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_____. The Historical Setting of the Austrian School of Economics. Auburn, Ala.: Ludwig von Mises Institute, [1969] 1984.

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_____. Socialism: An Economic and Sociological Analysis. London: Jonathan Cape, 1936. Reprinted Indianapolis: Liberty Fund, 1981.

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_____. Theory and History: An Interpretation of Social and Economic Evolution. New Haven, Conn.: Yale University Press, 1957.

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Footnotes

Chapter 1: Roots

¹ On the Mises family, see in particular the 1881 Adelsakt (Ennoblement Act) for Meyer (or Mayer) Rachmiel Mises, Österreichisches Staatsarchiv. See also Österreichisches Biographisches Lexikon 1815–1950 (Vienna: Verlag der Österreichischen Akademie der Wissenschaften, 1975), vol. 6.

² The “Kingdom of Galicia and Lodomeria” had not existed before the division of Poland. The Habsburgs chose this name as a quasi-historical justification of the annexation. In the late Middle Ages, the Hungarian King Andrew had been a Rex Galiciae et Lodomeriae, that is, a king of the old Ruthenian principalities of Halitsch and Wladimir. See Isabel Röskau-Rydel, “Galizien, Bukowina, Moldau,” in idem, Deutsche Geschichte im Osten Europas: Galizien, Bukowina, Moldau (Berlin: Siedler, 1999), pp. 11, 16.

³ In 1918, Galicia fell back to Poland, and today Lemberg and the adjacent lands belong to Ukraine. Other historical names of Lemberg were Lviv, Lwow, Lvov, Leopoli, L'wiw, L'vov, Lwiw, Leopolis, L'viv.

⁴ In 1848, the Galician population totalled 5.2 million. Among them were 2.2 million Roman Catholics (essentially Poles, but also Germans), 2.2 million Greek Catholics (Ruthenians), 333,000 Greek Orthodox, and 333,000 Jews. The city of Lemberg had some 63,000 residents in 1840, of which 30,000 were Roman Catholics, 4,500 Greek Catholics, and 25,000 Jews. See Röskau-Rydel, “Galizien, Bukowina, Moldau,” p. 48.

⁵ See Cyprian Pogonowski, Jews in Poland (New York: Hippocrene Books, 1993). Jews were evicted from England (1290), France (1306), Croatia (1349), Crimea (1350), Hungary (1360), Germany, Bohemia, Italy and Provence (1394), Austria (1421), Spain (1497), Estonia and Latvia (1495), and Portugal (1497); see ibid., p. 275.

⁶ Erik von Kuehnelt-Leddihn, The Cultural Background of Ludwig von Mises (Auburn, Ala.: Ludwig von Mises Institute, 1999), p. 2.

⁷ The Jewish community in Krakow had remained pro-Polish under orthodox religious leadership. In Lemberg, by contrast, the pro-German secular faction had its way. See Röskau-Rydel, “Galizien, Bukowina, Moldau,” pp. 88f., 145.

⁸ Heinrich Graetz, History of the Jews (Philadelphia: Jewish Publishers, 1895), vol. 5, p. 612.

⁹ Röskau-Rydel, “Galizien, Bukowina, Moldau,” pp. 27–29.

¹⁰ See Rudolf Sieghart, Die letzten Jahrzehnte einer Grossmacht (Berlin: Ullstein, 1932), pp. 334f.

¹¹ In 1880, there were some 324,000 Galicians whose first language was German; in 1910, only some 90,000 were left. Thus even at its high point, the Germanization movement had a weak numerical impact in the part of Poland annexed by the house of Habsburg. The main reason was that most of the new settlers were Catholics and were therefore integrated into the existing Polish parishes and schools. See Röskau-Rydel, “Galizien, Bukowina, Moldau,” pp. 88f., 130, 152.

¹² It seems that railroad construction was a spin-off of Jewish initiatives to promote the industrialization of Austria. Thus William Johnston states that a few years after 1831, “Salomon Rothschild persuaded Metternich to promote industrialization in the Habsburg domains.” William M. Johnston, Vienna, Vienna—The Golden Age, 1815–1914 (Milan: Arnoldo Mondadori, 1981), p. 29.

¹³ See Alois Gratz, “Die österreichische Finanzpolitik,” Hans Mayer, ed., Hundert Jahre österreichische Wirtschaftsentwicklung, 1848–1948 (Vienna: Springer, 1949), pp. 254f.

¹⁴ They married on October 17, 1880. See the marriage certificate in the Grove City Archive: file #6/9/1/1. Witnesses were Fischel Landau (Adele's father) and Isidor Nirenstein.

¹⁵ Röskau-Rydel, “Galizien, Bukowina, Moldau,” pp. 70, 147. Joachim Landau was the brother of Ludwig von Mises's grandfather on the maternal side. See Mises, Erinnerungen (Stuttgart: Gustav Fischer Verlag, 1978), p. 20. Ludwig's grandmother on the maternal side was a Kallir, his grandfather a Landau.

¹⁶ On Hermann von Mises, see the entry in Österreichisches Biographisches Lexikon, 1815–1950 (Vienna: Verlag der österreichischen Akademie der Wissenschaften), vol. 6, p. 317.

¹⁷ There seems to have been an oil boom in what came to be called the “Galician Pennsylvania”—Hermann's election district around Drohobycz, an area southwest of Lemberg. At the turn of the nineteenth and twentieth century, Galicia was the number four producer of petroleum worldwide, after Russia, the United States, and the Dutch East Indies. See Balduin Winter, “Die Rückkehr zum Kind. Wirklichkeit ist mehr als Realität. Drohobycz, die Heimat des Dichters und Traumtänzers Bruno Schulz im vergessenen Europa,” Die Ost-West-Wochenzeitung (literature section; March 30, 2001).

¹⁸ Jews were expelled from Vienna under Leopold I in 1669–1670. A few years later these measures were rescinded rather half-heartedly, and so things remained as in 1670. As far as Maria Theresa is concerned, cultural historian Robert Kann states:

Within the first five years of Maria Theresa's reign the Jews were driven out of Bohemia (1745), and less than three years before her death, less than five years before Joseph II issued the famous Toleranzpatent, in 1777 she wrote these words: “‘In the future no Jew shall be allowed to remain in Vienna without my special permission.” (Robert A. Kann, A Study in Austrian Intellectual History: From Later Baroque to Romanticism [New York: Praeger, 1960], p. 158)

¹⁹ Röskau-Rydel, “Galizien, Bukowina, Moldau,” p. 68.

²⁰ On Meyer Rachmiel Mises, see the entry (Mises, Majer Jerachmiel von) in Österreichisches Biographisches Lexikon, 1815–1950, vol. 6, pp. 317f.

²¹ These activities must have played a decisive role in his eventual ennoblement. Throughout Franz Joseph's reign, contributions to public objectives or the creation of public-welfare oriented funds were instrumental in the ennoblement of wealthy industrialists, merchants, or bankers. See Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 256.

²² Röskau-Rydel, “Galizien, Bukowina, Moldau,” pp. 73f. Graetz remarks,

[I]n almost every large community, there arose a party of the “Enlightenment” or “the Left,” which had not yet broken with the old school, but whose action bordered upon secession. By the ultra-orthodox they were denounced as heretics, on account of their preference for pure language and form, both in Hebrew and European literature. (Graetz, History of the Jews, vol. 5, p. 403)

²³ Röskau-Rydel, “Galizien, Bukowina, Moldau,” p. 91. The petition had been initiated by the Polish politicians Smolka, Ziemalkowski, and Kulczycki. It also demanded the introduction of the Polish language in public schools and civil service.

²⁴ Anselm von Rothschild's son Albert became a general counselor to the Austro-Hungarian bank and was commonly regarded as the key figure in the Austrian financial market. It is likely that his father played a similar though less publicized role in the National bank.

²⁵ Hirsche Mises was married to a member of the Nirenstein family, Marie Nirenstein. See Grove City Archive: file #6/9/1/1.

²⁶ Two of his daughters were still living in 1881: Stella Klarmann and Elise Bernstein.

²⁷ Röskau-Rydel, “Galizien, Bukowina, Moldau,” p. 147.

²⁸ See Gratz, “Die österreichische Finanzpolitik,” p. 255.

²⁹ Ibid., pp. 270f.

³⁰ Other family members had followed in the same path. By the 1890s at least three of Arthur's brothers and cousins—Emil, Felix, and Hermann—had left for Vienna, too. Felix was a chief physician at the Vienna general hospital, and Hermann was a reputable journalist and politician.

³¹ Johnston, Vienna, Vienna, p. 200.

³² Charitable works were a quintessential part of her upbringing. See her autobiographical recollections in Adele von Mises, “A Day in the House of My Parents,” Tante Adele erzählt (unpublished manuscript, 1929). The chapter has been translated and put online by John Kallir.

³³ Ludwig was a rigorous bookkeeper throughout his life. He kept track of his income and daily expenditure in a personal ledger.

³⁴ On his training in these sports see Margit von Mises, My Years with Ludwig von Mises (Cedar Falls, Iowa: Center for Futures Education, 1978), p. 20.

³⁵ About the typical German economist he wrote:

Such study of “economic state science” necessarily repelled young people with intelligence and thirst for knowledge. Instead, it strongly attracted simpletons.... They were dilettantes in everything they undertook. They pretended to be historians, but they scarcely looked at the collaborative sciences, which are the most important tools of the historian. The spirit of historical research was alien to them. They were unaware of the basic mathematical problems in the use of statistics. They were laymen in jurisprudence, technology, banking, and trade techniques. With amazing unconcern they published books and essays on things of which they understood nothing. (Mises, Erinnerungen, pp. 7, 67f.; Notes and Recollections [Spring Mills, Penn.: Libertarian Press, 1978], pp. 7, 102)

³⁶ Johnston, Vienna, Vienna, p. 200.

Chapter 2: School Years

¹ Carl E. Schorkse, Fin-de-siècle Vienna (New York: Knopf, 1980), p. 6.

² Roman classicism for the lower chamber, the Abgeordnetenhaus, Greek classicism for the upper chamber, the Herrenhaus.

³ Until the 1890s, Vienna counted barely more than 60,000 inhabitants. Felix Somary recalls: “Everything outside the centre was known as ‘Vorstadt’—the suburbs—which almost meant the same as ‘provinces’.” Felix Somary, The Raven of Zurich: The Memoirs of Felix Somary (London: Hurst & Co., 1960), p. 1. After 1900 a municipal reform merged Vienna with its proximate suburbs. The old Vienna thereafter became the first district of the new city.

⁴ By comparison, it takes more than two hours of walking to cross Paris within the Boulevard Périphérique, and it takes roughly the same time to walk through the city of London.

⁵ William M. Johnston, Vienna, Vienna—The Golden Age, 1815–1914 (Milan: Arnoldo Mondadori, 1981), p. 104. Johnston observes that even simple members of the opera or Philharmonic orchestras were greeted in public and that “many of them performed chamber music in the salons of the wealthy.”

⁶ Schorkse, Fin-de-siècle Vienna, p. xxvii.

⁷ On Vienna café culture, see Gustav Gugitz, Das Wiener Kaffeehaus. Ein Stück Kultur- und Lokalgeschichte (Vienna: Deutscher Verlag für Jugend und Volk, 1940). On the role of cafés in the education of young intellectuals see Stefan Zweig, Die Welt von Gestern—Erinnerungen eines Europäers (Frankfurt a.M.: Gustav Fischer, 1988), pp. 56f.

⁸ Mises, Erinnerungen (Stuttgart: Gustav Fischer Verlag, 1978), p. 4; Notes and Recollections (Spring Mills, Penn.: Libertarian Press, 1978), p. 2.

⁹ Mises, Erinnerungen, p. 4; Notes and Recollections, p. 2.

¹⁰ Johnston, Vienna, Vienna, p. 20:

The concentration of the supreme genius of Haydn, Mozart, Beethoven, and Schubert in one city over two generations has no parallel in the entire history of culture. The closest parallel would be the Rome of Raphael and Michelangelo, or the Athens of Sophocles and Euripides. Yet in no other art do the greatest geniuses so outstrip lesser creators as in musical composition.

¹¹ Ibid., p. 104.

¹² William Johnston observes that the majority of great “Viennese” pioneers had been born outside of Vienna. See ibid., p. 198.

¹³ Heinrich Graetz reports that the first cautious steps toward Jewish integration into Viennese social life were undertaken when Fanny Itzig, a Jewish woman from Berlin (that is, from the Mendelssohn circle) moved to Vienna in the 1780s and opened a brilliant salon. See Heinrich Graetz, History of the Jews (Philadelphia, 1895), vol. 5, pp. 413f.

¹⁴ See Israel Shahak, Jewish History, Jewish Religion (London: Pluto Press, 1994).

¹⁵ Johnston, Vienna, Vienna, p. 200.

¹⁶ Ibid., p. 98:

[T]he paper took an increasingly pro-German and anti-Slav stand. Under its mentor and editor Moritz Benedikt (1849–1920), it fanned anti-Slav feelings among Austro-Germans. It lauded the post-1880 alliance with Germany, and in 1914 positively welcomed war as an ally of Wilhelm II.... The Neue Freie Presse resembled the liberal bourgeoisie who read it: exquisite taste in culture accompanied by naivete in politics.

¹⁷ See her recollections, Adele von Mises, “A Day in the House of My Parents,” Tante Adele erzählt (unpublished manuscript, 1929). Graetz mentions one “great rabbi Landau” as condemning the study of philosophy and science. See Graetz, History of the Jews, vol. 5, p. 402.

¹⁸ What Schorske says about Theodor Herzl, the founder of the Zionist movement, also applies to Ludwig von Mises:

When Theodor was born in 1860, his family was well out of the ghetto: economically established, religiously “enlightened,” politically liberal, and culturally German. Their Judaism amounted to little more than what Theodor Gomperz, the assimilated Jewish classicist, liked to call “un pieux souvenir de famille.” (Schorkse, Fin-de-siècle Vienna, p. 147)

Schorske's parents even liked to call his bar mitzvah his “Konfirmation.”

¹⁹ Zweig, Die Welt von Gestern, p. 17. Zweig was born in the same year as Mises, 1881, and also was a Jewish intellectual whose family had settled in Vienna only recently. Zweig's testimony is therefore representative of experiences and sentiments of the milieu in which Mises spent his childhood.

²⁰ Johnston, Vienna, Vienna, p. 17. Newspaper censorship continued in force until after 1900 (see ibid., p. 97).

²¹ The expression is Stefan Zweig's.

²² Why had Franz's police state tamed the Viennese more than the provincials? Johnston gives this explanation:

Vienna suffered far more harshly from censorship and police surveillance than any other region of the Habsburg Empire. In the days before the electric telegraph and the railroad, it was nearly impossible to harass a hinterland as effectively as a capital city.... At no other time since Maria Theresa centralised Austrian administration did the provinces compete so successfully with the capital in cultural prominence as during the Biedermeier period. (Johnston, Vienna, Vienna, pp. 17f.)

²³ Erik von Kuehnelt-Leddihn, The Cultural Background of Ludwig von Mises (Auburn, Ala.: Ludwig von Mises Institute, 1999), p. 3.

²⁴ Ibid.

²⁵ Detailed information on the classes taught at Mises's school is contained in Jahres-Bericht über das k.k. Akademkische Gymnasium in Wien für das Schuljahr 1899/1900 (Vienna: Verlag des k.k. Akademkischen Gymnasiums, 1900) and the annual reports for the previous years.

²⁶ Virgil, The Aeneid, VI, 95.

²⁷ Mises, The Anti-Capitalistic Mentality (Princeton, N.J.: Van Nostrand, 1956), pp. 93–94. Mises argued:

The liberty which the Greek statesmen, philosophers and historians glorified as the most precious good of man was a privilege reserved to a minority. In denying it to metics and slaves they virtually advocated the despotic rule of a hereditary caste of oligarchs. Yet it would be a grave error to dismiss their hymns to liberty as mendacious. They were no less sincere in their praise and quest of freedom than were, two thousand years later, the slave-holders among the signers of the American Declaration of Independence. (p. 93)

And he went on:

The passionate endeavors to eliminate the classical studies from the curriculum of the liberal education and thus virtually to destroy its very character were one of the major manifestations of the revival of the servile ideology. (p. 94)

For a diametrically opposed assessment of the relationship between classical literature and liberty see Frédéric Bastiat, “Baccalauréat et socialisme,” Oeuvres completes (2nd ed., Paris: Guillaumin, 1863), vol. 4, pp. 442–503. Bastiat argues in particular that the classics have bequeathed to us the notion that society is a purely conventional construct, as well as the idea that legislation could fabricate society according to just any design.

²⁸ Johnston, Vienna, Vienna, p. 97. The other reformers were the professors Franz Bexner and Hermann Bonitz.

²⁹ Königlich preussische Akademie der gemeinnützigen Wissenschaften.

³⁰ Eugen Guglia, Das Theresianum in Wien (Vienna: Schroll, 1912). Somary, The Raven of Zürich.

³¹ Schorske, Fin-de-siècle Vienna, p. 135; Karl Kautsky, Erinnerungen und Erörterungen (The Hague: Mouton, 1960), p. 211.

³² Rudolf Sieghart, Die letzten Jahrzehnte einer Grossmacht (Berlin: Ullstein, 1932), pp. 15f.

³³ Johnston, Vienna, Vienna, p. 217.

³⁴ See Margit von Mises, My Years with Ludwig von Mises (Cedar Falls, Iowa: Center for Futures Education), p. 15.

³⁵ See Mises, Erinnerungen, p. 3. There he states: “As an Austrian it was not difficult for me to realize the overtones of these writers. And I soon discerned the method of their analysis, which had rudely been called the falsification of history.” Mises, Notes and Recollections, p. 3. See also Margit von Mises, My Years with Ludwig von Mises, p. 15.

³⁶ Lew Rockwell, “Heart of a Fighter,” The Free Market 23, no. 7 (2005): 4f.

³⁷ See Rudolf A. Métall, Hans Kelsen (Vienna: Verlag Franz Deuticke, 1968), p. 4.

³⁸ Many years later, he had nothing favorable to say about the neo-Kant-ian movement (in particular Cohen and Natorp), which blossomed at the turn of the century. He said it was an era of decline and neo-Kantianism was its philosophical reflection. See Mises to Lachmann, letter dated October 11, 1956; Grove City Archive: Lachmann file.

³⁹Jahres-Bericht über das k.k. Akademische Gymnasium in Wien für das Schuljahr 1899/1900, p. 13. The written part of the exam also included mathematics and geometry (requiring among other things that he deliver a mathematical proof for a geometric theorem), as well as translations. Mises had to translate from Latin into German, from German into Latin, and from Greek into German.

⁴⁰ Mises, Theory and History (New Haven, Conn.: Yale University Press, 1957), pp. 293–94.

⁴¹ Mises, “Eugen von Böhm-Bawerk and the Discriminating Reader,” The Freeman (August 1959).

⁴² Sieghart, Die letzten Jahrzehnte einer Grossmacht, pp. 377ff.

⁴³ The Austrian Reichsrat voted a new constitution on December 21, 1867. On the Ausgleich see, in particular, ibid., pp. 111ff.

⁴⁴ This concerned in particular Slovaks and Romanians. The “Kingdom of Croatia and Slavonia” was also part of Hungary, but it was relatively autonomous.

⁴⁵ They were pressing these demands on their legal representative, the King of Hungary. This king was of course Franz Joseph himself.

⁴⁶ Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 113.

⁴⁷ Support for the Ausgleich came from the Poles and the Italians. Both nations were settled predominantly in areas where they had the economic and political power, but were numerically inferior to other local nations (Ruthenians, southern Slavs).

⁴⁸ This was one of the stipulations of an agreement of seven governments at a congress in Berlin in August 1878. The Berlin Congress dealt with territorial questions in southeastern Europe and the Middle East. It was prompted by a crushing Russian victory over Turkey and signed by these two states, as well as by the governments of Austria-Hungary, Germany, France, England, and Italy.

⁴⁹ Johnston, Vienna, Vienna, p. 8.

⁵⁰ The greatest problem of this stance was that the traditional political territories (the “kingdoms and lands”) did not have nationally homogeneous populations. Except for some of the Alpine regions, all these traditional territories hosted at least two nationalities, often more.

⁵¹ Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 391.

⁵² Somary, The Raven of Zurich, p. 11. He goes on to observe:

The leaders of our modern great empires are driven rapidly in bullet-proof cars, protected by countless bodyguards. Aristotle thus defined the difference between a monarch and a tyrant: the monarch protects his people, the tyrant has to protect himself from them.

⁵³ Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 210.

⁵⁴ Somary, The Raven of Zurich, p. 10.

⁵⁵ These figures are taken from Johnston, Vienna, Vienna, pp. 199f.

⁵⁶ Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 311.

⁵⁷ Georg Franz has argued that the rising Austro-Jewish establishment was instrumental in promoting a homegrown brand of classical-liberal doctrine. See Franz, Liberalismus—Die deutschliberale Bewegung in der habsburgischen Monarchie (Munich: Callwey, 1955), pp. 145–220, 439.

⁵⁸ Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 348.

⁵⁹ On Adler see Karl R. Stadler, “Victor Adler,” Tausend Jahre Österreich, Walter Pollack, ed. (Vienna: Verlag Jugend und Volk, 1974), vol. 3, pp. 50ff. Kautsky distinguished himself by advocating a determinist brand of Marxism, that is, he believed that Marx had discovered strict laws of social evolution. Capitalism necessarily led to socialism and communism, and it was therefore devoid of sense to try to “push” things through violent overhaul. Norbert Leser argued that Kautsky thereby exercised a nefarious influence on Austrian socialism. Kautsky's determinist views spread fatalism and paralyzed the activities of socialist “practitioners.” See Norbert Leser, “Otto Bauer— Friedrich Adler—Max Adler,” in ibid., p. 256.

⁶⁰ Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 351. (German pronunciation of the letter “k” renders the epithet identical to international slang for excrement.)

⁶¹ Somary, The Raven of Zurich, p. 7.

⁶² Rechts- und staatswissenschaftliche Fakultät der k.k. University of Vienna.

⁶³ According to his 1941 U.S. “Affidavit of Identity and Nationality,” see Grove City Archive: Mexico 1942 files.

Chapter 3: Alma Mater Rudolphina

¹ The very expression “academic freedom” is in fact a term translated from the German. See Erik von Kuehnelt-Leddihn, The Cultural Background of Ludwig von Mises (Auburn, Ala.: Ludwig von Mises Institute, 1999), p. 3.

