aim at its realization. Stones are moved by an impulse from outside. Animals, in their behavior, follow the impulses of their senses and appetites. Man is the only being who can control his impulses and passions, who can suppress a natural inclination and act contrary to it.

  The economics mainstream disagreed. Economic historian Bruce Caldwell wrote that by the mid-20th century, with the ascendance of positivism and Keynesianism, Mises came to be regarded by many as the archetypal unscientific economist. In 1957, a review in The Economist said he had a splendid analytical mind and an admirable passion for liberty but was as a student of human nature worse than null. Scholar Scott Scheall identified economist Terence Hutchison, starting with his 1938 book The Significance and Basic Postulates of Economic Theory, as the most persistent critic of Mises's apriorism.

  Even Friedrich Hayek, in a 1978 interview conducted after Mises's death, said he never could accept the almost eighteenth-century rationalism in Mises's argument. Hayek had earlier, in The Counter-Revolution of Science, argued for a more pluralistic approach to economic inquiry and was skeptical of purely deductive methodologies, though he did not name praxeology directly.

  Milton Friedman offered a characteristically personal account of Mises's inflexibility. At the first Mont Pelerin meeting, Friedman recalled, Mises stood up during a discussion about income distribution and declared: you're all a bunch of socialists. When his former student Fritz Machlup gave a talk questioning the gold standard and favoring floating exchange rates, Mises refused to speak to Machlup for three years. Friedman attributed this rigidity partly to the persecution Mises had endured throughout his life.

  Mises's widow Margit, after his death, quoted a passage he had written about economist Benjamin Anderson. She said it best described his 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.

  Mises himself acknowledged, by the time of his later writings, that many core Austrian concepts had been absorbed into mainstream economics. Marginal utility, opportunity cost, and the importance of subjective value had become widely accepted. He noted that the label Austrian had become more of a historical reference than a marker of a distinct contemporary doctrine. What remained genuinely separate was praxeology's rejection of empirical methods, and that divide has not closed. Most mainstream economists continue to view the approach as lacking empirical validation and testability, making it a minority tradition within the broader discipline.

• 8. Legacy and the Mises Institute

  ›

  The Mises Institute was founded in 1982 by Lew Rockwell, Burton Blumert, and Murray Rothbard, nine years after Mises's death. Its founding followed a split between Rothbard and the Cato Institute, of which Rothbard had been one of the original founders. Ron Paul provided funding for the new organization. It is located in Alabama, and its motto is the Virgil quotation Mises had carried since high school.

  The institution publishes thousands of free books in e-book and audiobook format, including works by Mises, Rothbard, Hans-Hermann Hoppe, and other economists in the Austrian tradition. It also runs summer seminars.

  The 20,000-page archive of Mises's papers and unpublished works is housed at Grove City College, which also awarded him an honorary doctorate in 1957. New York University awarded him an honorary doctorate in 1963 and the University of Freiburg in Germany did so in 1964. The University of Vienna honored his original doctorate on its 50th anniversary in 1956, renewing it according to European tradition. In 1962 the Austrian government awarded him the Austrian Decoration for Science and Art, presented at the Austrian Embassy in Washington, D.C. In 1969 the American Economic Association cited him as Distinguished Fellow.

  Mises's personal library was bequeathed in his will to Hillsdale College. His influence reached scholars who went on to found or shape major institutions: Murray Rothbard and the development of anarcho-capitalist philosophy; Peter Boettke, who leads the contemporary Austrian economics program at George Mason University; and Friedrich Hayek, whose 1951 essay The Transmission of the Ideals of Freedom pays direct tribute to Mises's influence on the 20th-century libertarian movement. Tyler Cowen's assessment, written decades after Mises's death, placed the economic calculation articles among the most important economics articles ever written. Israel Kirzner, another of Mises's students, helped inspire the rise of postwar libertarian institutions including the Foundation for Economic Education.