² Appointments of professors had to be approved by the emperor, as with other high civil servants. See William M. Johnston, Vienna, Vienna—The Golden Age, 1815–1914 (Milan: Arnoldo Mondadori, 1981), p. 97.

³ On the University of Vienna see Rudolf Kink, Geschichte der kaiserlichen Universität zu Wien, 2 vols. (Vienna: Gerold, 1854); Franz Gall, Alma Mater Rudolphina 1365–1965—die Wiener Universität und ihre Studenten (Vienna: Austria Press, 1965).

⁴ The exact name of his chair was Lehrstuhl für Polizei und Kameralwissenschaften. On Sonnenfels see Robert A. Kann, A Study in Austrian Intellectual History: From Later Baroque to Romanticism (New York: Praeger, 1960), pp. 153ff.; see also Hans Tietze, Die Juden Wiens (Vienna & Leipzig: Tal, 1933), pp. 107ff.

⁵ The two phases had nothing to do with our present-day distinction between undergraduate studies and graduate studies. As Kuehnelt-Leddihn points out, in Mises's day, Continental universities had no undergraduates— “they were graduate schools pure and simple.” Kuehnelt-Leddihn, The Cultural Background of Ludwig von Mises, p. 3.

⁶ Rudolf Sieghart, Die letzten Jahrzehnte einer Grossmacht (Berlin: Ullstein, 1932), pp. 115ff.

⁷ Kuehnelt-Leddihn, The Cultural Background of Ludwig von Mises, p. 3.

⁸ At the turn of the century, several hundred thousand Czechs lived in Vienna. See Johnston, Vienna, Vienna, p. 200.

⁹ Luwig von Mises, Erinnerungen (Stuttgart: Gustav Fischer, 1978), p. 13.

¹⁰ It is likely that in this first phase of his studies he attended a class of Karl Theodor von Inama-Sternegg on medieval economic history. Inama-Sternegg was an old rival of Carl Menger's. Already in 1879, then still under the leadership of Lorenz, the department of law and government science had supported his attempt to gain the chair of political economy that eventually went to Menger. Inama-Sternegg was an economic historian through and through. His main field of research was German economic history from the late ninth to the sixteenth century. See K.T. von Inama-Sternegg, Deutsche Wirtschaftsgeschichte, 4 vols. (Leipzig: Duncker & Humblot, 1879–1901).

¹¹ Mises, Entwicklung des gutsherrlich-bäuerlichen Verhältnisses in Galizien (1772—1848), Eduard Bernatzik and Eugen von Philippovich, eds., Wiener staatswissenschaftliche Studie 4, no. 2 (Vienna & Leipzig: Deuticke, 1902): vi + 144. After him, some of his fellow students and friends published research in the same series. See for example, Karl Pribram, Der Lohnschutz des gewerblichen Arbeiters nach österreichischem Recht (1904); Hans Kelsen, Die Staatslehre des Dante Alighieri (Vienna: Deuticke, 1906); Alfred Amonn, Objekt und Grundbegriffe der theoretischen Nationalökonomie (Vienna: Deuticke, 1911).

¹² See in particular Georg Knapp, Die Bauernbefreiung und der Ursprung der Landarbeiter in den älteren Teilen Preussens, 2 vols. (Leipzig: Duncker & Humblot, 1887); see also Knapp, Die Landarbeiter in Knechtschaft und Freiheit (Leipzig: Duncker & Humblot, 1891). This is the same Knapp who today is better known among economists for his Staatliche Theorie des Geldes (Government approach to the theory of money) (Leipzig: Duncker & Humblot, 1905). We will discuss Knapp's work in our presentation of Mises's theory of money.

¹³ See C. Grünberg, Die Bauernbefreiung und die Auflösung des gutsherrlich-bäuerlichen Verhältnisses in Böhmen, Mähren und Schlesien, 2 vols. (Leipzig: Duncker & Humblot, 1893–1894).

¹⁴ Some years later, a young man by the name of Leo Fishman (Fischmann) wrote on peasant liberation in central Austria (Inneroesterreich). See Fishman to Mises, letter dated November 11, 1950; Grove City Archive: “F” file.

¹⁵ Mises, Notes and Recollections (Spring Mills, Penn.: Libertarian Press, 1978), p. 6.

¹⁶ In Eastern Galicia (the area around Lemberg), the Ruthenians represented two thirds of the population, whereas the nobility was almost exclusively Polish. See Isabel Röskau-Rydel, “Galizien, Bukowina, Moldau,” in idem, Deutsche Geschichte im Osten Europas: Galizien, Bukowina, Moldau (Berlin: Siedler, 1999), p. 49.

¹⁷ Mises, Entwicklung des gutsherrlich-biiuerlichen Verhältnisses in Galizien (1772–1848), p. 79.

¹⁸ Ibid., p. 114.

¹⁹ Ibid., pp. 104f.

²⁰ August Rodakiewicz, Die galizischen Bauern unter der polnischen Republik: eine agrarpolitische Untersuchung (Brünn: Rohrer, 1902). In the same year, he published some results of this work in an article for Eugen von Böhm-Bawerk's Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung 11 (1902): 153ff.

²¹ Mises Archive 107: 26f.

²²Schmoller's Jahrbuch 28 (1): 374–79; see Mises Archive 107: 28ff.

²³ Mises Archive 50.

²⁴ k.u.k. Divisions Artillerie Regiment Nr. 6; k.u.k. Feld Kanonen Regiment Nr. 30; Einjährig-Freiwilliger.

²⁵ Röskau-Rydel, “Galizien, Bukowina, Moldau,” p. 70.

²⁶ Things began to change slowly after the Austrian republic was created in 1918. Quick and thorough changes occurred only under the (national) socialist regime: under Hitler, the Wehrmacht employed tens of thousands of “partial Jews” (Mischlinge) as regular soldiers, and some of them even as generals, admirals, and field marshals—unthinkable in the old regime. See Erik von Kuehnelt-Leddihn, Von Sarajevo nach Sarajevo (Vienna: Karolinger, 1996); Bryan Mark Rigg, Hitler's Jewish Soldiers (Lawrence: Kansas University Press, 2004).

²⁷ Mises, Erinnerungen, p. 3; Notes and Recollections, p. 2.

²⁸ This may sound similar to the English-language epithet, “armchair socialists,” but chair in this case refers to a full professorship in the European university system. Perhaps “ivory-tower socialists” would be more on the mark.

²⁹ Ralph Raico, Die Partei der Freiheit (Stuttgart: Lucius & Lucius, 1999), p. 185.

³⁰ Mises, The Historical Setting of the Austrian School of Economics (Auburn, Ala.: Ludwig von Mises Institute, [1969] 1984), p. 14.

³¹ Mises, Erinnerungen, pp. 10f.; Notes and Recollections, pp. 13, 16. Mises adds that only in one respect were his views not quite as wrong as those of his fellow students: he was “consciously anti-Marxian.”

³² See Menger's letter to the (Austrian) Ministry of Culture, dated March 19, 1902, quoted in Yukihiro Ikeda, Die Entstehungsgeschichte der “Grundsätze” Carl Mengers (St. Katharinen: Scripta Mercaturae Verlag, 1997), pp. 1f.

³³ Eugen von Philippovich, Grundriss der politischen Oekonomie, 9th ed., 3 vols. (Tübingen: Mohr, 1911). On Philippovich see Mises, “Eugen von Philippovich,” Neue Österreichische Biographie, 1st section, vol. 3 (1926), pp. 53–62; Ludwig Elster, “Philippovich von Philippsberg, Eugen,” Handwörterbmh der Staatswissenschaften 6 (1925). See also the obituaries by Amonn in Jahrbücher für Nationalökonomie und Statistik, 3rd series, vol. 58, pp. 158–63, and by Hainisch in Schriften des Vereins für Sozialpolitik 159: 25–29.

³⁴ Friedrich von Wieser, “Der Geldwert und seine geschichtlichen Veränderungen,” Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung 13 (1904); reprinted in Wieser, Gesammelte Abhandlungen, F.A. Hayek, ed. (Tübingen: Mohr, 1929), pp. 164–92.

³⁵ Felix Somary, The Raven of Zurich: The Memoirs of Felix Somary (London: Hurst & Co., 1960), pp. 12f. Somary had first been hired by Carl Menger to assist him in extended sociological studies. But Menger did not anticipate publication any time soon and felt he might be wasting his brilliant young assistant's time. He put Somary in touch with Philippovich, who was looking for help with a new edition of his textbook.

³⁶ Mises, “Eugen von Philippovich,” p. 60.

³⁷ Wiener Fabier-Gesellschaft, established 1891. The main protagonists were Hainisch, Pernerstorfer, and Philippovich.

³⁸ This seems to have been rather exceptional among economics professors. Mises, who knew well the economics profession of the turn of the century, later said:

In the decades between the Prussian constitutional conflict (1862) and the Weimar constitution (1919), only three men sensed the problems of social reform: Philippovich, Stolzmann, and Max Weber. Among these three, only Philippovich had any knowledge of the nature and content of theoretical economics. (Mises, A Critique of Interventionism [New Rochelle, N.Y.: Arlington House, 1977], p. 38)

³⁹ Mises, “Eugen von Philippovich,” p. 61.

⁴⁰ Ibid., p. 62.

⁴¹ Eugen von Philippovich, Die Entwicklung der wirtschaftspolitischen Ideen im 19. Jahrhundert (Tübingen: Mohr, 1910), p. 131.

⁴² Ibid., pp. 132–38.

⁴³ Mises, Erinnerungen, p. 19; Notes and Recollections, p. 33.

⁴⁴ See F.A. Hayek, “Einleitung,” introduction to Mises, Erinnerungen (Stuttgart: Gustav Fischer Verlag, 1978), p. xiv.

⁴⁵ Mises, Erinnerungen, p. 7; Notes and Recollections, p. 7.

It was my intense interest in historical knowledge that enabled me to perceive readily the inadequacy of German historicism. It did not deal with scientific problems, but with the glorification and justification of Prussian policies and Prussian authoritarian government.

⁴⁶ Mises, Theory and History (New Haven, Conn.: Yale University Press, 1957), p. 288; emphasis added.

⁴⁷ Mises, Erinnerungen, pp. 13f.; Notes and Recollections, pp. 19f.

⁴⁸ Mises, Erinnerungen, p. 58.

⁴⁹ Ludwg von Mises, “Zur Geschichte der österreichischen Fabriksgesetzgebung,” Zeitschrift für Volkswirtschaft, Socialpolitik und Verwaltung 14 (1905): 209–71.

⁵⁰ Ibid., p. 234.

⁵¹ Ibid., pp. 258ff.

⁵² Ibid., p. 270.

⁵³ See for example Dr. Mises, Beweis, dass der Mond aus Jodine bestehe, 2nd ed. (Leipzig: Voss, 1832); idem, Vergleichende Anatomie der Engel—Eine Skizze (Leipzig: Industrie-Comptoir, 1825).

⁵⁴ Mises, Erinnerungen, p. 23; Notes and Recollections, p. 39.

⁵⁵ Otto Bauer, Die Nationalitätenfrage und die Sozialdemokratie (Vienna, 1907). On Bauer see Norbert Leser, “Otto Bauer—Friedrich Adler—Max Adler,” Tausend Jahre Österreich, Walter Pollack, ed. (Vienna: Verlag Jugend und Volk, 1974), vol. 3, pp. 258ff.

⁵⁶ Mises, “Eugen von Böhm-Bawerk and the Discriminating Reader,” The Freeman (August 1959).

⁵⁷ His Habilitation director was Philippovich. See Franz Baltzarek, “Ludwig von Mises und die österreichische Wirtschaftspolitik der Zwischenkriegszeit,” Wirtschaftspolitische Blätter 28, no. 4 (1981): 127. Philippovich's Habilitation thesis (which he wrote under Menger) dealt with the achievements of the Bank of England. See Eugen von Philippovich, Die Bank von England im Dienste der Finanzverwaltung des Staates (Vienna: Deuticke, 1885); translated as History of the Bank of England and Its Financial Services to the State (Washington, D.C.: Government Printing Office, 1911). Still Wieser's inaugural lecture might have had a more direct impact on Mises's interest in problems of money and banking.

⁵⁸ Mises, “Die wirtschaftspolitischen Motive der österreichischen Valutaregulierung,” Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung 16 (1907): 571.

⁵⁹ Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 74.

Chapter 4: Fin de siècle Economic Science

¹ Mises, Erinnerungen (Stuttgart: Gustav Fischer Verlag, 1978), p. 19; F.A. Hayek, “Einleitung,” Carl Menger, Gesammelte Werke, F.A. Hayek, ed. (Tübingen: Mohr, 1968), vol. 1, pp. xxxii.

² After Menger successfully discharged his commission to tutor Crown Prince Rudolf in economics, he obtained the right to accede to Knighthood. Menger did not apply because he preferred his bourgeois status. See Brigitte Hamann, Rudolf: Kronprinz und Rebell (Munich: Piper, 1978), pp. 77, 86.

³ On Menger see in particular Friedrich von Wieser, “Karl Menger,” Anton Bettelheim, ed., Neue österreichische Biographie: 1815–1918 (Vienna, 1923), vol. 1, pp. 84–92, reprinted in idem, Gesammelte Abhandlungen (Tübingen: Mohr, 1929); Hayek, “Einleitung,” pp. vii-xxxvi; Yukihiro Ikeda, Die Entstehungsgeschichte der “Grundsätze” Carl Mengers (St. Katharinen: Scripta Mercaturae Verlag, 1997).

⁴ Some ten years later, in a diary entry, he said his present health problems were due to the excessive professional activities of the past, as well as to bad nutrition during some periods of his adolescence, too much time spent in cafés, and too many love affairs. He then decided to spend more time in the countryside and to go out for walks regularly. See Karl Menger's biographical sketch of his father Carl's professional career, “X. Beginn der akademischen Laufbahn,” Carl Menger Papers, Duke University, Box 21.

⁵ Ikeda, Die Entstehungsgeschichte der “Grundsätze” Carl Mengers, pp. 65, 170.

⁶ This was a fashionable subject of feuilleton novels, a new literary genre at the time. In France, the “king of the feuilleton novel,” Eugène Sue had become rich and famous with Le Juif errant (1844–45). The protagonist of his novel symbolized the oppression of the Jewish people throughout the centuries.

⁷ Kurt Paupié, Handbuch der österreichischen Pressegeschichte 1848–1959 (Vienna: Braumüller, 1960), vol. 1, pp. 119f. Paupié also claims that Menger's own paper, the Wiener Tagblatt, had an official or semi-official character, in particular due to Menger's close ties with Belcredi (p. 119).

⁸ Wieser emphasized: “He entered government service,” in “Karl Menger,” p. 84. See also F.A. Hayek, “Einleitung,” p. xii; Ki'ichiro Yagi, “Carl Menger as Editor: Significance of Journalistic Experience for his Economics and for his Later Life,” Revue européenne des sciences sociales 30, no. 92 (1992); Hamann, Rudolf, p. 78.

⁹ Wieser, “Karl Menger.”

¹⁰ Apparently Menger did not abandon his literary interests. In January 1869 he published another novel, Die Bettlerin von St. Marx (The Beggaress of St. Marx) in another Vienna paper, the Allgemeine Volkszeitung. See Ikeda, Die Entstehungsgeschichte der “Grundsätze” Carl Mengers, p. 65, n. 168.

¹¹ In the parlance of twentieth century analytical philosophy Menger's “elements” would have been called “primitives” of economic theory.

¹² Carl Menger, Grundsätze der Volkswirtschaftslehre (Vienna: Braumüller, 1871), p. vii. Barry Smith has convincingly argued that Menger applied Aris-totelean realism in economic analysis. See Barry Smith, “Austrian Economics and Austrian Philosophy,” in Wolfgang Grassl and Barry Smith, eds., Austrian Economics: Historical and Philosophical Background (London: Croom Helm, 1986), pp. 1–36; idem, “Aristotle, Menger, Mises: An Essay in the Metaphysics of Economics,” Bruce J. Caldwell, ed., Carl Menger and His Legacy in Economics (Durham, N.C.: Duke University Press, 1990), pp. 263–88. See also Raimondo Cubbedu, The Philosophy of the Austrian School (London: Routledge, 1993), chap. 1, § 1.

¹³ Menger, Grundsätze; translated as Principles of Economics, p. 191.

¹⁴ Menger's February 1884 letter to Léon Walras, as translated and published in Étienne Antonelli, “Léon Walras et Carl Menger à travers leur correspondence,” Économie appliquée 6, nos. 2–3 (1953): 269–87. The passage is quoted from pp. 280f.; the translation is mine.

¹⁵ William Jaffé emphasizes that:

Carl Menger avoided the use of mathematics in his economics not because he did not know any better, but out of principle. When he wrote to Léon Walras on June 28, 1883 that he had been for some time thoroughly acquainted with Walras's writings, he did not disclaim, as did other correspondents, sufficient knowledge of mathematics to follow these writings, which we may be sure he would have done if that had been the case. Instead, Carl Menger declared his objection in principle to the use of mathematics as a method of advancing economic knowledge. (William Jaffé, “Menger, Jevons and Walras De-Homogenized,” Economic Inquiry 14 [December 1976]: 521)

Robert Hébert reports that Menger owned the journals where the mid-nineteenth century French “econo-engineers” published their pioneering studies in mathematical economics. Menger also owned the books of the major representatives of this school of thought. See Robert F. Hébert, “Jevons and Menger Re-Homogenized: Who is the Real ‘Odd Man Out’?” American Journal of Economics and Sociology 57, no. 3 (1998): 329.

¹⁶ Menger's February 1884 letter to Léon Walras, p. 282.

¹⁷ Wilhelm Roscher, Geschichte der National-Oekonomik in Deutschland, 1st ed. (Munich: Oldenbourg, 1874), pp. 1014f.

¹⁸ See for example Gustav Schmoller, “Volkswirtschaft, Volkswirtschaftslehre und methode,” Handwörterbuch der Staatswissenschaften, 3rd ed. (Jena: Gustav Fischer, 1911), vol. 8, p. 426, where Schmoller speaks of a battle of his school against Ricardo's one-sidedness.

¹⁹ Yet by the same token Say also paved the way to displacing the continental tradition of economic thought that could be traced back to the Spanish late-Scholastics—a tradition that was still alive and vigorous in the Catholic countries of Europe. See below.

²⁰ Murray N. Rothbard, Classical Economics: An Austrian Perspective on the History of Economic Thought (Cheltenham, U.K.: Edward Elgar, 1995), chap. 1.

²¹ On scholastic economics and the economics of the late-scholastic School of Salamanca in particular, see Joseph A. Schumpeter, A History of Economic Analysis (Oxford: Oxford University Press, 1954); Marjorie Grice-Hutchinson, The School of Salamanca: Readings in Spanish Monetary Theory, 1544–1605 (Oxford: Clarendon Press, 1952); Raymond de Roover, Business, Banking, and Economic Thought in Late Medieval and Early Modern Europe (Chicago: University of Chicago Press, 1974); Emil Kauder, A History of Marginal Utility Theory (Princeton, N.J.: Princeton University Press, 1965); Murray N. Rothbard, Economic Thought before Adam Smith (Cheltenham, U.K.: Edward Elgar, 1995); Jesús Huerta de Soto, “New Light on the Prehistory of the Theory of Banking and the School of Salamanca,” Review of Austrian Economics 9, no. 2 (1996): 59–81.

²² Shelagh Eltis and Walter Eltis, “The Life and Contribution to Economics of the Abbé de Condillac,” in Etienne de Condillac, Commerce and Government: Considered in Their Mutual Relationship (Cheltenham, U.K.: Edward Elgar, 1997).

²³ Menger quoted Condillac more than any foreign authority other than Adam Smith, and in contrast to Smith, he quoted him only favorably.

²⁴ See in particular Etienne de Condillac, Essai sur l'origine des connaissances humaines (1746); Traité des sensations (1754); Le commerce et le gouvernement (1776). These works are collected in his (Euvres complètes (Paris: Tourneux, Lecointe et Durey, 1822), vols. 1, 3, and 4.

²⁵ In 1807, Gottlieb Hufeland called the subjectivist theory the “traditional view” and recommended never to deviate from it. See Gottlieb Hufeland, Neue Grundlegung der Staatswirthschaftskunst (Giessen and Wetzlar: Tasche & Müller, 1807), p. 18.

²⁶ See in particular Erich Streissler, “The Influence of German Economics on the Work of Menger and Marshall,” Caldwell, ed., Carl Menger and His Legacy in Economics; idem, “Carl Menger, der deutsche Nationalökonom,” B.P. Priddat, ed., Wert, Meinung, Bedeutung (Marburg: Metropolis, 1997), pp. 33–88; Ikeda, Die Entstehungsgeschichte der “Grundsätze” Carl Mengers.

²⁷ Erich Streissler points out that Alfred Marshall's Principles of Economics (London: Macmillan, 1891) had the exact structure of a typical German textbook. See Streissler, “The Influence of German Economists on the Work of Menger and Marshall,” Caldwell, ed., Carl Menger and his Legacy in Economics, p. 51.

²⁸ William M. Johnston, Vienna, Vienna—The Golden Age, 1815–1914 (Milan: Arnoldo Mondadori, 1981), p. 15.

²⁹ This point of view was not limited to intellectuals working in “ideological” fields such as history, political economy, or philosophy. In a public lecture given on August 3, 1870, Emil du Bois-Reymond, the rector of the Frederick-William University of Berlin and a pioneer of electro-physiology, proclaimed that his university was the “intellectual bodyguard of the House of Hohenzollern.” See Emil du Bois-Reymond, Über den deutschen Krieg (Berlin: Hirschwald, 1870).

³⁰ Streissler, “The Influence of German Economics on the Work of Carl Menger and Marshall.” Through this work, Streissler has convincingly corrected the heretofore prevailing notion that the Younger Historical School was somehow more deeply rooted in the German tradition of economic science than Carl Menger. As Streissler stated, the real revolutionary was Gustav Schmoller, not Menger.

³¹ Schmoller was a professor in Halle from 1864 to 1872. Being one of the first beneficiaries of the Prussian-German victory over France in the Franco-Prussian War, he moved to the University of Strasbourg (1872–1882), before finally receiving a chair at the University of Berlin (1882–1913).

³² Gustav Schmoller, “Einladung zur Eisenacher Versammlung von 1872,” printed in Franz Boese, Geschichte des Vereins für Sozialpolitik, 1872–1932 (Berlin: Duncker & Humblot, 1939), p. 241.

³³ The smear term “Kathedersozialisten” was coined by Heinrich Bernard Oppenheim in his book Der Katheder-Sozialismus (Berlin: Oppenheim, 1872). See Ralph Raico, Die Partei der Freiheit (Stuttgart: Lucius & Lucius, 1999), p. 200. The only Austrian participant in the initial 1872 meeting was one Dr. Friedmann (probably Otto Bernhard Friedmann), a journalist from Vienna.

³⁴ On the history of the Verein see Boese, Geschichte des Vereins für Sozialpolitik, 1872–1932; Dieter Lindenlaub, Richtungskämpfe im Verein für Sozialpolitik: Wissenschaft und Sozialpolitik im Kaiserreich vornehmlich vom Begin des “Neuen Kurses” bis zum Ausbruch des ersten Weltkrieges, 1890–1914 (Wiesbaden: Steiner, 1967); Irmela Gorges, Sozialforschung in Deutschland, 1872—1914, 2nd ed. (Frankfurt a.M.: Anton Hain, 1986).

³⁵ Raico, Partei der Freiheit, p. 188.

³⁶ Many years later, Mises characterized their attitude in the following words:

It is the mentality of officialdom—which, according to Brentano, was “the only sounding board of the Association for Social Policy”—that considers as constructive and positive only that ideology which calls for the greatest number of offices and officials. And he who seeks to reduce the number of state agents is decried as a “negative thinker” or an “enemy of the state.” (Mises, A Critique of Interventionism [New York: Arlington House, 1977], pp. 82–83)

See also Mises, The Historical Setting of the Austrian School of Economics (New Rochelle, N.Y.: Arlington House, 1969), p. 31. On the history of the Bismarckian welfare state, and of its predecessor under Frederick II, see Gerd Habermann, Der Wohlfahrtsstaat: Die Geschichte eines Irrwegs, 2nd ed. (Frankfurt: Ullstein, 1997).

³⁷ Gustav Schmoller, “Eröffnungsrede zum 25 jährigen Bestehen des Vereins auf der Kölner Tagung von 1897,” printed in Boese, Geschichte des Vereins für Sozialpolitik, 1872–1932, pp. 253ff., in part pp. 262f.

³⁸ Ibid., pp. 260f.

³⁹ In the early years, the most vociferous opposition to the Verein's agenda came from non-members such as Heinrich Oppenheim and Julius Wolf. See Raico, Partei der Freiheit, pp. 200ff. Pohle and Voigt published their influential and devastating critiques of the Verein only after they left it in 1905.

⁴⁰ See for example Gustav Schmoller, “Die Gerechtigkeit in der Volkswirtschaft,” Schmotters Jahrbuch 5 (1881), pp. 19–54; idem, Zur Social- und Gewerbepolitik der Gegenwart (Leipzig: Duncker & Humblot, 1890); idem, Grundriss der allgemeinen Volkswirtschaftslehre (Leipzig: Duncker & Humblot, 1900).

⁴¹ See his important February 1884 letter to Léon Walras, as translated and published in Antonelli, “Léon Walras et Carl Menger à travers leur correspondence,” pp. 269–87. The passage referred to is on p. 283.

⁴² Carl Menger, Untersuchungen zur Methode der Sozialwissenschaften und der politischen Oekonomie im besonderen (Leipzig: Duncker & Humblot, 1883); translated as Investigations into the Method of the Social Sciences and of Political Economy in Particular (New York: New York University Press, 1985).

⁴³ Gustav Schmoller, “Zur Methodologie der Staats- und Sozial-Wissenschaften,” Schmoller's Jahrbuch n.s. 7, no. 3 (1883): 239ff. See also the review by Norbert Leser in Conrad's Jahrbücher n.s. 7, p. 273ff.

⁴⁴ See the 1886 edition of Roscher's Grundlagen, quoted from Karl Milford, “Hufeland als Vorläufer von Menger und Hayek,” in Birger Priddat, ed., Wert, Meinung, Bedeutung: Die Tradition der subjektiven Wertlehre in der deutschen Nationalökonomie vor Menger (Marburg: Metropolis, 1997), pp. 99f. In 1871, Menger had dedicated his Grundsätze to Roscher.

⁴⁵ As far as Menger's contributions to the debate are concerned, see Carl Menger, Die Irrthümer des Historismus in der deutschen Nationalökonomie (Vienna: Alfred Hölder, 1884); idem “Zur Kritik der politischen Ökonomie,” Zeitschrift für das Privat- und öffentliche Recht der Gegenwart 14 (1887); idem, “Grundzüge einer Klassifikation der Wirtschaftswissenschaften,” Jahrbücher für Nationalökonomie und Statistik n.s. 19 (1889). These papers have been reprinted in Carl Menger, Gesammelte Werke, F.A. Hayek, ed., 2nd ed. (Tübingen: Mohr, 1970), vol. 3.

⁴⁶ The model of opposition between libertarian-minded theorists and statist historians is not a complete reflection of the state of affairs. There were in fact market-friendly historicists such as Lujo Brentano, as well as theorists with strong statist inclinations such as Adolf Wagner, or even Wieser.

⁴⁷ Richard Schüller, Die klassische Nationalökonomie und ihre Gegner (Berlin: Heymanns, 1895). Hildebrand had succeeded Lorenz von Stein, but stayed only one year in Vienna.

⁴⁸ For an introduction to nineteenth-century German thought on the nature of science, see the collection of original papers by Humboldt, Gauss, Chamisso, Virchow, Helmholtz, Ranke, Burckhardt, and many others in Wolfgang Schirmacher, ed., German Essays on Science in the 19th Century (New York: Continuum, 1996).

⁴⁹ Accounts of the differences between these authors can be found in J.R. Hicks, “Léon Walras,” Econometrica (October 1934): 338; Schumpeter, A History of Economic Analysis, p. 918; Jaffé, “Menger, Jevons and Walras De-Homogenized,” pp. 511ff.; Sandra J. Peart, “Jevons and Menger Re-Homogenized?” American Journal of Economics and Sociology 57, no. 3 (1998): 307ff. According to a widespread view, Walras eclipsed Menger and Jevons because he had pioneered general-equilibrium theory and thereby demonstrated the interdependency of all economic phenomena. This view is peculiar because this general interdependency is in fact a presupposition of any sort of economic analysis. It is in fact merely another way of saying that there is scarcity. Mark Blaug corrected this erroneous view, stressing that Menger too analyzed economic phenomena in their mutual interdependence. See Mark Blaug, “Comment” [on O'Brien's “Lionel Robbins and the Austrian Connection”], Caldwell, ed., Carl Menger and His Legacy in Economics, p. 186.

⁵⁰ Jaffé, “Menger, Jevons and Walras De-Homogenized,” pp. 513ff., 518. A French predecessor was Jules Dupuit, who published two articles on marginal value in the late 1840s. See Robert Ekelund and Robert Hébert, Secret Origins of Modern Microeconomics: Dupuit and the Engineers (Chicago: Chicago University Press, 1999); and Jean-Pascal Simonin et François Vatin, L'oeuvre multiple de Jules Dupuit (1804–1866): Calcul d'ingénieur, analyse économique et pensée sociale (Angers: Presses de l'Université d'Angers, 2002).

⁵¹ Hermann Heinrich Gossen, Entwickelung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für menschliches Handeln (Braunschweig: Vieweg & Sohn, 1854).

⁵² See the preface of the 1879 second edition of his Principles of Economics, p. il.

⁵³ Léon Walras, “Un économiste inconnu: Hermann-Henri Gossen,” Journal des Économistes (April and May 1885). This is the same Walras who in his correspondence with Menger apologized that his German was not good enough to digest Grundsätze.

⁵⁴ See Walras's February 2, 1887 letter to Menger, as translated and published in Antonelli, “Léon Walras et Carl Menger à travers leur correspondence,” pp. 269–87. The letter is quoted on pp. 285f. See also the exchange of letters between Jevons and Walras published in the Journal des Économistes (June 1874). In a January 27, 1887 letter to Léon Walras, Menger had emphasized that there was only a limited analogy between his approach and Gossen's, but that there was no conformity in the “decisive questions.” See Antonelli, “Léon Walras et Carl Menger à travers leur correspondence,” pp. 269–87. The letter is quoted on pp. 284f.

⁵⁵ Jaffé (“Menger, Jevons and Walras De-Homogenized,” pp. 515f.) stresses that Walras initially did not associate diminishing marginal utility with quantities consumed, but with quantities possessed. It is true that Walras was more cautious than Gossen and Jevons in speculating on the psychological underpinnings of his price theory, even though in his Eléments d'économie politique he eventually did bring in Gossen-style psychological analysis. But, as we shall see, the decisive consideration for our purposes is that value is for Walras (just as for Gossen and Jevons) a two-sided relationship, involving an acting person and one other object; whereas Menger's analysis of value features at least three elements: acting person and two things that are ranked from the point of view of the agent.

⁵⁶ Gossen, Entwickelung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für menschliches Handeln, pp. 80ff.

⁵⁷ This fact is crucial to understanding the history of twentieth-century economic thought. Gossen was already an enthusiastic mathematician and only studied law under the severe pressure of his father; see F.A. Hayek, “Einleitung,” introduction to Hermann Heinrich Gossen, Entwickelung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für menschliches Handeln, 3rd ed. (Berlin: Prager, 1927), pp. xf. All of his followers featured the same mindset. As Mark Blaug points out, Jevons first studied chemistry and biology and then turned his attention to economics. His “inspiration was Bentham's ‘felicific calculus’ of pleasure and pain, supplemented by the works of Dionysius Lardner... and Fleming Jenkins..., two British engineer-economists of the 1860s” (Great Economists before Keynes: An Introduction to the Lives and Works of One Hundred Great Economists of the Past [Cambridge: Cambridge University Press, 1986], p. 100). Walras pursued formal studies in letters, science, and engineering. From his father, the economist Auguste Walras, he adopted the conviction that some concept of utility maximization is the fundamental element of economic science. Walras's great follower Vilfredo Pareto was an engineer and turned to economics only at the age of 42. Similarly, Knut Wicksell's and Irving Fisher's first university degrees were in mathematics. Gustav Cassel, who according to Blaug (ibid, pp. 41ff.) had written the most widely read textbook of the interwar period, was a Ph.D. in mathematics, then became a schoolmaster and then turned to economics, becoming the greatest popularizer of general-equilibrium economics à la Walras. In contrast, the predominant formative influence on Austrian economists did not come in the form of mathematical training, but through legal studies. Until the interwar period, all Austrian economists had to obtain a first degree in law before they could turn their research to economic problems. As a consequence, the Vienna economists distinguished themselves by a great capacity to think conceptually and, most importantly, by their eagerness to relate all of their concepts to the observed real world. Their training in law effectively counterbalanced the inclination some of them felt for the natural sciences (for example, Böhm-Bawerk had in his youth a great interest in theoretical physics; see Joseph A. Schumpeter, “Eugen von Böhm-Bawerk,” Neue Österreichische Biographie [Vienna, 1925], vol. 2, p. 65).

⁵⁸ Jaffé, “Menger, Jevons and Walras De-Homogenized,” p. 519.

⁵⁹ Ibid., p. 520.

⁶⁰ Mises, Money, Method, and Market Process: Essays by Ludwig von Mises, Richard Ebeling, ed. (Auburn, Ala.: Ludwig von Mises Institute, 1990).

⁶¹ See Karl Menger's biographical sketch of his father Carl's professional career, “X. Beginn der akademischen Laufbahn.”

⁶² Roughly speaking, this rank corresponded to a present-day associate professor in the United States.

⁶³ There must have been some Protektion involved. Here it should be remembered that Menger's journalistic activities had early on brought him in touch with established political forces. These connections probably played in his favor when he applied for the chair at the University of Vienna.

⁶⁴ Erich Streissler, “Menger's treatment of economics in the Rudolf lectures,” Erich W. Streissler, and Monika Streissler, eds., Carl Menger's Lectures to Crown Prince Rudolf of Austria (Aldershot, U.K.: Edward Elgar, 1994), pp. 4, 14.

⁶⁵ Ibid., p. 17. On Menger's liberalism see also Israel Kirzner, “Menger, Classical Liberalism, and the Austrian School of Economics,” Caldwell, ed., Carl Menger and His Legacy in Economics, pp. 93–106; Ki'ichiro Yagi, “Carl Menger as Editor: Significance of Journalistic Experience for his Economics and for his Later Life,” Revue européenne des sciences sociales 30, no. 92 (1992); idem, “Carl Menger and Historical Aspects of Liberalism in Austria,” essay presented at a symposium on Carl Menger and the Historical Aspects of Liberalism (Center for Historical Social Science Literature, Hitotsubashi University, December 18–19, 2004).

⁶⁶ Ibid.

⁶⁷ Kurt Rothschild, “Carl Menger,” Walter Pollack, ed., Tausend Jahre Österreich (Vienna: Verlag Jugend und Volk, 1974), vol. 3, pp. 67ff.

⁶⁸ Klaus H. Hennings, The Austrian Theory of Value and Capital: Studies in the Life and Work of Eugen von Böhm-Bawerk (Cheltenham, U.K.: Edward Elgar, 1997), pp. 10f., 24, n. 13. Mises's characterization of Menger's and Böhm-Bawerk's attitude gives a somewhat misleading picture of the times. In Erinnerungen (p. 22), Mises stresses that these men were not interested in promoting their cause through their personal power (see also Mises, Historical Setting of the Austrian School of Economics, p. 39). But that does not mean that they did not have considerable power, nor that they never made any use of it.

⁶⁹ Hayek, “Einleitung,” pp. xxxiiif.

⁷⁰ It appears that the main reason why Menger retired at the comparatively young age of sixty-two was that he had caused a scandal through an affair with his housemaid. The affair became public because of the birth of Karl, whom Carl Menger acknowledged as his son. Karl cost Menger his career, and he thereby also changed the history of the Austrian School of economics, which under Carl's guidance certainly would have taken a different course than it did under his successor, Friedrich von Wieser. But Karl's birth also led to a rapprochement between the Austrian School and the mainstream through a more direct route: Karl Menger himself would eventually become a famous mathematical economist.

⁷¹ Shigeki Tomo, Eugen von Böhm-Bawerk (Marburg: Metropolis, 1994), pp. 157–62.

⁷² On Böhm-Bawerk see in particular F.X. Weiss, “Eugen von Böhm-Bawerk,” F.X. Weiss, ed., Gesammelte Schriften (Vienna: Hölder-Pichler-Tempsky, 1926; reprint Frankfurt a.M.: Sauer & Auvermann, 1968), vol. 1, pp. iii-xv; Schumpeter, “Eugen von Böhm-Bawerk;” H. Schullern-Schrattenhofen, “Eugen Ritter von Böhm-Bawerk,” Adolf Günther, ed., Die Universität Innsbruck (Innsbruck: Tyrolia, 1928), pp. 17–21; Hennings, The Austrian Theory of Value and Capital; Tomo, Eugen von Böhm-Bawerk; idem, “Eugen von Böhm-Bawerk's Innsbruck Lectures on Economics,” Eugen von Böhm-Bawerk, Innsbrucker Vorlesungen über Nationalökonomie (Marburg: Metropolis, 1998).

⁷³ A copy of Böhm-Bawerk's paper with the title “Referat über Kapitalzins im Knies'schen Seminar” is available in the Grove City Archive: Pamphlet Box # 4. Wieser's paper was published after his death in Wieser, Gesammelte Abhandlungen, Hayek, ed. (Tübingen: Mohr, 1929).

⁷⁴ Böhm-Bawerk's major accomplishment as a minister of finance was the reform of the Austrian system of direct taxation. He started working on this project in 1889 and his proposals made it, in essentially unaltered form, into a law voted in 1896. Among other things, Böhm-Bawerk's law introduced a personal income tax (top marginal rate: 5 percent), as well as the principle of progressive tax rates into the Austrian code. See Schumpeter, “Eugen von Böhm-Bawerk,” pp. 75, 77; Alois Gratz, “Die österreichische Finanzpolitik von 1848 bis 1948,” Hans Mayer, ed., Hundert Jahre österreichischer Wirtschaftsentwicklung, 1848–1948 (Vienna: Springer, 1949), p. 278. The most complete presentation of his activities in the Ministry of Finance is in Tomo, Eugen von Böhm-Bawerk, pp. 53–65, 141–78. On Böhm-Bawerk's economic theories, see also Hennings, The Austrian Theory of Value and Capital.

⁷⁵ Schumpeter reports that as a minister Böhm-Bawerk followed the maxim, “A finance minister must always be ready to give his demission and always act as if he never intended to quit his job.” Böhm-Bawerk quit when another increase in the army budget was no longer covered by corresponding savings or increased taxation. See Schumpeter, “Eugen von Böhm-Bawerk,” pp. 79f. Böhm-Bawerk was not opposed to additional government expenditure as a matter of principle. It was in fact the great strategy of the Koerber cabinet (1900–1904) to renew and increase the attachment of the various nations of Austria-Hungary to the central government in Vienna through an ambitious spending program. The strategy succeeded. Conflicts related to national culture suddenly shifted into the background as the economic and financial establishment of the various nations sensed that business with the central government was more important than continuing the policy of obstruction. See Rudolf Sieghart, Die letzten Jahrzehnte einer Grossmacht (Berlin: Ullstein, 1932), pp. 56ff.

⁷⁶ Schullern-Schrattenhofen, “Eugen Ritter von Böhm-Bawerk,” p. 21. The author observes that this election was all the more remarkable because economics had not been considered a prestigious science.

⁷⁷ Schumpeter, “Eugen von Böhm-Bawerk,” p. 80. Both Schumpeter and Mises (Erinnerungen, p. 23) state that Böhm-Bawerk declined an offer to become executive director of a major Vienna bank.

⁷⁸ Mises, Erinnerungen, p. 24.

⁷⁹ The reference is Böhm-Bawerk, Rechte und Verhiiltnisse vom giiterwirthschaftlichen Standpunkte (literally: Rights and legal relationships considered from the point of view of the theory of economic goods]. The original manuscript of his Habilitation thesis had 728 pages and the title “Kritische Beiträge zur volkswirtschaftlichen Lehre von der Güternutzung.” See Tomo, Eugen von Böhm-Bawerk, p. 71.

⁸⁰ Böhm-Bawerk, “Grundzüge der Theorie des wirtschaftlichen Güterwerths,” Conrad's Jahrbücher für Nationalökonomie und Statistik n.s. 13 (1886); reprinted as Grundzüge der Theorie des wirtschaftlichen Güterwerths (London: London School of Economics and Political Science, 1932).

⁸¹ Schumpeter, “Eugen von Böhm-Bawerk,” pp. 70, 72.

⁸² This thesis was no more than hinted at in Menger, Principles, pp. 153f.; and William Stanley Jevons, Theory of Political Economy (London: Macmillan, 1888), p. 72.

⁸³ Translated and published in 1898 as Karl Marx and the Close of His System (London: T.F. Unwin, 1989).

⁸⁴ This essay was a critical response to Rudolf Stolzmann. Possibly Böhm-Bawerk also wished to preempt a fallacious opinion accepted by some of his most gifted students. A case in point was Ludwig von Mises, who shortly before had argued that labor unions could raise wage rates for all workers, at least in the short run. See Mises, “Die allgemeine Teuerung im Lichte der theoretischen nationalökonomie,” Archiv für Sozialwissenschaften und Sozialpolitik 37 (1912): 570f.

⁸⁵ For an enthusiastic characterization by his main follower, see Hans Mayer, “Friedrich Freiherr von Wieser,” Neue Österreichische Biographie (Vienna, 1929), vol. 6, pp. 180–98. A more critical short presentation is in Klaus H. Hennings, “Friedrich Wieser,” Walter Pollack, ed., Tausend Jahre Österreich, vol. 3, pp. 71ff.

⁸⁶ Schumpeter in Neues Wiener Tagblatt (July 10, 1921); quoted from F.A. Hayek, “Friedrich Freiherr von Wieser,” Jahrbücher fiir Nationalökonomie und Statistik 125 (1926): 523.

⁸⁷ Hayek, “Friedrich Freiherr von Wieser,” Jahrbücher für Nationalökonomie und Statistik, pp. 523f.

⁸⁸ Ibid., p. 524.

⁸⁹ Hans Mayer, “Friedrich Freiherr von Wieser,” vol. 6, pp. 184, 187. Hayek, “Friedrich Freiherr von Wieser,” p. 518.

⁹⁰ He acknowledges his intellectual debt to Jevons in the preface of his Habilitation thesis, where he mentions the Englishman as one of his two main sources of inspiration (the other one was Menger); see Friedrich von Wieser, Über den Ursprung und die Hauptgesetze der wirthschaflichen Werthes (Vienna: Hölder-Pichler-Tempsky, 1884), p. viii.

⁹¹ Friedrich von Wieser, Der natürliche Werth (Vienna: Hölder-Pichler-Tempsky, 1889), § 3, p. 7; idem, Theorie der gesellschaftlichen Wirtschaft, 2nd ed. (Tübingen: Mohr, 1924), p. 24. Hayek noticed that Wieser had “supplemented” the elementary theory of prices “in regard to its psychological foundations” through Gossen's law of want-satiation (see Hayek, “Friedrich Freiherr von Wieser,” p. 520). As we have pointed out above, there was in Menger's value theory no such emphasis on diminishing satisfactions of the same type.

⁹² Hayek, “Einleitung,” p. xiv. In his introduction to Menger's collected works, Hayek points out that Gossen's work had been favorably mentioned in an 1870 book by F.A. Lange (see Hayek, “Einleitung,” p. x, n. 2), but this had no impact. Wieser was not the only Viennese theorist who developed marginal-utility analysis along Jevonsian lines. There were in particular two non-academic economists, Rudolf Auspitz and Richard Lieben, who a few years after Wieser published two books that focused entirely on the graphical (and to a lesser extent, algebraic) exposition of price theory. See Rudolf Auspitz and Richard Lieben, Zur Theorie des Preises (Leipzig: Duncker & Humblot, 1887); idem, Untersuchungen über die Theorie des Preises (Leipzig: Duncker & Humblot, 1889). Despite the non-academic background of the authors, these works were very well researched and based on a thorough knowledge of the existing literature in the field, in particular the works of Bernoulli, Laplace, Thünen, Dupuit, Gossen, Mangoldt, Menger, Jevons, Walras, Wieser, Böhm-Bawerk, and Launhardt. Just as their contemporary fellow-Jevonsian in Vienna, Auspitz and Lieben emphasized the fictional nature of their style of economic analysis. Thus, noticing that an economic theorist cannot use experiments to isolate causes and their effects, they assert that the economist “is forced to take refuge with his ideas into an abstract world that can be grasped more easily; but then he must try to approximate the real world through gradual changes of his assumptions” (Untersuchungen über die Theorie des Preises, p. vii; see also Wieser, Der natürliche Werth, part 2). In other words, unrealistic assumptions were absolutely essential for economic analysis. Realism of economic science was at best a matter of approximating the real world, but not a matter of describing it. Auspitz and Lieben were however quite perceptive in regard to the internal logic of mathematical equilibrium economics. They pointed out, for example, that equilibrium obtains only if each individual seeks to maximize his personal satisfaction and if each individual knows how to choose the combination of factors of production most suitable to this end (see for example Untersuchungen über die Theorie des Preises, p. 537). Jevonsian German-language writers outside of Vienna were Knut Wicksell, Über Wert, Kapital und Rente (Jena: Gustav Fischer, 1893); and Georg Sulzer, Die wirtschaftlichen Grundgesetze in der Gegenwartsphase ihrer Entwicklung (Zurich: Müller, 1895).

⁹³ The literal translation of the title is “On the cause and the principal laws of economic value.” No English translation of the work exists.

⁹⁴ In a 1911 essay, he defended the fictions contained in these—as he would call them—idealizing assumptions. See Friedrich von Wieser, “Das Wesen und der Hauptinhalt der theoretischen Nationalökonomie—kritische Glossen,” Jahrbuch für Gesetzgebung, Verwaltung und Volkswirtschaft im deutschen Reich 35, no. 2 (1911); reprinted in Wieser, Gesammelte Abhandlungen, Hayek, ed., pp. 10–34. We will present Wieser's argument below when dealing with Schumpeter.

⁹⁵ Friedrich von Wieser, “Grenznutzen,” Handwb'rterbuch der Staatswissenschaften (2nd and 3rd editions, Jena: Gustav Fischer, 1900 and later); reprinted in Wieser, Gesammelte Abhandlungen, Hayek, ed., pp. 88, 93.

⁹⁶ The is review in Schmollers' Jahrbuch 13 (1889): 1488–90.

⁹⁷ Wieser coined the term Grenznutzen in order to convey the meaning of Jevons's “final utility.” Through Philip Wicksteed, one of Jevons's students, the new term then made it into English; see Philip H. Wicksteed, The Alphabet of Economic Science (reprint, New York: Augustus M. Kelley, [1888] 1970).

⁹⁸ For example, Wieser alleged that Menger held that the law of decreasing marginal value was a Gossen-style “law of satiation” (Wieser, “Karl Menger,” p. 89). Böhm-Bawerk also shares some of the responsibility for this confusion. His first exposition of the theory of value and prices in 1886 was strongly influenced by Wieser's Ursprung und Hauptgesetze (1884), and thus indirectly by Gossen and Jevons. He at least implicitly endorsed the view that value was a psychological phenomenon, pertaining to the sphere of human feelings, and he also believed in the measurability of value and in inter-individual comparisons of value. While these assumptions played a relatively insignificant role in his work (compared to Wieser), the fact that he held them at all promoted the gradual departure from Menger's realist economics toward the emerging neo-classical paradigm. It was symptomatic that Walras complained to Menger (who had shown reluctance to recognize a predecessor in Gossen) that, after all, Böhm-Bawerk shared exactly the same view. Walras believed it was “impossible to deny that he [Gossen] has been the first to conceive clearly and mathematically that what I call utilité and rareté, and which is nothing but the subjectiver Wert or the Grenzwert of Mr. von Böhm-Bawerk.” Quote from Walras's February 2, 1887 letter to Menger, as translated and published in Antonelli, “Léon Walras et Carl Menger à travers leur correspondence,” pp. 269–87. The passage is quoted from pp. 285f., translation is mine.

⁹⁹ A student of Carl Menger's in the late nineteenth century, Robert Zuckerkandl, argued along the same popular lines. In his eyes too, price was but an “expression” of value, and he rejected Böhm-Bawerk's statement that price and value shared virtually no features that would permit them to be lumped together in the same analytical framework. See Robert Zuckerkandl, Zur Theorie des Preises, 2nd ed. (Leipzig: Stein & Co, [1889] 1936); reprint (Amsterdam: Liberac, 1968), pp. 24f. and passim.

¹⁰⁰ Wieser, Der natürliche Werth, p. 54.

¹⁰¹ Ibid, p. 60.

¹⁰²Erinnerungen, p. 21. Mises says that despite all his great personal qualities, Wieser was not original in his research and was more harmful than useful for the development of the Austrian School. When Mises explains the meaning of his own contributions, he makes it clear that his work was based on Menger and Böhm-Bawerk, not on Wieser.

¹⁰³ Friedrich von Wieser, Theorie der gesellschaftlichen Wirtschaft, 1st ed. (Tübingen: Mohr, 1914). An English edition with the title Social Economics appeared in 1927 (New York: Adelphi) with a preface by WC. Mitchell. In foreign countries too, Wieser was therefore perceived as the main interwar authority on Austrian economics. This goes a long way toward explaining the rise of Keynesianism in the mid-1930s.

¹⁰⁴ Yet, significantly, while Hayek's book dealt with virtually all the fundamental errors in the social sciences—in particular, with the errors inherent in scientism (positivism), historicism, and holism—he did not talk about “psy-chologism” in economic theory.

¹⁰⁵ Jeffrey M. Herbener, Hans-Hermann Hoppe, Joseph T. Salerno, “Introduction to the Scholar's Edition,” Ludwig von Mises, Human Action: A Treatise on Economics, Scholar's edition (Auburn, Ala.: Ludwig von Mises Institute, 1998), pp. vff.; Joseph T. Salerno, “The Place of Human Action in the Development of Modern Economic Thought,” Quarterly Journal of Austrian Economics 2, no. 1 (1999): 35ff.

¹⁰⁶ Joseph A. Schumpeter, Wesen und Hauptinhalt der theoretischen Nationalökonomie (Munich: Duncker & Humblot, 1908). On Schumpeter see Eduard März, Joseph Alois Schumpeter—Forscher, Lehrer und Politiker (Vienna: Verlag für Geschichte und Politik, 1983); Wolfgang Stolper, Joseph Alois Schumpeter: The Public Life of a Private Man (Princeton, N.J.: Princeton University Press, 1994); Richard Swedberg, Joseph A. Schumpeter—eine Biographie (Stuttgart: Klett-Cotta, 1994). Also see Stephan Böhm, “Schumpeter and Mises,” Klaus Hennings and Warren J. Samuels, eds., Neoclassical Economic Theory, 1870 to 1930 (Boston: Kluwer, 1990).

¹⁰⁷ He was also a visiting professor at Columbia University in 1913–1914, and at Harvard University in 1927–1928 and 1930.

¹⁰⁸ März, Joseph Alois Schumpeter—Forscher, Lehrer und Politiker, pp. 169ff.; Swedberg, Joseph A. Schumpeter—eine Biographie, pp. 100f.

¹⁰⁹ His ambitions as a young man were virtually boundless. He sought to become the greatest economist in the world, the greatest horse rider in Austria, and the greatest lover in Vienna. See Swedberg, Joseph A. Schumpeter— eine Biographie, p. 71.

¹¹⁰ Examples of minor importance are Mises's endorsement of the doctrine that later came to be called “demonstrated preference.” See Murray N. Rothbard, “Toward a Reconstruction of Welfare and Utility Economics,” Mary Sennholz, ed., On Freedom and Free Enterprise: Essays in Honor of Ludwig von Mises (New Haven, Conn.: Van Nostrand, 1956. Similarly, Mises agreed with Schumpeter (and the sociologist Georg Simmel) that choice or—as Sim-mel and Schumpeter put it—“exchange” was the fundamental phenomenon of economic science.

¹¹¹ Gottlob Frege, Function und Begriff (Concept and Object) (Jena: Pohle, 1892); Die Grundlagen der Arithmetik (The Foundations of Arithmetic) (Jena, Pohle, 1884); Die Grundgesetze der Arithmetik (Fundamental Laws of Arithmetic) (Jena: Pohle, 1893); Edmund Husserl, Logical Investigations (Halle a.S.: Max Niemeyer, 1900).

¹¹² Schumpeter, Wesen und Hauptinhalt der theoretischen Nationalökonomie, pp. 64ff.

¹¹³ He had anticipated this thesis in a 1906 article on what he called the mathematical method of theoretical economics; see Joseph A. Schumpeter, “Über die mathematische Methode der theoretischen Ökonomie,” Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung 15 (1906): 30–49.

¹¹⁴ Milton Friedman, Essays in Positive Economics (Chicago: University of Chicago Press, 1953), chap. 1.

¹¹⁵ Friedrich von Wieser, “Das Wesen und der Hauptinhalt der theoretischen Nationalökonomie—kritische Glossen,” Jahrbuch für Gesetzgebung, Verwaltung und Volkswirtschaft im deutschen Reich 35, no. 2 (1911); reprinted in Wieser, Gesammelte Abhandlungen, pp. 10–34.

¹¹⁶ Ibid., p. 12.

¹¹⁷ Wieser did not use this expression in his essay, but it had already been introduced by the physicist-philosopher Ernst Mach. See E. Mach's 1897 paper “Über Gedankenexperimente,” reprinted in his Erkenntnis und Irrtum, 5th ed. (Vienna, 1926; reprint Darmstadt: Wissenschaftliche Buchge-sellschaft, 1991), pp. 183–200.

¹¹⁸ Wieser, “Das Wesen und der Hauptinhalt der theoretischen Nationalökonomie—kritische Glossen,” p. 22.

¹¹⁹ Ibid., p. 23.

¹²⁰ Wieser warned that Schumpeter-style presentations could hamper the understanding of the meaning of economic relations:

Schumpeter himself still knows the meaning because he has been introduced to it by his predecessors. But the pupils that he introduces will not know it any longer, because he deprives them of the presentation of those most subtle connections, which only reveal themselves to the inner observation. (ibid. pp. 31f.)

¹²¹ Ibid., p. 33.

¹²² Schumpeter, Wesen und Hauptinhalt der theoretischen Nationalökonomie, pp. 50, 80, 200; Mises, Theorie des Geldes und der Umlaufsmittel (Leipzig and Munich: Duncker & Humblot, 1912); idem, Die Gemeinwirtschaft (Jena: Gustav Fischer, 1922); idem, Grundprobleme der Nationalökonomie (Jena: Gustav Fischer, 1933); Richard von Strigl, Die ökonomischen Kategorien und die Organisation der Wirtschaft (Jena: Gustav Fischer, 1923); Lionel Robbins, The Nature and Significance of Economic Science (London: Macmillan, 1932).

¹²³ Schumpeter, Wesen und Hauptinhalt der theoretischen Nationalökonomie, pp. 182f.

¹²⁴ Mises to Miss Haider (Brookings Institution), letter dated July 3, 1931; Mises Archive 66a: 87f. He emphasized that he took no account of his own writings.

¹²⁵ See for example Kirzner's discussions of Schumpeter in Israel Kirzner, Competition and Entrepreneurship (Chicago: University of Chicago Press, 1973), pp. 79–81 and 125–31.

¹²⁶ Eugen von Böhm-Bawerk, “Eine ‘dynamische’ Theorie des Kapitalzinses,” Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung 22 (1913); reprinted Gesammelte Schriften, Weiss, ed.; reprint (Frankfurt a.M.: Sauer & Auvermann, 1968), vol. 2, pp. 520–85; quote is from p. 521.

¹²⁷ 7Böhm-Bawerk, “Eine ‘dynamische’ Theorie des Kapitalzinses,” p. 552.

Chapter 5. Early Professions

¹ Carl E. Schorkse, Fin-de-siècle Vienna (New York: Knopf, 1980), is famous for his claims that this interest in science and art was a substitute for the political career that the existing monarchical regimes made impossible. Schorke's claim relies on the implicit hypothesis that politics is inherently more satisfying than science or art—an hypothesis that tells us more about Schorske's own value-judgments than about those prevalent among young Germans and Austrians at the time.

² Erik von Kuehnelt-Leddihn, The Cultural Background of Ludwig von Mises (Auburn, Ala.: Ludwig von Mises Institute, 1999), pp. 6f.

³ Rudolf Sieghart, Die letzten Jahrzehnte einer Grossmacht (Berlin: Ullstein, 1932), p. 263.

⁴ Ludwig Pohle, Die gegenwiirtige Krisis in der deutschen Volkswirtschaftslehre (Leipzig: Deichert, 1911), p. 52.

⁵ See Karl Helfferich, Das Geld (Leipzig: Hirschfeld, 1903).

⁶ Mises, Erinnerungen (Stuttgart: Gustav Fischer Verlag, 1978), p. 69f.; Notes and Recollections (Spring Mills, Penn.: Libertarian Press, 1978), p. 105.

⁷ Mises, Erinnerungen, pp. 23; Notes and Recollections, p. 39.

⁸ The most important source of data on Mises's early professional development is a letter of application and curriculum vitae that he wrote to the Chamber of Commerce in 1909. This letter is today kept in the files containing the Machlup-Mises correspondence, at the Hoover Institution. See also the undated and non-addressed manuscript of a letter (written in the fall of 1937); Grove City Archive: Kammer für Handel, Gewerbe und Industrie files.

⁹ See Joseph A. Schumpeter, “Eugen von Böhm-Bawerk,” Neue Österreichische Biographie (Vienna, 1925), vol. 2, p. 65; Shigeki Tomo, Eugen von Böhm-Bawerk (Marburg: Metropolis, 1994), p. 53.

¹⁰ “The civil service was considered to be the nobilium officium par excellence, while top executive positions with private firms were valued far less highly.” Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 158.

¹¹ His 1909 curriculum vitae describes his position as that of a Konzeptspraktikant at the k.k. Finanzbezirksdirektion in Vienna. Mises's congratulatory letter on Spitzmüller's seventieth birthday in 1932 speaks of a Finanz-Landes-Direktion (head financial office of the regional government). See the June 12, 1932 letter in Mises Archive 71: 151. It is ironic that Mises would become the most outspoken and influential critic of the policies of the Austro-Hungarian Bank under Spitzmüller's governorship.

¹² Mises, Bureaucracy (New Haven, Conn.: Yale University Press, 1944), p. 94.

¹³ Quoted from Heinrich Treichl, Fast ein Jahrhundert (Vienna: Zsolnay, 2003). The question was addressed to Treichl's father Alfred, a friend of Mises's, who had made exactly the same decision a few years earlier.

¹⁴ Second floor, Krugerstr. 13.

¹⁵ Mises, “Die wirtschaftspolitischen Motive der österreichischen Valutaregulierung,” Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung 16 (1907): 561–82.

¹⁶ Mises, “Neuere Schriften über Geld- und Bankwesen,” Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung 17 (1908): 660–74.

¹⁷ Erich Streissler states that Menger applied exactly this technique in his lectures to Crown Prince Rudolf; see Streissler, “Menger's treatment of economics in the Rudolf lectures,” Erich W. Streissler and Monika Streissler, eds., Carl Menger's Lectures to Crown Prince Rudolf of Austria (Aldershot, U.K.: Edward Elgar, 1994), p. 11.

¹⁸ See Mises, Erinnerungen, pp. 14f.

¹⁹ Ibid., pp. 64f.

²⁰ See Martine Brunschwig Graf, Jean-Claude Frachebourg, Norman Scott, and Peter Tschopp, HEI 1927–2002 (Geneva: Graduate Institute of International Studies, 2002), p. 45. This part of the book was written by Norman Scott.

²¹ See Mises, “The Foreign Exchange Policy of the Austro-Hungarian Bank,” Economic Journal 19 (June 1909): 201–11. Edgeworth, the editor of the journal, had asked Philippovich to write this paper, but Philippovich had no time and proposed Mises.

²² See Mises, “Das Problem gesetzlicher Aufnahme der Barzahlungen in Oesterreich-Ungarn,” Jahrbuch fuer Gesetzgebung, Verwaltung und Volkswirtschaft (Schmollers Jahrbuch) 33, no. 3 (1909): 985–1037. He also expressed these thoughts in his Theory of Money and Credit (London: Jonathan Cape, 1934); reprinted (Indianapolis: Liberty Classics, 1980) and commented on the problem in Mises, “Austrian Empire, Finance and Banking,” Encyclopaedia Britannica, 12th ed. (1921), vol. 30, pp. 323f.

²³ On the incident, see Mises, Erinnerungen, pp. 28–32.

²⁴ See Walther Federn in Jahrbuch filer Gesetzgebung, Verwaltung und Volkswirtschaft (Schmollers Jahrbuch) 34 (1910): 151ff.; Otto Neurath, “Geset-zliche Barzahlungen und Kriegsfall,” in ibid., pp. 417ff.; Mises, “Zum Problem gesetzlicher Aufnahme der Barzahlungen in Öesterreich-Ungarn: Ein Schlusswort gegenüber Walther Federn,” in ibid., pp. 1877–84. Also see Fed-ern's piece in Der oesterreichische Volkswirt 44 (July 31, 1909).

²⁵ Mises, Erinnerungen, p. 31; Notes and Recollections, pp. 51f. He added:

Throughout my life I have held to these principles. I knew a great deal, if not all, about the corruption of interventionists and socialists with which I had to cope. But I never made use of this knowledge, which was not always properly understood by others.... It was often held against me that I politely rejected offers to supply me with proof, admissible in courts of law, of embezzlement and frauds by my opponents.

²⁶ This decision of the Vienna Chamber of Commerce seems to have been paralleled at many other places in Germany and Austria-Hungary since the late 1890s; see Franz Boese, Geschichte des Vereins für Sozialpolitik, 1872–1932 (Berlin: Duncker & Humblot, 1939), p. 126.

²⁷ See Franz Geissler, “Die Entstehung und der Entwicklungsgang der Handelskammern in Österreich,” Hans Mayer, ed., Hundert Jahre österreichischer Wirtschaftsentwicklung, 1848–1948 (Vienna: Springer, 1949), pp. 104, 108. See also Bundeskammer and Wiener Kammer der gewerblichen Wirtschaft, eds., 100 Jahre Handelskammern in Österreich (Vienna: Amtsblatt der Bundeskammer der gewerblichen Wirtschaft, 1948), p. 136.

²⁸ See Mises, Erinnerungen, pp. 45f.

²⁹ See Treichl, Fast ein Jahrhundert, p. 17. After the war, he ran the Bie-dermann Bank with Schumpeter, its brief-tenured president.

³⁰ One author claims that he was hired on October 15, 1909 as a provisional Konzipient (an aspiring lawyer who has only recently passed his exams). See Alexander Hörtlehner, “Ludwig von Mises und die österreichische Han-delskammerorganisation,” Wirtschaftspolitische Blätter 28, no. 4 (1981): 141. This seems to be wrong. In a May 1909 newspaper report Mises is mentioned as a “representative of the Kammer Bureau.” See Neue Freie Presse (10 May 1909), p. 4.

³¹ At this point, Mises was still living in I., Friedrichstrasse 4. Ludwig and his mother moved to another apartment in 1911. The new address was Wol-lzeile 24, also in the first district. See the Wohnungszeugnis (housing certificate) in Grove City Archive: file #6/9/1/1. Housing regulations prevented Ludwig from keeping the apartment when his mother died in 1937. By October 31 of that year, he found new tenants who sublet him one room, where he stored his library and personal documents. See his letter to the housing administration, dated September 24, 1937; Grove City Archive: file #6/9/1/1.

³² Mises, Erinnerungen, p. 46.

³³ Their opponents were agrarian circles that championed free trade, but only in industrial products. See Bundeskammer and Wiener Kammer der gewerblichen Wirtschaft, eds., 100 Jahre Handelskaminern in Österreich, p. 126. Still the Kammer's demeanor had to be moderate and reasonable. Some Austrian industrialist hardliners therefore created a number of other institutions of a more combative character, in particular the Industriellenklub (founded 1875). After World War I, it merged with other similar organizations into the Hauptverband der Industrie Österreichs. One of Mises's best friends, Weiss von Wellenstein, led that organization.

³⁴ See Bundeskammer and Wiener Kammer der gewerblichen Wirtschaft, eds., 100 Jahre Handelskammern in Österreich, p. 135f.

³⁵ The official name of his position was “Konzipist.” See Mises Archive 107: 79.

³⁶ See Alois Gratz, “Die österreichische Finanzpolitik von 1848 bis 1948,” Hans Mayer, ed., Hundert Jahre österreichischer Wirtschaftsentwicklung, 1848–1948, pp. 265, 307, fn. 70, 309, fn. 123.

³⁷ Mises Archive 107: 55b.

³⁸ Mises Archive 107: 55c. In a postwar book, he would point out that the conflict between commercial and agricultural producers had an ethnic aspect, the former being predominantly German and the latter non-German. See Mises, Nation, Staat und Wirtschaft (Vienna: Manz, 1919), p. 134; translated by Leland B. Yeager as Nation, State, and Economy (New York: New York University Press, 1983), pp. 164f.

³⁹ Mises Archive 107: 55d, 62.

⁴⁰ See for example the press reports in Mises Archive 107: 62, 71a.

⁴¹ See for example Mises Archive 107: 71.

⁴² All over the world, there were various “Young” movements: among the Czechs, the Chinese, in literature, painting, politics, etc.

⁴³ Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 138.

⁴⁴ Ibid., p. 143.

⁴⁵ See Boese, Geschichte des Vereins für Sozialpolitik, 1872–1932, pp. 131, 133; see also Mises's letter to Franz Böse dated September 30, 1919 in Mises Archive 53: 47f.

⁴⁶ Other topics dealt with were problems of enterprise owned by local government and a memorial lecture on the German economist Hansen, which was delivered by Georg F. Knapp.

⁴⁷ See Mises, “Max Weber und der Kathedersozialismus,” Kritik des Interventionismus (reprint, Darmstadt: Wissenschaftliche Buchgesellschaft, [1929] 1976, pp. 85ff.); Dieter Lindenlaub, “Richtungskämpfe im Verein für Sozialpolitik,” Vierteljahrschrift für Sozial- und Wirtschaftsgeschichte, Beiheft no. 52 (1967), pp. 272ff.; Dieter Krüger, “Max Weber und die ‘Jüngeren’ im Verein für Socialpolitik,” Wolfgang Mommsen and Wolfgang Schwentker, eds., Max Weber und seine Zeitgenossen (Göttingen: Veröffentlichungen des Deutschen Historischen Instituts London, 1988), pp. 98–136.

⁴⁸ Adolf Weber had no family ties with the brothers Alfred Weber and Max Weber.

⁴⁹ Mises, Kritik des Interventionismus, pp. 86f.; the translation is from Mises, A Critique of Interventionism, Hans Sennholz, trans. (New York: Arlington House, 1977), p. 103.

⁵⁰ Heino Heinrich Nau points out that Max Weber merely elaborated Carl Menger's methodological position. His main contribution was to synthesize Menger's methodology with Heinrich Rickert's theory of value relations. The debate on value freedom itself was therefore a continuation of Methodenstreit between Menger and Schmoller. After World War II, there was another round of essentially the same debate in the so-called Positivismusstreit, which at the beginning of the 1960s opposed the Marxist Frankfurt School and Karl Popper and his followers. See Nau, “‘Zwei Ökonomien.’ Die Vorgeschichte des Werturteilsstreit in der deutschsprachigen Ökonomik,” Nau, ed., Der Wer-turteilsstreit. Die Äusserungen zur Werturteilsdiskussion iin Ausschuss des Vereins für Sozialpolitik (1913) (Marburg: Metropolis, 1996), pp. 9–64.

⁵¹ The cartels reduced foreign competition and thus they diminished—for a while at least—the downward pressure on wage rates in the least competitive industries. Workers employed in these industries had less incentive to emigrate than they otherwise would have had.

⁵² Verhandlungen der Generalversammlung in Mannheim,” Schriften des Vereins für Socialpolitik 116 (Berlin: Duncker & Humblot, 1906).

⁵³ On Naumann see Ralph Raico, Die Partei der Freiheit (Stuttgart: Lucius & Lucius, 1999), chap. 6.

⁵⁴ Boese, Geschichte des Vereins für Sozialpolitik, 1872–1932, p. 113.

⁵⁵ Ibid., p. 133.

⁵⁶ See Friedrich von Wieser, “Der Geldwert und seine Veränderungen,” Schriften des Vereins für Socialpolitik 132 (Munich, 1909); reprinted in idem, Gesammelte Abhandlungen, F.A. Hayek, ed. (Tübingen: Mohr, 1929), pp. 193–242.

⁵⁷ The lecture manuscript was also published in the Verein's series. See Friedrich von Wieser, “Über die Messung der Veränderungen des Geldw-ertes,” Schriften des Vereins für Socialpolitik 132 (Munich, 1909); reprinted in idem, Gesammelte Abhandlungen, Hayek, ed., pp. 243–52.

⁵⁸ Mises, “Eugen von Philippovich,” Neue Österreichische Biographie (Vienna, 1926), 1st section, vol. 3, p. 56.

⁵⁹ See Max Weber, Gesammelte Aufsätze zur Wissenschaftslehre (Tübingen: Mohr).

⁶⁰ Max Weber, “Verhandlungen des Vereins für Socialpolitik in Wien, 1909,” Schriften des Vereins für Socialpolitik 132 (Munich and Leipzig: Duncker & Humblot, 1910): 583.

⁶¹ Mises, “Eugen von Philippovich,” p. 60.

⁶² The Vienna debate had a follow-up in a meeting of the Verein's Committee, which took place on January 5, 1914 in Berlin and was dedicated exclusively to the discussion of the role of value judgments in economic science. In order to avoid unsuitable publicity, the fifteen papers on which the meeting was based were not published, and there are no records of the debate. The meeting was the culmination of the value-judgment debate, which in modified form was continued in the 1960s in the so-called Positivis-musstreit. Meanwhile those fifteen papers have fortunately been published. See Nau, ed., Der Werturteilsstreit.

⁶³ By early January 1909, Weber had taken part in a meeting in Berlin to prepare the establishment of the sociological association. Among the thirty-nine other participants were Ferdinand Tönnies, Georg Simmel, Werner Sombart, Friedrich Herkner, Paul Barth, Ludwig Goldscheid, Hermann Kantorowicz, Franz Oppenheimer, Ernst Troeltsch, and his brother Alfred. Max Weber was also among the signers of the open letter of invitation to the first meeting of the Association in Frankfurt in 1910, where Tönnies was elected president and Weber himself treasurer.

⁶⁴ See Mises Archive 107: 70, 95.

⁶⁵ See Mises, “La Réforme financière en Autriche,” Revue Économique Internationale 7, no. 4 (October 1910): 39–59; idem, “Neue Literatur über Geld- und Bankwesen,” Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung 19 (1910): 385–95.

⁶⁶ See Ludwig von Mises, “Die neue Regierungsvorlage zur Abänderung des Personalsteuergesetzes,” Neue Freie Presse (#16931, October 10, 1911); copy is in Mises Archive 106: 7.

⁶⁷ See Mises, “Der ‘kleine Finanzplan’ des Abgeordneten Steinwender,” Neue Freie Presse (December 5, 1912); copy in Mises Archive 106: 10.

⁶⁸ See Mises Archive 107: 81.

⁶⁹ This line of argument seems to have been especially pronounced at the end of his campaign. A case in point is a report that he probably submitted in May 1913 on the proposed taxation of insurance contracts. Mises here criticized the differential treatment of agrarian and urban segments of the population, and the excessive orientation of the proposal toward the interests of the financial administration. See Mises Archive 107: 92.

⁷⁰ See Gratz, “Die österreichische Finanzpolitik von 1848 bis 1948,” p. 264.

⁷¹ Mises received fifty complimentary copies and had to pay 1372.50 marks (or 26.6 oz of gold) as his share of the total production costs (2264.18 marks). The first edition comprised 1,000 copies plus 100 complimentary copies for reviews and gifts (see Mises Archive 50a: 36f.).

⁷² See correspondence in Mises Archive 50a.

⁷³ Max Weber, Wirtschaft und Gesellschaft, 3rd ed. (Tübingen: Mohr, 1947), vol. 1, § 6, p. 40. In the English edition, this passage is not quite correctly translated as “The formulation of monetary theory, which has been most acceptable to the author, is that of von Mises.” Economy and Society: An Outline of Interpretive Sociology, Guenther Roth and Claus Wittich, eds. (Berkeley: University of California Press, 1978), p. 78.

⁷⁴ See Joseph Schumpeter, “Das Sozialprodukt und die Rechenpfennige: Glossen und Beiträge zur Geldtheorie von heute,” Archiv für Sozialwissenschaften und Sozialpolitik 44 (1917–1918).

⁷⁵ “The principal advantages of the work are found in that the author, in all mastery of the theory, never allows himself to fall into unrealistic abstractions, but remains fully grounded in fact.” Albert Hahn, review in Archiv für Soziahwissenschaften und Sozialpolitik, quoted from Mises Archive 87a: 11f.

⁷⁶ Benjamin M. Anderson, The Value of Money (New York: Macmillan, 1917), p. 100.

⁷⁷ See Mises, Erinnerungen, p. 18. See also Otto Ehrlich to Mises, letter dated April 29, 1942; Grove City Archive: Ehrlich file.

Chapter 6. Treatise on Money

¹ Landmarks are his essay on “Sociology and History” (1929) and several book publications: Epistemological Problems of Economics (first German edition, 1933; translated into English by George Reisman [Princeton, N.J.: Van Nostrand, 1960; 3rd ed., Auburn, Ala.: Ludwig von Mises Institute, 2003]); Nationalökonomie (Geneva: Editions Union, 1940); Human Action (New Haven, Conn.: Yale University Press, 1949; 3rd ed. [Auburn, Ala.: Ludwig von Mises Institute, 1998); Theory and History (New Haven, Conn.: Yale University Press, 1957; reprinted Auburn, Ala.: Ludwig von Mises Institute, 1985); and The Ultimate Foundation of Economic Science (New Rochelle, N.Y: Arlington House, 1962).

² See Carl Menger, Grundsätze der Volkswirthschaftslehre (Vienna: Braumüller, 1871); idem, Untersuchungen über die Methode der Socialwissenschaften und der Politischen oekonomie insbesondere (Leipzig: Duncker & Humblot, 1883).

³ Mises, Notes and Recollections (Spring Mills, Penn.: Libertarian Press, 1978), pp. 55f.

⁴ Mises, Erinnerungen (Stuttgart: Gustav Fischer Verlag, 1978), p. 74; Notes and Recollections, p. 112. See also Murray N. Rothbard, Ludwig von Mises: Scholar, Creator, Hero (Auburn, Ala.: Ludwig von Mises Institute, 1988), and James Rolph Edwards, The Economist of the Century: Ludwig von Mises in the History of Monetary Thought (New York: Carlton Press, 1985).

⁵ Although Menger delivered a painstaking analysis of the process of the emergence of money (a process that was in his view the best illustration of the emergence of social institutions) he was not the first economist to point out that money does not come into being by social contract. Among Menger's predecessors were John Law (1705), Ferdinando Galliani (1751), Étienne de Condillac (1776), Adam Smith (1776), Antonio Genovesi (1788), Jean-Baptiste Say (1802), and Richard Whately (1832). On the emergence of this approach in the eighteenth century see Arthur E. Monroe, Monetary Theory before Adam Smith (New York: Augustus M. Kelley, [1923] 1966).

⁶ Mises, Theory of Money and Credit, p. 65; also Mises quoted Böhm-Bawerk's Rechte und Verhältnisse vom güterwirthschaftlichen Standpunkte, pp. 120ff.

⁷ Regrettably, this comparative focus of his analysis was lost in the English translation of the title of the book: Theory of Money and Credit. The term Umlaufsmittel, which literally translates into “means of circulation,” was rendered in the English text as “fiduciary media.” Consequently the title of the book should have been Theory of Money and Fiduciary Media, but the publisher decided that the unusual terminology would irritate readers and thus opted for the smoother but toothless Theory of Money and Credit, failing to honor the fact that even in the original German version the expression was unusual. Mises was hostile to innovations in language that were not justified by the analysis of hitherto neglected phenomena. But the difference between money certificates on the one hand, and Umlaufsmittel on the other was such a neglected phenomenon, to the point that established scientific terminology even lacked the means for expressing this difference. Mises thus introduced the expression Umlaufsmittel for this purpose and even used it in the title of his book to highlight its importance.

⁸ See Franz Cuhel, Zur Lehre von den Bedürfnissen. Theoretische Untersuchungen über das Grenzgebiet von Ökonomik und Psychologie (Innsbruck: Wagner, 1907).

⁹ See ibid., pp. 190f. Böhm-Bawerk had made this claim in a long essay on the theory of value, his first statement on value theory. See Böhm-Bawerk, “Grundzüge der Theorie des wirtschaftlichen Güterwertes,” Jahrbücher für Nationalökonomie und Statistik n.s. 13 (1886): 48. It was this passage that met with criticism in Cuhel and Mises. Mises said many years later that, in distinct contrast to corresponding passages in Böhm-Bawerk's Positive Theory of Capital (New York: G.E. Stechert, 1930), the statement in Grundzüge “was incompatible with the whole tenor of Böhm's theory” (Mises to A.E. Foerster, letter dated March 2, 1965; Grove City Archive: Böhm-Bawerk file). This letter raises a certain problem because Mises here said that Böhm-Bawerk eventually realized his error and expressed the correct formulation in a later edition of Capital and Interest (South Holland, Ill.: Libertarian Press, 1959, vol. 2, bk. 3, part A, chap. 3, p. 148). But in the second edition of Theorie des Geldes und der Umlaufsmittel, 2nd ed. (Munich and Leipzig: Duncker & Humblot, 1924, p. 13), Mises said Böhm-Bawerk had not said anything new on this matter.

¹⁰ See Cuhel, Zur Lehre von den Bedürfnissen, pp. 178f.

¹¹ See ibid., p. 210. Cuhel called subjective utilities by the unusual name of “Egenzen.” In an analogous case, Vilfredo Pareto called subjective utility “ophélimité.”

¹² Mises, Notes and Recollections, p. 58.

¹³ See Henri Cernuschi, Nomisma; or, “Legal Tender” (New York: Appleton & Co., 1877); Josef von Neupauer, Die Schäden und Gefahren der Valutaregulierung für die Volkswirtschaft und die Kriegsbereitschaft (Vienna: Lesk & Schwidernoch, 1892); Wilhelm Lexis, “Papiergeld,” Handwörterbuch der Staatswissenschaften (Jena: Gustav Fischer, 1893; 2nd ed., 1901, 3rd ed., 1910). Mises mentions Neupauer's book in Mises, “Die wirtschaftspolitischen Motive der österreichischen Valutaregulierung,” Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung 16 (1907): 578.

¹⁴ See Georg F. Knapp, Staatliche Theorie des Geldes, 2nd ed. (Munich & Leipzig: Duncker & Humblot, 1918), p. 1.

¹⁵ See ibid., p. 31. Knapp thought he had to create an entirely new vocabulary to adequately deal with the theory of money and among many other innovations came up with the expression “chartal.”

¹⁶ In particular Andreas Voigt, one of the leaders of the small but growing cadre of anti-Schmoller economists, gave Knapp an unfavorable review. See Andres Voigt, “Die staatliche Theorie des Geldes,” Zeitschrift für die gesamte Staatswissenschaft 62 (1906): 317–40.

¹⁷ See L. Calligaris, “Staatliche Theorie des Geldes,” Münchener Allgemeine Zeitung (February 1, 1906); idem, “Staatliche Theorie des Geldes,” Österreichische Rundschau 7, no. 80 (May 10, 1906); F. Bendixen, Das Wesen des Geldes (Leipzig: Duncker & Humblot, 1908), p. 3; idem, “Fünf Jahre Geldtheorie,” Bank-Archiv 10, no. 10 (1911): 145ff.; W. Lexis, “Eine neue Geldtheorie,” Archiv für Sozialwissenschaften und Sozialpolitik 5 (1906): 557–74; idem, “Die Knappsche Geldtheorie,” Jahrhücher für Nationalökonomie und Statistik, 3rd series, 32 (1906): 534–45.

¹⁸ Ludwig von Mises, Staat, Nation und Wirtschaft (Vienna: Manz, 1919), p. 5, n. 3. Mises referred to Anderson's verdict that Knapp's book “has had wide influence on German thinking on money. It is typical of the tendency in German thought to make the State the center of everything.” Benjamin M. Anderson, The Value of Money (New York: Macmillan, 1917), p. 433. He also quoted Carl Menger's exasperated comment on the success of the State Theory of Money: “It is the logical development of Prussian police science. What are we to think of a nation whose elite, after two hundred years of economics, admire such nonsense, which is not even new, as highest revelation?” Mises, Erinnerungen, p. 20; Notes and Recollections, p. 35.

¹⁹ Mises, Theory of Money and Credit, p. 93.

²⁰ This particular standpoint for evaluating social problems is also reflected in the standard German names for the discipline of economics: “Nationalökonomie” (national economics) and “Volkswirtschaftslehre” (theory of the economy of the nation).

²¹ John Stuart Mill, Principles of Political Economy (Fairfield, Conn.: Augustus M. Kelley, [1848] 1976), bk. 3, chap. 7, § 3, p. 488.

²² See Knut Wicksell, Geldzins und Güterpreise (Jena: Gustav Fischer Verlag, 1898).

²³ See Karl Helfferich, Das Geld, 5th ed. (Leipzig: Hirschfeld, [1903] 1921), pp. 544ff. It is noteworthy that in his exposition Helfferich conflates physical and value terms.

²⁴ See Friedrich von Wieser, “Der Geldwert und seine geschichtlichen Veränderungen,” Zeitschrift für Volkswirtschaft, Socialpolitik und Verwaltung 13 (1904); reprinted in Wieser, Gesammelte Abhandlungen (Tübingen: Mohr, 1929), pp. 164–92.

²⁵ Mises later explained that the tenets of the Currency School were unacceptable to the kathedersocialist mindset because it seemed to leave no scope for government intervention. The German professors

favored the Banking School. The victory of the Historical School practically brought excommunication of the Currency School. Karl Marx, Adolf Wagner, Helfferich, Hilferding, Havenstein, and Bendixen held to the doctrines of the Banking School. (Ludwig von Mises, A Critique of Interventionism [New York: Arlington House, 1977], p. 94)

Even after World War I, the mainstream opinion among German monetary economists was that the Banking School had won the debate with the Currency School on virtually all substantive issues. The fact that John Stuart Mill, arch-advocate of the veil-of-money theory, endorsed the banking theory with only slight modifications played a crucial role in its sweeping success. See W. Mildschuh, “Geschichtliche Entwicklung der Geldtheorie,” Handwörterbuch der Staatswissenschaften 4 (1927): 720; J.S. Mill, Principles of Political Economy, book 3, chap. 24. Mill's view was probably strongly influenced by the crisis that erupted in 1846 despite the Bank Charter Act (1844), which sought to put the principles of the Currency School into legislation.

²⁶ In Geldzins und Güterpreise (pp. 34ff. and passim), Knut Wicksell had already delivered a scathing critique of the main tenets of the Banking School. His book was pointedly ignored at the time, as was Mises's Theory of Money and Credit. Only after World War I did both books enjoy a renaissance.

²⁷ See Wieser, “Der Geldwert und seine geschichtlichen Veränderungen,” pp. 180f. This was also Knut Wicksell's view; see in particular Geldzins und Güterpreise, chap. 3, where he elaborates on the distinction between relative prices and money prices. Wicksell's book had virtually no impact on the German scene at the time it first appeared. But his monetary views seem to have influenced his countryman Gustav Cassel, and through Cassel they eventually reached a broad academic audience after World War I, when Cassel's textbook became the main work of reference on theoretical economics at German Universities. See Gustav Cassel, Theoretische Sozialökonomik, 4th ed. (Leipzig: Deichert, 1927), in particular book three.

²⁸ For similar reasons, Wicksell believed that a cashless payment system or pure credit economy was possible. See his Geldzins und Güterpreise, pp. 58, 64ff.

²⁹ See Wieser, “Der Geldwert und seine geschichtlichen Veränderungen,” pp. 169, 175, 179.

³⁰ See ibid., pp. 175, 184.

³¹ See ibid., pp. 176f.

³² See Reinhard Kamitz, “Die österreichische Geld- und Währungspolitik von 1848 bis 1948,” Hans Mayer, ed., Hundert Jahre österreichischer Wirtschaftsentwicklung, 1848–1948 (Vienna: Springer, 1949), pp. 145f.

³³ See Wieser, “Der Geldwert und seine geschichtlichen Veränderungen,” pp. 184ff.

³⁴ He admitted that the increased production of commodity money was another factor explaining the secular decline of the purchasing power of money (see ibid., p. 192). Another factor was government expenditures, which were “shifted forward” in the form of taxation and thus “added” to prices, implying a lower purchasing power of money (see ibid., p. 186).

³⁵ Friedrich von Wieser, “Der Geldwert und seine Veränderungen,” Schriften des Vereins für Socialpolitik 132 (Munich and Leipzig: Duncker & Humblot, 1909); reprinted in Wieser, Gesammelte Abhandlungen, Hayek, ed., pp. 193–242.

³⁶ See ibid., pp. 204f., 208, 211. Wieser stressed that the value of money was determined in monetary exchanges of consumers' goods only. This precluded taking into consideration, for example, idle cash holdings not used in market exchanges, or monetary exchanges on the markets for producers' goods. The values of producers' goods were in fact merely derived from the values of consumers' goods (see ibid., pp. 214, 219).

³⁷ See ibid., pp. 165, 173. Wieser here argued that money was an object of exchange only in case it was bought and sold as monetary capital.

³⁸ Wieser, “Der Geldwert und seine Veränderungen,” p. 220. Joseph Schumpeter adopted the same point of view. See his Theorie der wirtschaftlichen Entwicklung (Leipzig: Duncker & Humblot, 1911), p. 196.

³⁹ In the English edition of Mises's book, Anweisungstheorie is translated as “claim theory” (see Mises, Theory of Money and Credit, appendix). The translation is however somewhat inappropriate. The term “claim” involves an underlying legalistic interpretation of what the assignment theorists hold the nature of money to be. But compared to a legal interpretation of money as a claim, the flaws of the assignment theory look minor. It is obvious that market exchanges are categorically different from the redemption of claims. But assignment theorists never subscribe to such clearly stated (and clearly wrong) interpretations of money. Their doctrine survives precisely because it is ambiguous.

⁴⁰ John Law, Money and Trade Considered with a Proposal for Supplying the Nation with Money (Edinburgh: Anderson, 1705), chap. 2. While Mises rejected this view, he accepted as fundamental the distinction that Law had made between the monetary and non-monetary demand for money:

It is reasonable to think Silver was Barter'd as it was valued for its Uses as a Mettal, and was given as Money according to its Value in Barter. The additional Use of Money Silver was apply'd to would add to its Value, because as Money it remedied the Disadvantages and Inconveniences of Barter, and consequently the demand for Silver encreasing, it received an additional Value equal to the greater demand its Use as Money occasioned. (ibid., chap. 1)

⁴¹ See in particular Henry D. Macleod, Theory and Practice of Banking, 2 vols. (London: Longman, Brown, Green, and Longmans, 1855), vol. 1. In the first chapter, the author characterizes money as an “evidence of debt being made transferable.” Again, although Mises rejected this opinion, he learned an important lesson from MacLeod, namely, that bank deposits are substitutes for money in essentially the same way as banknotes. However, while MacLeod inferred that there was no point in limiting the issuance of new notes, Mises concluded that deposit creation had to be limited, just as note issues had been limited through Peel's Bank Charter Act.

⁴² Adolf Wagner, Die russische Papierwährung (Riga: Kymmel, 1868), p. 44.

⁴³ Mises discusses Wagner's impact in Money, Method, and the Market Process: Essays by Ludwig von Mises, Richard Ebeling, ed. (Boston: Kluwer, 1990), chap. 7.

⁴⁴ Eugen von Böhm-Bawerk, Innsbrucker Vorlesungen über Nationalökonomie, Shigeki Tomo, ed. (Marburg: Metropolis, 1998), p. 211. This is from his Innsbruck lectures in the early 1880s. One must assume that Böhm-Bawerk stressed the same point in his lectures in Vienna.

⁴⁵ See Wieser, “Der Geldwert und seine Veränderungen,” p. 240.

⁴⁶ See ibid., pp. 229f.

⁴⁷ See F.X. Weiss, “Die moderne Tendenz in der Lehre vom Geldwert,” Zeitschrift für Volkswirtschaft, Socialpolitik und Verwaltung 19 (1909): 532ff.

⁴⁸ Wicksell relied on the same assumption. See Wicksell, Geldzins und Güterpreise, pp. 17ff.

⁴⁹ Again, Wicksell's monetary thought suffered from the same flaw. See ibid. pp. 20f., 64f.

⁵⁰ Mises here quotes Friedrich von Wieser, Der natürliche Wert (Vienna: Hölder-Pichler-Tempsky, 1889) p. 46.

⁵¹ See Mises, Theory of Money and Credit, p. 119.

⁵² See Mises, Nationalökonomie (Geneva: Editions Union, 1940), pp. 361f.; Human Action, Scholar's edition (Auburn, Ala.: Ludwig von Mises Institute, 1998) p. 408.

⁵³ Similarly, in his first publication on monetary problems, he had asserted at the beginning of his exposition that the media of circulation need to be “adjusted” to the demand for money. And in the same vein, he talks about conditions for a possible lack of fiduciary media. Such a condition holds when the quantity of the means of payment lags behind the economic development. This would “certainly lead to credit restrictions and, as a consequence, symptoms of economic crises.” See Mises, “Die wirtschaftspolitischen Motive der österreichischen Valutaregulierung,” pp. 562, 572.

⁵⁴ Discussing a somewhat different issue, Mises later admitted that at the time he wrote The Theory of Money and Credit he “was still too much under the influence of Mill” (Notes and Recollections, p. 60). This prevented him from decisively arguing against Böhm-Bawerk's ideas about money-induced “frictions;” but Mill's influence seems to have reached further than that.

⁵⁵ See Nikolay Gertchev, “Dehomogenizing Mises's Monetary Theory,” Journal of Libertarian Studies 18, no. 3 (2004): 57–90.

⁵⁶ See Don Patinkin, Money, Interest, and Prices: An Integration of Monetary and Value Theory (Evanston, Ill.: Row, Peterson, and Co., 1956).

⁵⁷ See Mises, Erinnerungen, p. 37. In his lectures, Böhm-Bawerk had stressed the Cantillon effects, but believed that they would “mainly” entail a higher price level. Besides they would merely affect the relationship between debtors and creditors. Böhm-Bawerk, Innsbrucker Vorlesungen über Nationalökonomie, pp. 220f.

⁵⁸ Mises, Theory of Money and Credit, pp. 239–40.

⁵⁹ His teacher Grünberg had analyzed the redistributive impact of inflation during the Napoleonic wars in Grünberg, Studien zur österreichischen Agrargeschichte (Leipzig: Duncker & Humblot, 1901), pp. 121ff. Mises had dealt with these cases on pp. 222ff. of the first edition of Theorie des Geldes und der Umlaufsmittel (1912). He eliminated these passages from further editions because he believed historical illustrations of the harmful effects of inflation were no longer necessary in light of recent firsthand experiences in Germany and Austria.

⁶⁰ He quotes David Hume and David Ricardo. Among his contemporaries, he merely refers to Rudolf Auspitz and Richard Lieben, Untersuchun-gen über die Theorie des Preises (Leipzig: Duncker & Humblot, 1889), p. 65. Mises quotes them on pp. 240f. of his Theory of Money and Credit. Other forerunners, whom Mises did not mention, were Mill, Principles of Political Economy, bk. 3, chap. 8, § 2, p. 491; Hermann Heinrich Gossen, Entwickelung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für men-schliches Handeln (Braunschweig: Vieweg & Sohn, 1854), pp. 205f.; and John E. Cairnes, “Essay Towards A Solution of the Gold Question: The Course of the Depreciation,” Essays in Political Economy: Theoretical and Applied (London: Macmillan, [1858] 1873), pp. 53ff.

⁶¹ The expression is Mark Blaug's. See Mark Blaug, Economic Theory in Retrospect, 4th ed. (Cambridge: Cambridge University Press, 1985), pp. 21ff.

⁶² See Richard Cantillon, Essay on the Nature of Commerce in General (reprint, New Brunswick, N.J.: Transaction, 2001). Similarly, Mises also revived the analysis of local price differences, which had been neglected since Richard Cantillon. See Eduard Heimann, History of Economic Doctrines: An Introduction to Economic Theory (New York: New York University Press, 1945), p. 43.

⁶³ See in particular Irving Fisher, The Purchasing Power of Money: Its Determination and Relation to Credit, Interest, and Crises, 2nd ed. (New York: Augustus M. Kelley, [1913] 1985).

⁶⁴ In contrast, Mises's analysis might have influenced John Maynard Keynes, who recognized the great importance of Cantillon effects and advocated monetary stabilization as a strategy for social conservation. See in particular John Maynard Keynes, A Tract on Monetary Reform (London: Macmillan, 1923); see also idem, Indian Currency and Finance (London: Macmillan, 1913); The Economic Consequences of the Peace (London: Macmillan, 1920). Keynes had dismissively reviewed Mises's book in the Economic Journal (September 1914): 417–19 in fairly vague and evasive terms. Later he confessed that “in German I can only clearly understand what I know already!” Treatise on Money (New York: Harcourt Brace, 1930), vol. 1, p. 199, footnote.

⁶⁵ See Otto Heyn, Irrtümer auf dem Gebiete des Geldwesens (Berlin, 1900), pp. 30f.; idem, Die indische Währungsreform (Berlin, 1903), p. 82; W. Lexis, “Papiergeld,” Handwörterbuch der Staatswissenschaften, 3rd ed. (Jena: Gustav Fischer, 1909–1911), vol. 6, p. 989; Georg D. Knapp, Staatliche Theorie des Geldes (Leipzig, 1905), p. 208.

⁶⁶ See Ludwig von Mises, “Die wirtschaftspolitischen Motive der österreichischen Valutaregulierung,” Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung 16 (1907), p. 565.

⁶⁷ Mises, Theory of Money and Credit, p. 284.

⁶⁸ Ibid.

⁶⁹ Ibid., p. 207.

⁷⁰ Here Mises referred to his treatment of these predecessors in the first edition of Theorie des Geldes und der Umlaufsmittel, 1st ed. (Leipzig and Munich: Duncker & Humblot, 1912), pp. 203ff.

⁷¹ Ludwig von Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” Schriften des Vereins für Sozialpolitik 164, no. 2 (Munich: Duncker & Humblot, 1923): 21f.

⁷² See Kurt Singer's book review in Deutsche Wirtschaftszeitung (June 1, 1913).

⁷³ Mises to Lederer, letter dated January 29, 1920; Mises Archive 73: 41f.

⁷⁴ See Gustav Cassel, “The Present Situation of the Foreign Exchanges,” Economic Journal 26 (1916): 62–65; idem, “Abnormal Deviations in International Exchanges,” Economic Journal 28 (1918): 413–15; idem, Theoretische Sozialökonomie, 4th ed. (Leipzig: Deichert, 1927), §§ 60 and 89.

⁷⁵ Mises, Notes and Recollections, p. 60.

⁷⁶ At about the same time, two other members of Böhm-Bawerk's seminar presented original business cycle theories in elaboration of the principles of the Banking School. See Rudolf Hilferding, Das Finanzkapital (Berlin: Dietz, 1947 [1910]), part 4, chaps. 17 to 19; Joseph A. Schumpeter, Theorie der wirtschaftlichen Entwicklung (Munich: Duncker & Humblot, 1911).

⁷⁷ A group of French economists had developed similar ideas in the mid-1800s. Victor Bonnet argued that excessive investments in fixed capital—excessive meaning disproportionate in comparison to the investments in circulating capital—were responsible for economic crises; and Charles Coquelin had anticipated Knut Wicksell in elaborating the hypothesis that business cycles were caused by credit expansions. See Charles Coquelin, Du credit et des banques (Paris: Guillaumin, 1848); Victor Bonnet, Etudes sur la monnaie (Paris: Guillaumin, 1870). A good survey of nineteenth-century business cycle theories is in Eugen von Bergmann, Geschichte der nationalökonomischen Krisentheorien (Stuttgart: Kohlhammer, 1895).

⁷⁸ In 1903, Werner Sombart had presented a “disproportionality theory” of the business cycle at a meeting of the Verein für Socialpolitik in Hamburg (Schriften des Vereins für Socialpolitik 113; Leipzig: Duncker & Humblot, 1903). Sombart argued that increased gold production had provoked a real-location of resources that was unsustainable after the gold production ceased. The ensuing crisis, which hit Germany in 1900–1902, was therefore a structural crisis that reflected the unsuitable use that had been made of the capital goods. Sombart's theory does not take into account the problem of inter-temporal misallocation.

⁷⁹ In Wieserian fashion, Wicksell defined the natural rate of interest as the rate that would come into existence under the sole influence of real (non-monetary) factors; see Wicksell, Geldzins und Güterpreise, pp. iii, 93ff. He also defined it as the rate at which the price level would remain constant (see ibid., p. 92). Both distinctions led to great confusion among later theorists, but Mises's business cycle theory seemed to show that it was useful to make some such distinction. In Human Action he would eventually show that the relevant distinction is between the equilibrium rate of interest and the market rate. Both rates are monetary rates and can therefore coincide.

⁸⁰ See ibid., pp. v-vi. Wicksell noticed that Frédéric Bastiat had made a similar point in his polemic against Proudhon. Only Bastiat had not insisted that the concomitant price increase would be over-proportional. See Frédéric Bastiat, Œuvres completes, 6th letter to Proudhon.

⁸¹ See Mises, Theorie des Geldes und der Umlaufsmittel, 2nd ed., pp. 364ff.

⁸² Wicksell comes closest to Mises's discovery when he points out that a low money rate (relative to the natural rate) will incite businessmen to launch additional investment projects and even observes that the low money rate disrupts general equilibrium (see Geldzins und Güterpreise, pp. 87f., 97). But he does not see the implication: that the structure of production is set on a path that is physically impossible to complete.

⁸³ As far as the exposition of Mises's business-cycle theory is concerned (part 3, chap. 5, in part § 4), there are no differences between the first edition and later editions. But for a few exceptions the text is exactly the same (see 1st ed., pp. 425–36; 2nd ed., pp. 366–75); the same is true for the entire chapter 5, except for § 5 (see below). Thus from the first edition, Mises's business-cycle theory contains the same discussion of forced savings, the reverse movement of prices, the natural rate of interest and deviations from it induced through fiduciary media, the importance of the subsistence fund, etc. as did all later editions. The difference between the first and the second edition relates to the concluding § 5 of chapter 5, where Mises discusses the significance of his own contribution to business-cycle theory.

⁸⁴ See Mises, Theorie des Geldes und der Umlaufsmittel, 1st ed., p. 433; my translation.

Chapter 7. The Great War

¹ See in particular Ludwig von Mises, Nation, Staat und Wirtschaft (Vienna: Manz, 1919); translated by Leland B. Yeager as Nation, State, and Economy (New York: New York University Press, 1983); and, Omnipotent Government: The Rise of the Total State and Total War (New Haven, Conn.: Yale University Press, 1944).

² Louise Sommer to Mises, letter of September 1917; Mises Archive 4: 143ff.

³ See Mises Archive 62: 143ff. and 100: 3.

⁴ See k.u.k. Armee, “Kriegsereignisse im Norden. Von der Mobilisierung bis einschliesslich der Schlacht bei Lemberg,” Österreichisch-ungarische Kriegsberichte aus Streffleurs Militärblatt (Vienna: Seidel & Sohn, 1915), bk. 1, pp. 7ff.

⁵ Mises, Nation, Staat und Wirtschaft, p. 112n; Nation, State, and Economy, p. 138n.

⁶ Information on equipment and organization of k.k. artillery batteries is contained in Mises Archive 3: 23ff.

⁷ See Mises Archive 100: 28.

⁸ See correspondence in Mises Archive 100: 13, 23, 15, 29, 31. Mises later denounced the bad treatment of the common soldiers as a serious impediment to the war effort:

From the political point of view it was a grave mistake to follow completely different principles in the compensation of the officer and the enlisted man and to pay the soldier at the front worse than the worker behind the lines. That contributed much to demoralising the army! (Nation, Staat und Wirtschaft, p. 135, n. 18; Nation, State, and Economy, p. 166)

⁹ See correspondence in Mises Archive 100: 20, 26, 35; 102: 6, 7, 8, 18, 33.

¹⁰ See Mises Archive 2: 97.

¹¹ See correspondence in Mises Archive 100: 19, 22.

¹² Correspondence in Mises Archive 2: 98.

¹³ See correspondence in Mises Archive 100: 49.

¹⁴ The book was first published 1918 in Berlin, and then remained for decades a standard monograph of aviation theory, being reprinted in a posthumous 6th edition in 1957 (Berlin). Before the war, Richard von Mises had already gained an expert reputation based on his Elemente der technischen Hydromechanik (Leipzig: B.G. Teubner, 1914).

¹⁵ Mises emphasizes that wartime public opinion strongly favored a confiscatory taxation of the great profits made in the armament industries. Initially, the Austrian leadership did not give in to these demands because it was aware of the military importance of having an efficient private production of war materials. See Mises, Nation, Staat und Wirtschaft, pp. 142f.

¹⁶ See correspondence in Mises Archive 100: 44.

¹⁷ Mises, Nation, Staat und Wirtschaft, p. 114; Nation, State, and Economy, pp. 140f. See also Rudolf Sieghart, Die letzten Jahrzehnte einer Grossmacht (Berlin: Ullstein, 1932), p. 282.

¹⁸ See k.u.k. Armee, “Kriegsereignisse im Norden. Von der Mobilisierung bis einschliesslich der Schlacht bei Lemberg,” Österreichisch-ungarische Kriegsberichte aus Streffleurs Militärblatt (Vienna: Seidel & Sohn, 1915), bk. 2, p. 35.

¹⁹ In the German: “es mit den Russen besser geht.” See postcard from Richard von Mises to Ludwig von Mises, dated December 18, 1914; in Mises Archive 2: 102.

²⁰ At least, this was the guess of Mises's uncle Alfred Landau. In a letter to Mises, dated December 3, 1914, he surmises that Mises's studies of the Ruthenian language will be helpful for the administration of the new “Gouvernement Tarnopol.” See Mises Archive 2: 118. Ruthenian was the language of the Ukrainians living under Austrian rule in the eastern part of Galicia.

²¹ See correspondence in Mises Archive 2: 102. This must have been Alfred Adler (1870–1937). Up to the 1930s, Adler was the most famous Vienna psychologist. He had first worked with Sigmund Freud, but early on went his own way in placing great emphasis on the particular conditions of each individual patient (Individualpsychologie).

²² See correspondence in Mises Archive 2: 103.

²³ See correspondence in Mises Archive 2: 116. A full description of his military decorations is in Marcel Klang, Die geistige Elite Österreichs (Vienna: Barth, 1936), pp. 617f.

²⁴ See correspondence in Mises Archive 102: 14.

²⁵ See Mises Archive 2: 21f., 24. He later observed that only the Austrian Germans and the Hungarians fought for the monarchy with full conviction, whereas the service of the Slavs and Romanians was half-hearted at best; many of them actually fought on the other side; see Mises, Nation, Staat und Wirtschaft, pp. 112f.

²⁶ Mises kept some news clippings about these successes, which were reported on daily. See Mises Archive 102: 29, 31. He later remarked that the success was due to the by-then inferior armament of the Russian troops; see Mises, Nation, Staat und Wirtschaft, p. 112n.

²⁷ Mises, Nation, Staat und Wirtschaft, pp. 114f.; Nation, State, and Economy, pp. 141.

²⁸ The main substance was willow bark (salix=willow).

²⁹ See correspondence in Mises Archive 102: 4, 6.

³⁰ See correspondence in Mises Archive 102: 27.

³¹ See Mises Archive 3: 34.

³² Newsflash Ödenburger Zeitung (Sopron), November 28, 1915:

Our Heroes. The well known and beloved Reserve Lieutenant Dr. Ludwig Edler von Mises, in civilian life an unsalaried lecturer at the University of Vienna, and currently stationed with our Thirtieth, was honored anew with the Signum Laudis in silver for his outstanding efforts before the enemy.

³³ He would stay in touch with them for the rest of his life. See for example, the correspondence with Col. Ottokar Schulz and with Max Sokal, dating from the 1960s; Grove City Archive: “S” files.

³⁴ See correspondence in Mises Archive 2: 36.

³⁵ See Mises Archive 3: 34f.

³⁶ See Mises Archive 3: 30ff.

³⁷ Mises later pointed out that wartime central planning started with Devisenzentralen or Foreign Exchange Centrals. See Mises, “Austrian Empire. Finance and Banking,” Encyclopedia Britannica, 12th ed. (1921), vol. 30, pp. 323f.

³⁸ See Jurij Krizek, “Die Kriegswirtschaft und das Ende der Monarchie,” R.G. Plaschka and K. Mack, eds., Die Auflösung des Habsburgerreiches (Munich: Oldenbourg, 1970), pp. 43–52; Götz Briefs, “Kriegswirtschaftslehre und Kriegswirtschaftspolitik,” Handwörterbuch der Staatswissenschaften, 4th ed. (Jena: Gustav Fischer, 1923), vol. 5, pp. 984–1022; H. Wittek, “Die kriegswirtschaftlichen Organisationen und Zentralen in Österreich,” Zeitschrift für Volkswirtschaft und Sozialpolitik (1922); Otto Göbel, Deutsche Rohstoffwirtschaft im Krieg (Stuttgart: Carnegie Stiftung, 1930).

³⁹ Briefs, “Kriegswirtschaftslehre und Kriegswirtschaftspolitik,” p. 1017.

⁴⁰ Mises, Nation, State, and Economy, p. 146; Nation, Staat und Wirtschaft, pp. 118f.:

It will be the task of economic history to describe in detail the stupidities of the economic policy of the Central Powers during the war. At one time, for example, the word was given to reduce the livestock by increased slaughtering because of a shortage of fodder; then prohibitions of slaughtering were issued and measures taken to promote the raising of livestock. Similar planlessness reigned in all sectors. Measures and countermeasures crossed each other until the whole structure of economic activity was in ruins.

⁴¹ Mises, Nation, Staat und Wirtschaft, p. 114; Nation, State, and Economy, p. 140.

⁴² Around August 20, Mises arrived in Vienna. Zerline, a relative, welcomed him after a week of “Butterstehen, Eierstehen, Milchstehen.” See Mises Archive 2: 123.

⁴³ See Mises Archive 4: 106.

⁴⁴ See Mises Archive 2: 43ff., 5: 23. One hundred and eighty-three kronen would be about 200 gold francs or 1.867 ounces of gold.

⁴⁵ See Mises Archive 4: 38.

⁴⁶ See Mises Archive 4: 35f., 77, 110ff. Ewald Pribram worked for the Zentralstelle für Wohnungsreform and as of August 1917 was the fiancé of Marianne Fürth (see Mises Archive 4: 173).

⁴⁷ See correspondence in Mises Archive 56: 22.

⁴⁸ Mises Archive 107: 94.

⁴⁹ He published these considerations shortly thereafter in an article for Weber's Archiv and later incorporated the piece as a chapter of the second edition of his Theorie des Geldes und der Umlaufsmittel (Munich and Leipzig: Duncker & Humblot, 1924). See Mises, “Zur Klassifikation der Geldtheorie” (On the classification of monetary theory), Archiv für Sozialwissenschaft und Sozialpolitik 44 (1917–1918): 198–213; idem, Theory of Money and Credit (London: Jonathan Cape, 1934), appendix A.

⁵⁰ See Heinrich Treichl, Fast ein Jahrhundert (Vienna: Zsolnay, 2003), p. 15.

⁵¹ The rotwild is a German Red Deer. The word rotwild literally translates to “red game animal.”

⁵² See Mises Archive 4: 69f. See also their correspondence following the publication of his Nation, Staat und Wirtschaft (in Mises Archive 53: 56ff.).

⁵³ See Mises Archive 2: 87. It seems as if shortly before, in April 1916, he had briefly visited his old regiment in Vasarhely in Hungary (see Mises Archive 2: 77).

⁵⁴ See, for Kelsen and Amonn, Mises Archive 4: 61f.; for Broda, Mises Archive 4: 97ff.; for Schwarz, Pribram, Brockhausen, Adler, Perels, and Bartsch see Mises Archive 4: 41f.

⁵⁵ Être vrai partout, même pour sa patrie [sic]. Tout citoyen est obligé de mourir pour sa patrie; personne n'est obligé de mentir pour elle.” Montesquieu, Oeuvres completes (Paris: Gallimard / Pléiade, 1996), vol. 1, “Préceptes,” p. 1415.

⁵⁶ See Ludwig von Mises, “Vom Ziel der Handelspolitik,” Archiv für Sozialwissenschaft und Sozialpolitik 42, no. 2 (1916): 561–85. After Mises's sudden departure from Vienna, Lederer would eventually read the proof pages (see Mises Archive 4: 37, 217). Mohr Publishers sent a statement of honorarium of 93.75 marks at the end of December, but Mises probably answered this letter only in May 1917. In June, Mohr wired the money to Mises's Postsparkassen account: 142 kronen and 4 Heller (see Mises Archive 2: 94ff.).

⁵⁷ See Mises, “Vom Ziel der Handelspolitik,” pp. 564f. Mises also pioneered a comparative criterion for (relative) over-population and under-population: “We consider a country to be over-populated if it is more densely inhabited than it would be if a system of freedom of migration covered the entire surface of the earth” (ibid., p. 576).

⁵⁸ His interest in the theoretical and political implications of modern migration might have been stirred as early as the Philippovich seminar. Since the 1890s, Philippovich had promoted migration research among German economists, even though he never succeeded in getting the subject discussed at any of the meetings of the Verein für Socialpolitik. See Eugen von Philippovich, ed., “Auswanderung und Auswanderungspolitik,” Schriften des Vereins für Socialpolitik 52 (1892); see also the follow-up study on Austrian migration by one of his students: Leopold Caro, “Auswanderung und Auswanderungspolitik in Österreich,” Schriften des Vereins für Socialpolitik 131 (1909).

⁵⁹ Mises, “Vom Ziel der Handelspolitik,” p. 567.

⁶⁰ Ibid., p. 570.

⁶¹ He pointed out that industrial workers in the (typically Anglo-Saxon) immigration countries could successfully call for anti-immigration laws because the mass immigration from Europe threatened national unity: “There can be no doubt that all countries will effectively close themselves off against immigration that threatens their national composition, just as the countries settled by white men have long since closed themselves off against yellow immigration” (ibid., p. 574).

⁶² Ibid., 577.

⁶³ Ibid., p. 578.

⁶⁴ See Mises Archive 4: 74.

⁶⁵ See Mises Archive 4: 124ff.

⁶⁶ See Mises Archive 2: 852ff. They did not reach their position before December 19, probably because of bad roads and enemy action hampering their moves.

⁶⁷ He wrote back to his friends in Vienna for the first time on January 11, 1917, sending New Year's greetings. See Mises Archive 4: 38.

⁶⁸ See Mises Archive 4: 229ff.

⁶⁹ See Mises Archive 4: 110ff., 115.

⁷⁰ See Mises Archive 4: 106.

⁷¹ See Mises Archive 4: 61f. Pribram later on proved that he had great talents for self-promotion.

⁷² See Mises Archive 53: 7.

⁷³ See Mises Archive 4: 54f., 95f., 101.

⁷⁴ See Mises's May 3 report on his encounter with a German military police officer in Mises Archive 3: 80.

⁷⁵ Mises, “Der Wiedereintritt Deutsch-Österreichs in das Deutsche Reich und die Währungsfrage.” Michael Hainisch, ed., “Wirtschaftliche Verhältnisse Deutsch-Österreichs,” Schriften des Vereins für Sozialpolitik 158 (Leipzig: Duncker & Humblot, 1919), p. 169.

⁷⁶ See Mises Archive 4: 18f., 101.

⁷⁷ Sieghart, Die letzten Jahrzehnte einer Grossinacht, p. 246.

⁷⁸ See Mises Archive 4: 192, 200f.

⁷⁹ See Mises Archive 4: 205f.

⁸⁰ See Mises Archive 3: 41ff., 54, 71f., 95. The documents also refer to the following places: Kozmacz and Prokaraw (3: 52), Prewarskic Rotc (3: 64), Gutin Tomnatek (3: 101), and others (for example, 3: 46, 104, 110). Mises's code name is Rotwild (3: 64). One of their last engagements in battle seems to have taken place on August 8, confronting Romanian troops (3: 67).

⁸¹ The recognition was pronounced on September 3. See Mises Archive 4: 51.

⁸² Apparently, the hip problem deteriorated considerably during the battle. See the remarks in later letters from Helene Meyerson (Mises Archive 4: 79) and Bettelheim (Mises Archive 4: 6).

⁸³ The pieces were published around August 20 and before. See Mises Archive 4: 102.

⁸⁴ August 3 letter to Mises in Mises Archive 4: 87ff. The envious feelings might have originated from the fact that she had taken care of a foster child (4: 143ff.), but was not up to the task. She seems to have been convinced, however, that Mises himself was inexhaustible. She urged him to publish, at last, the typology of monetary theories that he had presented in his course on monetary economics of the year before. See Mises Archive 4: 143ff., 225.

⁸⁵ See Mises Archive 51: 107; 4: 103; 7: 12.

⁸⁶ The report is dated October 21, 1917. See Mises Archive 4: 15.

⁸⁷ In Mises's judgment, the success was due to the inferiority of the Italian soldiers. See Mises, Nation, Staat und Wirtschaft, p. 112 n. In the same work, Mises points out (p. 82) that the Austrian army had never been defeated in battle by Italian forces.

⁸⁸ Gordon Brook-Shepherd, The Austrians: A Thousand-Year Odyssey (New York: Carroll & Graf, 1997), p. 198.

⁸⁹ See Mises Archive 2: 12.

⁹⁰ See Mises Archive 2: 11, 19. Usual abbreviation: 10 K.W. Abt. des k.u.k. KriegsMin. The department was located in the Hotel National in the second Viennese district (the so-called Leopoldstadt) at Taborstrasse 18 (see, e.g., Mises Archive 51: 80).

⁹¹ He also seems to have been involved in Kammer activities. See the letters from Schmerling (Mises Archive 51: 23) and Tayenthal (51: 31).

⁹² See Mises Archive 54: 2. The book written as Imperialismus would later be published as Nation, Staat und Wirtschaft (Nation, State, and Economy).

⁹³ See Mises Archive 51: 47.

⁹⁴ His Banktheoretische Übungen (exercises in the theory of banking) are mentioned in letters from Käthchen Pick (May 17, 1918; see Mises Archive 51: 32) and one Bermann (June 27, 1918; see ibid. 51: 32). The list with the subjects dealt with is in Mises Archive 17: 15. The list of participants is in Mises Archive 17: 22. Mises had research-related correspondence with Schöndorf (51: 1), anonymous (51: 5), Louise Sommer (51: 21f., 61f., 86), Gama (51: 40f.), and Hilde Oppenheimer (51: 46).

⁹⁵Ausserordentlicher Universitätsprofessor. The promotion followed an imperial decision of May 7.

⁹⁶ In November 1919, Weber lived at Jaffé's place since his own apartment had to be repaired (73: 57). Some years after Weber's death, Mises contributed to Rickert's sculpture of Weber (December 1928, 73: 35f.), which can still be admired in Heidelberg University.

⁹⁷ See Mises, Erinnerungen (Suttgart: Gustav Fischer, 1978), p. 5.

⁹⁸ We will deal with this influence in more detail in a subsequent chapter.

⁹⁹ An August 29, 1918 letter by a certain Irene Schmerling is revealing. She wrote: “Frau Singer recently told me that you had asked for me (I suppose you were interested in food?—I have only got ersatz honey!)” (“Fr. Singer erzählte mir kürzlich, dass Sie nach mir gefragt hätten (wohl um Lebensmittel?—es ist nur Kunsthonig da!”). Mises's annual salary in November/December 1918 was 1,120.51 kronen (see Mises Archive 51: 52). This corresponded to US$71.05, according to data given in Mises, “Austrian Empire. Finance and Banking,” Encyclopedia Britannica, 12th ed. (1921), vol. 30, pp. 323f.

¹⁰⁰ Mises helped among others the following persons: the brother of his fellow 1/22–officer Greifs (Mises Archive 51: 45, 72), one Petschek (51: 65f.), one Steiner (51: 74f.), one Skiem (51: 80ff.), one Sattler (51: 87), one Sussmann (52: 2), and possibly also Richard von Strigl (51: 59f.). Other friends of Mises had a very different reputation. Greifs, who had also approached Kelsen to help place his brother Karl, wrote to Mises: “If you see Kelsen, please tell him that I am not astonished about his silence, but embarrassed I am” (Mises Archive 51: 91). But even complete strangers approached him. Leo Fishman many years later recalled his visit with Mises. See Fishman to Mises, letter dated November 11, 1950; Grove City Archive: “F” file.

¹⁰¹ See Mises Archive 51: 78; 52: 2.

¹⁰² “Wandlungen der österreichischen Finanzpolitik.” The invitation came from Wilhelm Wieselthier and Julius Löw. See Mises Archive 51: 4; 56: 16.

¹⁰³ See “Finanzreform und Vermögensabgabe,” Neues Wiener Tagblatt (January 23, 1918); a copy is in Mises Archive 106: 16.

¹⁰⁴ See Mises Archive 2: 4.

¹⁰⁵ See “Über Kriegskostendeckung und Kriegsanleihen,” copy in Mises Archive 10. Mises commented:

In the summer of 1918 the Army supreme Command organized a course for officers who were to offer patriotic instruction for the troops.... My lecture was published from stenographic notes without giving me the opportunity to read the proofs. (Notes and Recollections [Spring Mills, Penn.: Libertarian Press, 1978], pp. 66f.)

¹⁰⁶ See Mises Archive 8: 2ff., 31ff., 36ff.; 9: 14, 162ff. The economic exploitation of occupied territories to finance the war effort has a long tradition. However, World War I added the instrument of all-around planning. See Georg Holzbauer, Barzahlung und Zahlungsmittelversorgung in militärisch besetzten Gebieten (Jena: Gustav Fischer, 1939), pp. 1–18.

¹⁰⁷ Dated August 25, 1918; see Mises Archive 51: 69ff.

¹⁰⁸ Interestingly, it was the bank director Katz who approached Mises on behalf of a political mission. Apparently, Katz was known to have close ties to top political circles in Vienna, for Mises took his proposals seriously and answered in a letter dated June 20, 1918 (see Mises Archive 51: 104). Presumably Katz had been asked to look out for a suitable currency expert because as a bank director he was supposed to be knowledgeable in monetary matters.

¹⁰⁹ See Mises Archive 51: 104ff.:

But such a position cannot be accepted by a Captain of the artillery, a charge I hold, neither outwardly, nor within the context of the inner workings of the administration. In my view, the position in question ought to be comparable to that of the Bosnian secretary of state.

¹¹⁰ Mises Archive 51: 108ff.

¹¹¹ See Oberst Linoch to Mises (in Bad Gastein), letter dated July 20, 1918; Mises Archive 51: 50ff.

¹¹² His leave was extended through August 25. Mises stayed in the Hotel Badeschloss (see Mises Archive 2: 17f.).

¹¹³ See Mises Archive 8: 2ff., 9, 26; 18.

¹¹⁴ See Mises Archive 8: 9.

¹¹⁵ See Mises Archive 8: 20f.

¹¹⁶ See “Bemerkungen betreffend die Einrichtung einer ukrainischen Notenbank” (Remarks Concerning the Establishment of a Ukrainian Central Bank) in Mises Archive 51: 114ff. The report was printed without indication of authorship. However, style and content reveal it to be a pure product of Mises's pen. See also the various study materials in Mises Archive 51: 95ff.

¹¹⁷ Ibid.

Chapter 8. Nation, State, and Economy

¹ Mises, Nation, Staat und Wirtschaft. Beiträge zur Politik und Geschichte der Zeit (Vienna & Leipzig: Manzsche Verlags- und Universitäts-Buchhandlung, 1919); translated by Leland B. Yeager as Nation, State, and Economy (New York: New York University Press, 1983).

² The first impressed reader was the young Kammer secretary who typed the manuscript: Therese Thieberger. She would remain his assistant until 1934, when he left for Geneva, and they would remain good friends for the rest of their lives. See Thieberger to Mises, December 5, 1971; Grove City Archive: Thieberger file.

³ Rudolf Sieghart made this point with great emphasis:

The peace diktats of the year 1919 have wiped the Austro-Hungarian monarchy off the map, and for the future world history this Empire is likely to be a dead letter. Of all its struggles and sufferings, nothing but some names will remain in history, or so it appears, as in the case of Carthage. But the problems which this Empire has made such painful efforts to solve are not solved in most of its successor states. They reappear everywhere in the world and will for a long time occupy the minds wherever national minorities struggle for the continued existence of their proper culture. (Rudolf Sieghart, Die letzten Jahrzehnte einer Grossmacht [Berlin: Ullstein, 1932], p. 361)

⁴ Mises admits that great political ideas like liberalism, socialism, etc., are not language-dependent. But he points out (Nation, State, and Economy, pp. 38, 41, 87) that the concrete application of such general ideas is conditioned by language and language-dependent culture.

⁵ Significantly, the very first and hotly debated problem of the constitutive assembly (konstituierender Reichstag) was to select the language for its deliberations starting on July 22, 1848. See Isabel Röskau-Rydel, “Galizien, Bukowina, Moldau,” in idem, Deutsche Geschichte im Osten Europas: Galizien, Bukowina, Moldau (Berlin: Siedler, 1999), p. 96.

⁶ See Mises, Nation, Staat und Wirtschaft, p. 1.

⁷ See ibid., pp. 45, 63f., 74, 90, 107n.

⁸ Mises, Nation, State, and Economy, p. 216.

⁹ Mises, Nation, Staat und Wirtschaft, p. 178; Nation, State, and Economy, p. 217.

¹⁰ Mises, Nation, Staat und Wirtschaft, p. 180; Nation, State, and Economy, p. 219. Mises here expresses essentially the same idea as William Graham Sumner in his famous essay on “The Conquest of the United States by Spain” (Yale Law Journal, January 1899) in which he argued that, although the democratic United States had won the 1898 war with imperialist Spain, the Spanish spirit had conquered the United States.

¹¹ Mises, Nation, Staat und Wirtschaft, p. 181; Nation, State, and Economy, p. 220.

¹² Mises, Nation, Staat und Wirtschaft, p. 74; Nation, State, and Economy, p. 91.

¹³ Mises, Nation, Staat und Wirtschaft, p. 181; Nation, State, and Economy, p. 220.

¹⁴ He would later comment on the crucial flaw of Bentham's political thought, which celebrated the democratic majority principle as the foundation for liberty. See Mises, Theory and History (New Haven, Conn.: Yale University Press, 1957), pp. 67f.

¹⁵ See Mises, Nation, Staat und Wirtschaft, p. 174; Nation, State, and Economy, p. 211.

¹⁶ John Locke, “Some Considerations of the Consequences of the Lowering of Interest and Raising the Value of Money,” Patrick Hyde Kelly, ed., Locke on Money (Oxford: Clarendon Press, 1991), vol. 1, p. 304.

¹⁷ See Adam Smith, Wealth of Nations (New York: Modern Library, 1994), bk. 4, chap. 7, pt. 3, p. 660 and passim.

¹⁸ Ibid., bk. 4, chap. 9, p. 745. Other contemporary economists also argued along these lines. For example, Etienne de Condillac pointed out that virtually all forms of economic interventionism were in fact “blows against commerce.” See Condillac, Commerce and Government (Cheltenham, U.K.: Edward Elgar, 1997), second part.

¹⁹ See Carl Menger, Untersuchungen über die Methode der Socialwissenschaften und der Politischen Oekonomie insbesondere (Leipzig: Duncker & Humblot, 1883), in particular appendix 6, pp. 262ff.; repinted in Carl Menger, Gesammelte Werke, F.A. Hayek, ed., 2nd ed. (Tübingen: Mohr, 1969), vol. 2; idem “Zur Kritik der politischen Ökonomie,” Zeitschrift für das Privat- und öffentliche Recht der Gegenwart 14 (1887); idem, “Grundzüge einer Klassifikation der Wirtschaftswissenschaften,” Jahrbücher für Nationalökonomie und Statistik, n.s. 19 (1889). The latter two papers have been reprinted in Menger, Gesammelte Werke, vol. 3.

²⁰ See Heinrich Dietzel, “Der Ausgangspunkt der Socialwirthschaftslehre und ihr Grundbegriff,” Zeitschrift für die gesamte Staatswissenschaft 39 (1883): 1–80; idem, “Beiträge zur Methodik der Wirtschaftswissenschaften,” Jahrbücher für Nationalökonomie und Statistik 43 (1884): 17–44, 193–259.

²¹ See Heinrich Dietzel, Theoretische Socialökonomik (Leipzig: Duncker & Humblot, 1895); idem, “Selbstinteresse und Methodenstreit in der Wirtschaftstheorie,” Handwörterbuch der Staatswissenschaften, 3rd ed. (Jena: Gustav Fischer, 1911), vol. 7, pp. 685–97.

²² See Ludwig Pohle, Die gegenwärtige Krisis in der deutschen Volkswirtschaftslehre (Leipzig: Deichert, 1911), pp. 13f., 30ff.

²³ See Mises, Nation, Staat und Wirtschaft, pp. 141 n., 148f., 150, 182.

²⁴ Mises, Nation, Staat und Wirtschaft, p. 182; Nation, State, and Economy, p. 221.

²⁵ Mises, Nation, Staat und Wirtschaft, p. 37; Nation, State, and Economy, p. 46.

²⁶ Mises, Nation, Staat und Wirtschaft, p. 79; Nation, State, and Economy, p. 96. In contrast, the majority principle was in his eyes merely a means, rather than a constituent part of democracy; see Nation, Staat und Wirtschaft, p. 36.

²⁷ The other errors were military and political. The military errors were, (1) to expect the war to be short, and (2) to expect miracles from unceasing offensives. The political errors were (3) not to anticipate a war on all fronts, and (4) to make the interests of the East-Elbian Junkers supreme in German politics. See Mises, Nation, Staat und Wirtschaft, pp. 111ff.

²⁸ His views on war finance had an impact on young free-market oriented economists of the interwar period such as Stefan Possony (Die Wehrwirtschaft des totalen Krieges [Vienna: Gerold, 1938]) and Georg Holzbauer (Barzahlung und Zahlungsmittelversorgung in militärisch besetzten Gebieten [Jena: Gustav Fischer, 1939]), but also on interventionists like Adolf Lampe (Allgemeine Wehrwirtschaft [Jena: Gustav Fischer, 1938]). Lampe had a preference for “playing markets” though. He suggested that entrepreneurial activities be centrally guided.

²⁹ Mises, Nation, Staat und Wirtschaft, p. 137; Nation, State, and Economy, p. 168. He went on to explain that war finance through debts (rather than through taxation or inflation) merely modifies the future distribution of resources.

³⁰ Mises, Nation, Staat und Wirtschaft, p. 140; Nation, State, and Economy, p. 172.

³¹ Mises observes that the German socialists had stuck to the tenet of democracy only because until 1914 they had always been in the opposition and therefore bore no responsibility for their co-nationals in the eastern territories. With the onset of World War I, when they came to power in Germany and Austria, they slowly changed their minds and would have followed in the footsteps of the German liberals, but with the loss of the eastern provinces the problem of mixed nations disappeared as well. See Mises, Nation, Staat und Wirtschaft, pp. 105f.

³² See Mises, Nation, Staat und Wirtschaft, p. 152f.; Nation, State, and Economy, p. 185f.

³³ Mises, Nation, Staat und Wirtschaft, p. 169; Nation, State, and Economy, p. 206.

³⁴ See Mises, Nation, Staat und Wirtschaft, pp. 157ff. In his later work, based on the socialist-calculation argument, he would show that the problem is the impossibility of identifying what the interests of the commonwealth are.

³⁵ Mises, Nation, Staat und Wirtschaft, pp. 163f.; Nation, State, and Economy, p. 199.

³⁶ See Mises, Nation, Staat und Wirtschaft, pp. 9f. He stated that a nation's specific language generated specific “political constructions” and in particular specific foundational ideas determining the operation of their governments (Staatsgedanken); see ibid., pp. 12, 38, 41, 87.

³⁷ Mises did not argue that language communities are the only factor, or the most important one, in modern politics. He speculated that racial communities were far more important. The problem was that the sociology of race and of race relations was not sufficiently developed to warrant scientific statements. He acknowledged, however, that it had become a “principle of modern political world law” that it is “no longer acceptable to use force on peoples of the white race.” That is, the use of force against dark-skinned people in the European colonies was considered legitimate, but not the use of force against fellow-whites. German imperialism made enemies in all quarters by violating this distinction. See Mises, Nation, Staat und Wirtschaft, pp. 62, 64f.; Nation, State, and Economy, pp. 76, 79f.

³⁸ For example, he examined the role of written language and stated that it had played a crucial role in the competition between dialects. The first written dialect became the standard language. See Mises, Nation, Staat und Wirtschaft, pp. 17ff.

³⁹ Mises, Nation, Staat und Wirtschaft, p. 27; Nation, State, and Economy, p. 34.

⁴⁰ Mises, Nation, Staat und Wirtschaft, pp. 31f.; Nation, State, and Economy, pp. 39f.

⁴¹ See Mises, Nation, Staat und Wirtschaft, p. 48.

⁴²En passant he mentioned his contribution to the economics of migration by highlighting the importance of relative overpopulation, in distinction to already-known absolute overpopulation. See Mises, Nation, Staat und Wirtschaft, pp. 45ff. He had developed the concept of relative over-population in his “Vom Ziel der Handelspolitik,” Archiv für Sozialwissenschaft und Sozialpolitik 42, no. 2 (1916): 576.

⁴³ Mises, Nation, Staat und Wirtschaft, p. 62; Nation, State, and Economy, p. 77.

⁴⁴ Mises, Nation, Staat und Wirtschaft, pp. 78f.; Nation, State, and Economy, p. 96.

⁴⁵ For surveys on Austrian language legislation, see Alfred Fischel, ed., Materialien zur Sprachenfrage (Brünn: Irrgang, 1902); idem, ed., Das österreichische Sprachenrecht, 2nd ed. (Brünn: Irrgang, 1910); Sieghart, Die letzten Jahrzehnte einer Grossmacht, pp. 421ff.

⁴⁶ See Eduard Bernatzik, Die Ausgestaltung des Nationalgefühls im 19. Jahrhundert (Hannover: Helwing, 1912), p. 30.

⁴⁷ See Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 323; Röskau-Rydel, “Galizien, Bukowina, Moldau,” p. 97.

⁴⁸ The social-democratic faction in the central parliament thereafter called itself “union of social-democratic deputies.” See Sieghart, Die letzten Jahrzehnte einer Grossmacht, pp. 351ff.

⁴⁹ See Otto Bauer, Die Nationalitätenfrage und die Sozialdemokratie (Vienna: Verlag der Wiener Volksbuchhandlung, 1907); translated as The Question of Nationalities and Social Democracy (Minneapolis: University of Minnesota Press, 2000). Before World War I, Karl Renner published his ideas on the nationality question under the pseudonyms “Synoptikus” and “Rudolf Springer.” See Synoptikus, Staat und Nation (Vienna: Dietl, 1899); Rudolf Springer, Die Krise des Dualismus und das Ende der Déakistischen Episode in der Geschichte der Habsburgschen Monarchie: eine politische Skizze (Vienna: published by the author, 1904); idem, Grundlagen und Entwicklungsziele der Österreichisch-Ungarischen Monarchie (Leipzig: Deuticke, 1906). At the end of World War I, he published under his true name: Das Selbstbestimmungrecht der Nationen: in besonderer Anwendung auf Oesterreich (Leipzig: Deuticke, 1918).

⁵⁰ Mises, Nation, Staat und Wirtschaft, pp. 66f.; Nation, State, and Economy, p. 82.

⁵¹ Mises, Nation, Staat und Wirtschaft, p. 61; Nation, State, and Economy, p. 76.

⁵² With this consideration Mises complemented the Ricardian analysis of free trade, which was based on the assumption that capital and labor were mobile only within the borders of the state. See Mises, Nation, Staat und Wirtschaft, pp. 51ff.

Chapter 9. 1919

¹ Jurij Krizek argues that these tensions were amplified during the war because of the compulsory centralization of the k.u.k. economy, which unilaterally benefited the industrial and financial establishment in Vienna and Budapest. See Jurij Krizek, “Die Kriegswirtschaft und das Ende der Monarchie,” R.G. Plaschka and K. Mack, eds., Die Auflösung des Habsburgerreiches (Munich: Oldenbourg, 1970), pp. 43–52.

² For a previous Austrian attempt to enter into peace negotiations with the United States on the basis of a proposed new federal structure for Austria-Hungary, see Erik von Kuehnelt-Leddihn, Von Sarajevo nach Sarajevo (Vienna: Karolinger, 1996), p. 21.

³ Rudolf Sieghart, Die letzten Jahrzehnte einer Grossmacht (Berlin: Ullstein, 1932), p. 248.

⁴ See Christian Eckert, “Friedensverträge. II. Vom staatswissenschaftlichen Standpunkte,” Handwörterbuch der Staatswissenschaften, 4th ed. (Jena: Gustav Fischer, 1927), vol. 4, pp. 444ff., 515.

⁵ See Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 354.

⁶ See Mises, Nation, Staat und Wirtschaft (Vienna: Manz, 1919), p. 134; translated by Leland B. Yeager as Nation, State, and Economy (New York: New York University Press, 1983), pp. 164f.

⁷ Mises, Nation, Staat und Wirtschaft, p. 144; Nation, State, and Economy, p. 176.

⁸ Virtually all the higher officials in Bauer's ministry—including Bauer himself—were Jews or of Jewish origin. On November 22, 1918 (Mises Archive 107: 55a) and again on January 11, 1919, the Vienna paper Reichspost insinuated that the ministry's takeover by Bauer, “the Jew Dr. Richard von Schüller, a close relative of the recently deceased industrialist Taussig,” and Schüller's subordinate “Jews Dr. v. Mieses, [sic] Dr. Broda, and Dr. Steiner” was somehow unacceptable. Yet the fact was, as the Wiener Morgenzeitung—a “Jewish National” newspaper—pointed out, that Mises and Somary were Austria's most important currency theoreticians (see Mises Archive 107: 44).

⁹ Mises often met with Bauer, Lederer (director of the Staatskommission für Sozialisierung), and Schumpeter (who became finance minister in the Spring of 1919). See Mises Archive 53: 13.

¹⁰ Mises, Notes and Recollections (Spring Mills, Penn.: Libertarian Press, 1978), p. 77.

¹¹ Alexandre Millerand, born 1859, French socialist, was originally radical; when in power, he limited his activities to moderate programs.

¹² John von Miquel, 1821–1901, German statesman, originally was an extreme revolutionary; later he was described as one who had entirely surrendered his radicalism, and aimed only at “practical measures for improving the condition of the people irrespective of the party programs.”

¹³ Mises, Notes and Recollections, pp. 16–19. This passage is the only direct source from which we know about Mises's role in preventing Otto Bauer and his wife Helene Gumplowicz from putting their Bolshevist plans into practice. Some collateral evidence is provided in a February 1919 letter to Mises from a certain Dr. Johanna Wallner. She sent him her telephone number and asked him to give Dr. Bauer her greetings. “Under present circumstances,” she writes, she does not want to bother (behelligen) Bauer with her affairs (see her letter dated February 16, 1919, Mises Archive 53: 30ff.). Thus she knew that Bauer was very busy in his government activities and that Mises was likely to see Bauer precisely in these busy times.

¹⁴ Before he changed his views on the question of socialization, Bauer had been the leader of the left wing of the Austrian socialists. Thereafter he increasingly shifted to the middle ground and reinforced his position within the party apparatus. See Norbert Leser, “Otto Bauer—Friedrich Adler—Max Adler,” Walter Pollack, ed., Tausend Jahre Österreich (Vienna: Verlag Jugend und Volk, 1974), vol. 3, p. 270.

¹⁵ The Socialization Commission in Germany first met on December 5, 1918 and also included the Austrian professors Lederer, Hilferding, and Schumpeter, as well as Theodor Vogelstein (a former chief executive in the war-socialist economy of Germany), the influential publisher Heinrich Cunow, labor-union leader Otto Hué, and the German professors Carl Ballod, Robert Wilbrandt, and Eduard Heimann, who acted as secretary general of the Commission. By March 1919, similar committees had been established not only in Vienna, but also in Dresden, Munich, and Stuttgart. See the very informative piece by neo-Spartakist Manfred Behrend, “‘Der Wandschirm, hinter dem nichts geschieht.’ Bildung, Tätigkeit und Ende der ersten deutschen Sozialisierungskommission,” Glasnost (1998); and the literature quoted therein.

¹⁶ See Sozialisierungskommission, Vorläufiger Bericht über die Frage der Sozialisierung des Kohlenbergbaues (Berlin, February 15, 1919); quoted from Behrend, “Der Wandschirm, hinter dem nichts geschieht.”

¹⁷ Such plans had already been discussed during the war at a meeting of the Verein für Socialpolitik on October 14, 1916 in Berlin. Heinrich Herkner had championed the idea of solving the problem posed by the huge war debts through a one-time confiscatory tax. Alfred Weber, who at the time worked for the German Treasury, fiercely opposed any discussion of the issue because it would jeopardize the government's attempt to sell war bonds. See Franz Boese, Geschichte des Vereins für Sozialpolitik, 1872–1932 (Berlin: Duncker & Humblot, 1939), p. 153.

¹⁸ See ibid., pp. 160f. See also Lederer's paper in “Verhandlungen des Vereins für Sozialpolitik in Regensburg 1919,” Schriften des Vereins für Sozialpolitik 159 (1920); and Alfred Amonn, Hauptprobleme der Sozialisierung (Leipzig: Quelle & Meyer, 1919). Amonn belonged to the German-Austrian Staatskommission für Sozialisierung.

¹⁹ Some evidence for his involvement is in correspondence with Frau Fischer, his secretary at the Kammer. See the July 1919 correspondence Mises Archive 53: 40. Mrs. Fischer wrote to Mises after his departure to Bad Gastein, where he would spend his summer vacation.

²⁰ Mises, Nation, Staat und Wirtschaft, p. 140; Nation, State, and Economy, pp. 171. The Austrian experience prepared him well for the American discussion of capital levies of the early 1940s. See his comments in “Report of After-Dinner Discussion, July 30, 1941 on The Prospects for and Extent of A Capital Levy,” Grove City Archive: Trusts and Estates file.

²¹ See Mises, Nation, Staat und Wirtschaft, p. 119; Nation, State, and Economy, pp. 146f. fn.

²² Mises to Emil Lederer, letter dated October 21, 1919; Mises Archive 73: 58.

²³ Gesellschaft der österreichischen Volkswirte; “Die politischen Beziehungen Wiens zu den Ländern im Lichte der Volkswirtschaft.” See Mises Archive 107: 20a, 55. The speech was subsequently published in Neues Wiener Tagblatt and Wirtschaftspolitisches Archiv and struck a nerve with the general public. Herr Roth-Seefrid, a businessman and lawyer who knew Austria as well as he knew the back of his own hand, wrote to Mises: “I would hope that the essay was circulated widely in Germany, where, I must unfortunately admit, a frighteningly unclear impression of the Anschluss and the like reigns” (Mises Archive 74: 2; translation mine). Roth-Seefrid lived in Berchtesgaden. Mises might have met him there on vacation, for example in August 1927 (Mises Archive 62: 6).

²⁴ See “Über die im Hinblick auf das Fortschreiten der Geldentwertung zu ergreifenden Massnahmen” (On the measures to be taken on behalf of the decreasing value of money) in Mises Archive 109.

²⁵ “Über die im Hinblick auf das Fortschreiten der Geldentwertung zu ergreifenden Massnahmen,” p. 1 in Mises Archive 109: 2.

²⁶ “Über die im Hinblick auf das Fortschreiten der Geldentwertung zu ergreifenden Massnahmen,” p. 6 in Mises Archive 109: 7.

²⁷ See Mises Archive 74: 11ff. Much later, in February 1924, Karl Polanyi sent Mises his paper “Sozialistische Rechnungslegung” which had been published in the Archiv 49 (1922) and asked Mises for an offprint of his critique of this article. Polanyi by then lived in the 7th district in Vienna. His letter did not sound very clear (see Mises Archive 80: 87).

²⁸ See Christian Eckert, “Friedensverträge. II. Vom staatswissenschaftlichen Standpunkte,” p. 511.

²⁹ Mises, “Der Wiedereintritt Deutsch-Österreichs in das Deutsche Reich und die Währungsfrage,” Michael Hainisch, ed. Wirtschaftliche Verhältnisse Deutsch-Österreichs (Schriften des Vereins für Sozialpolitik, vol. 158; Leipzig: Duncker & Humblot, 1919), pp. 155.

³⁰ F.A. Hayek, Profit, Interest, and Investment and Other Essays on the Theory of Industrial Fluctuations (London: Routledge & Kegan Paul, 1939), pp. 63f., n. 1.

³¹ Mises believed and continued to believe for some time that these popular anti-German laws would prove to be short-lived. On May 9, 1919 he took part in a conference sponsored by the Währungsschutz association dealing with the Austrian position in the forthcoming peace negotiations (see Mises Archive 107: 22, 44b). In his comment, which was widely publicized, he stated that the Allies had rejected Russia's refusal to pay the government debts of the old Czarist regime. On the same grounds, therefore, they would have to reject the demands of the new Czechoslovakian, Polish, and Yugoslavian governments, which sought to repudiate debts incurred under the Habsburg monarchy. This would be in accordance with a time-honored principle of international law. Any other stance on this issue would jeopardize international trade, thus harming the Allies' own interests. However, this impeccable argument did not prevent the Allies from siding with the Slavic successor states. Hatred is often stronger than self-interest.

³² “Die Abstempelung der Kronennoten im jugoslawischen Staate,” Neue Freie Presse (#19536; January 14, 1919); copy is in Mises Archive 106. Such anonymous pieces were often signed by “a leading monetary politician.” Mises's authorship is evident from the writing style and vocabulary, as well as from the fact that these pieces are kept in common files (the custodians of the archive in Moscow worked diligently in preserving the “natural” order of the files that they had received from their owner).

³³ He wrote that:

the money problem, at the moment of the dissolution of the Austro-Hungarian Monarchy, was merely a technical problem of printing, and the question how to obtain printing-plates, banknote-paper and printing-ink appeared for the moment the most important points of currency policy. (Ludwig von Mises, “Republic of Austria. Banking and Finance,” Encyclopedia Britannica, 12th ed. [1921], vol. 30, pp. 348f.)

³⁴ Graetz's letter to Mises, dated January 16, 1919; Mises Archive 53:1.

³⁵ The article was signed “von einem hervorragenden Währungspolitiker” (from the pen of a leading monetary politician) in Neue Freie Presse (February 11, 1919); see copy in Mises Archive 107: 39.

³⁶ Mises probably commented on this event too in a piece for Neue Freie Presse. See Dub's February 25 letter in Mises Archive 53: 16.

³⁷ This is the paper already quoted as “Der Wiedereintritt Deutsch-Österreichs in das Deutsche Reich und die Währungsfrage,” pp. 145–71. Austria's “re-entering” into the German Empire refers to the years before 1867 when its Kronländerwere part of the Deutscher Bund (German Federation). The Bund had been established under the leadership of the house of Habsburg as a post-Napoleonic-wars successor organization of the Holy Roman Empire of German Nations, which had disappeared in 1806. The Bund ended in 1867 when Prussia defeated it in a short war (battle of Königgrätz).

Mises finished this work in early July 1919, but he circulated a previous version in the wake of his activities in early 1919; see Staatssekretär Urban's letter dated March 5, 1919, which refers to this article, in Mises Archive 53: 29.

³⁸ Mises, “Der Wiedereintritt Deutsch-Österreichs in das Deutsche Reich und die Währungsfrage,” pp. 153f. See also his presentation in Mises, “Republic of Austria. Banking and Finance,” pp. 348f.

³⁹ See Mises Archive 107: 23.

⁴⁰ This is Emil Lederer commenting in correspondence on Mises's paper “Zahlungsbilanz und Wechselkurse” (Balance of payments and exchange rates). See Mises Archive 73: 57.

⁴¹ In those days of heated activity, Mises was often asked to deliver on the same day, and seems to have complied (see Mises Archive 53: 16, for an article on the implications of Czech monetary policies in late February 1919).

⁴² See Graetz's letter dated March 8, 1919; Mises Archive 53: 44. In the same vein, Mises was also invited to contribute monetary analyses to Dorn's Volkswirtschaftliche Wochenschrift, a weekly economics journal edited by a former colleague from the Wissenschaftlichen Comité für Kriegswirtschaft. See the editor's letter dated January 27, 1919 in Mises Archive 53: 54. The editor also invited him to lecture before the Frauenklub on “Socialization and Economic Planning.” Two weeks before, Otto Neurath had given a talk on this subject, and Mises would provide the antidote.

⁴³ For example, in the lecture he gave on May 2, 1919 on “Means and Ends of Currency Policy” (see Mises Archive 53: 12), he addressed the members of a commerical association. The talk was apparently very successful and dealt a heavy blow to the inflationist party (see newspaper reports in Mises Archive 107: 21, 44a). Mises gave many more talks of this nature during the year, for example, at a common meeting of Austria's chambers of commerce in October 1919 (see Mises Archive 107: 44c).

⁴⁴ “Die Quantitätstheorie” and “Zahlungsbilanz und Wechselkurse.” Copies of both papers are in Mises Archive 39.

⁴⁵ Mises, “Der Wiedereintritt Deutsch-Österreichs in das Deutsche Reich und die Währungsfrage,” p. 156.

⁴⁶ Ibid., pp. 156f.

⁴⁷ Ibid., p. 164.

⁴⁸ Ibid., p. 165.

⁴⁹ The conference took place on November 11, 1919. See the newspaper report in Mises Archive 107: 44d.

⁵⁰ Wilhelm Rosenberg was already known as a writer on currency problems. See his Valutafragen, 2nd ed. (Vienna: Manz, 1918).

⁵¹ Mises, “Über die im Hinblick auf das Fortschreiten der Geldentwertung zu ergreifenden Massnahmen,” p. 7; Mises Archive 109: 8.

⁵² Ibid., pp. 2f. (Mises Archive 109: 3f.). Without knowing it, Mises had spelled out here an idea that, many years before him, Carl Menger had stated in a private note, saying that ideas must run their course. F.A. Hayek discovered this note at the beginning of the 1930s, when he worked on a new edition of Menger's works. Mises later referred to this note in his The Historical Setting of the Austrian School of Economics (Auburn, Ala.: Ludwig von Mises Institute, [1969] 1984), pp. 36f.

⁵³ On the 1920 reform of the law see Bundeskammer and Wiener Kammer der gewerblichen Wirtschaft, eds., 100 Jahre Handelskaminern in Österreich (Vienna: Amtsblatt der Bundeskammer der gewerblichen Wirtschaft, 1948), pp. 143ff.; Franz Geissler, “Die Entstehung und der Entwicklungsgang der Handelskammern in Österreich,” Hans Mayer, ed., Hundert Jahre österreichische Wirtschaftsentwicklung, 1848–1948 (Vienna: Springer, 1949), pp. 110ff.

⁵⁴ For his involvement with the export academy see Mises Archive 53: 3. The export academy would later become the Hochschule für Welthandel and then the Wirtschaftsuniversität, under which name it is still known today.

⁵⁵ Schumpeter to Mises, letter dated December 9, 1918, Mises Archive 51: 130f.

⁵⁶ Most of the same members assembled for a summer seminar on the issue of free trade versus protectionism. Among the participants was apparently Siegfried Rosenbaum, the president of the Anglo-Oesterreichische Bank and sponsor of Walter Federn's Österreichischer Volkswirt. See Rosenbaum's September 1919 letter (Mises Archive 53: 33f) in which he expressed his wish to attend soon another seminar with Mises and Fräulein Dr. Sommer.

⁵⁷ See Mises Archive 17: 25.

⁵⁸ Starting in 1919, the University of Vienna offered a new degree in government sciences with a strong emphasis on economics. Students had to attend six semesters of courses in economics, public finance, economic history, statistics, general theory of the state, public administration, and international law. To obtain the Ph.D. in government sciences, they then had to write a dissertation and undergo “two thorough exams.” See Amtsblatt der Universität Wien 6, no. 9 (June 1919).

⁵⁹ This last group met on Monday evenings on the premises of the Staatskommission für Sozialisierung. Most of its members were Marxists or people with communist leanings such as Lederer and Käthe Pick; see Pick's letter to Mises in Mises Archive 53: 50. Pick had been a member of Mises's seminar already during the 1918 theoretical exercises in the economics of banking. See her correspondence with Mises in Mises Archive 51: 85, 53: 50. She also took part in his subsequent university seminars.

⁶⁰ See Mises, Erinnerungen (Suttgart: Gustav Fischer, 1978), p. 11; Notes and Recollections, p. 16. The only exception he refers to was Otto Bauer, see above.

⁶¹ See Mises Archive 17: 37. Ephrussi was probably the heiress to the Ephrussi Bank. Margit von Mises mentions Ludwig's occasional joking remark that he could have married a rich heiress had he not met Margit. He was probably referring to Elisabeth Ephrussi. See Margit von Mises, My Years with Ludwig von Mises, p. 19.

⁶² Margit von Mises, My Years with Ludwig von Mises, 2nd enlarged ed. (Cedar Falls, Iowa: Center for Futures Education, 1984). On Mises's private seminar, see pp. 201–11. See also Notes and Recollections, pp. 97–100; Martha Steffy Browne [or Martha Stefanie Braun], “Erinnerungen an das Mises-Privatseminar,” Wirtschaftspolitische Blätter 28, no. 4 (1981).

⁶³ One of Marianne Herzfeld's letters (October 1, 1919, in Mises Archive 53: 9ff.) is most revealing in this regard. Fräulein Herzfeld's parents were acquainted with Mises and had him occasionally at their house for dinner.

⁶⁴ Machlup to Walter E. Spahr, letter dated October 24, 1940; Hoover Institution: Machlup-Mises correspondence file. Spahr was the head of the economics department of New York University. Machlup's letter was confidential.

⁶⁵ April 1929 letter of Mises to the Rockefeller Foundation, in Mises Archive 62: 125. In May 1931, Schams was a Sektionsrat in Vienna. Before that, he must have spent some time in Paris, maybe on a Rockefeller Fellowship; see ibid. 73: 13f.

⁶⁶ The Österreichische Wirtschafts-Psychologische Forschungsstelle, of which Mises was a board member.

⁶⁷ See Mises Archive 67: 7.

⁶⁸ It is in this regard very revealing to compare Murray Rothbard's biography of Mises (Ludwig von Mises: Scholar, Creator, Hero [Auburn, Ala.: Ludwig von Mises Institute, 1988]) with Rudolf Métall's biography of Kelsen (Hans Kelsen [Vienna: Verlag Franz Deuticke, 1968]).

⁶⁹ Othmar Spann's lecture was printed in the same year under the title Vom Geist der Volkswirtschaftslehre (Jena: Gustav Fischer, 1919), and later reprinted as an appendix to Fundament der Volkswirtschaftslehre, 3rd ed. (Jena: Gustav Fischer, 1923).

Chapter 10. A Copernican Shift

¹ Eduard März, “Die Bauer-Mises-Schumpeter-Kontroverse,” Wirtschaftspolitische Blätter 28, no. 4 (1981): 66f.

² Benjamin E. Lippincott, “Introduction,” On the Economic Theory of Socialism B.E. Lippincott, ed. (New York: McGraw-Hill, 1964), p. 4.

³ See Walther Rathenau, Zur Kritik der Zeit (Berlin: Gustav Fischer, 1912); idem, Deutschlands Rohstoffversorgung (Berlin: Gustav Fischer, 1916); idem, Probleme der Friedenswirtschaft (Berlin: Gustav Fischer, 1917); idem, Von kommenden Dingen (Berlin: Gustav Fischer, 1917); idem, Die neue Wirtschaft (Berlin: Gustav Fischer, 1918); idem, Die neue Gesellschaft (Berlin: Gustav Fischer, 1919); idem, Der neue Staat (Berlin: Gustav Fischer, 1919); idem, Autonome Wirtschaft (Jena: Diederichs, 1919). This enormous literary output could not fail to provoke various critical reactions. See for example Walter Lambach, Diktator Rathenau (Hamburg: Deutschnationale Verlagsanstalt, 1918); Theodor Fritsch, Anti-Rathenau, 2nd ed. (Leipzig: Hammer, 1919). On Rathenau's impact on Hayek see Hans Jörg Hennecke, Friedrich August von Hayek (Düsseldorf: Wirtschaft und Finanzen, 2000), pp. 40f.

⁴ See Friedrich Bendixen, Sozialismus und Volkswirtschaft in der Kriegsverfassung (Berlin: Guttentag, 1916); Richard Riedl, Die Aufgaben der Übergangswirtschaft (Vienna: Veröffentlichungen des Generalkommissariates für die Kriegs- und Übergangswirtschaft No. 1, 1917); Karl Pribram, Die Grundgedanken der Wirtschaftspolitik der Zukunft (Graz: Leuschner & Lubensky, 1918); Rudolf Wissel, Die Planwirtschaft (Hamburg: Auer, 1920); idem, Praktische Wirtschaftspolitik (Berlin: Verlag Gesellschaft und Erziehung, 1919). Wissel was a minister of the German government. Among the few critical voices were Andreas Voigt, Kriegssozialismus und Friedenssozialismus (Leipzig: Scholl, 1916); and Julius Meinl, Zwang oder Freiheit? (Vienna: Manz, 1918).

⁵ See Otto Neurath, Durch die Kriegswirtschaft zur Naturalwirtschaft (Munich: Callwey, 1919); idem, Die Sozialisierung Sachsens (Chemnitz: Verlag des Arbeiter- und Soldatenrates, 1919); Otto Neurath and Wolfgang Schuh-mann, Können wir heute sozialisieren? Eine Darstetiung der sozialistischen Lebensordnung und ihres Werdens (Leipzig: Klinkhardt, 1919).

⁶ Otto Bauer, Der Weg zum Sozialismus (Vienna: Verlag der Wiener Volksbuchhandlung, 1919).

⁷ This point has been underlined by socialist historian Eduard März. See März, “Die Bauer-Mises-Schumpeter-Kontroverse,” p. 70.

⁸ “Die Wirtschaftsrechnung im sozialistischen Gemeinwesen.” See Mises to Lederer, November 14, 1919; in Mises Archive 73: 56f.

⁹ Mises, Nation, Staat und Wirtschaft (Vienna & Leipzig: Manz, 1919), p. 130; translated by Leland B. Yeager as Nation, State, and Economy (New York: New York University Press, 1983), pp. 159f.

¹⁰ Mises, Nation, State, and Economy, p. 160; Nation, Staat und Wirtschaft, pp. 130–31. Mises went on to stress the subjective element in this process:

Accounting is not perfect. The exactness of its numbers, which strongly impresses the uninitiated, is only apparent. The evaluation of goods and claims that it must work with is always based on estimates resting on the interpretation of more or less uncertain elements.

¹¹ It later turned out that Mises had an important predecessor in Nicolas G. Pierson, the eminent Dutch economist who was also minister of finance and governor of the Dutch central bank. In an exchange with Austro-Marxist Karl Kautsky, Pierson had argued that any economic system would have to solve the problem of value determination, and that the socialists would have to demonstrate how this determination could be achieved without a system of market prices. See Nicolas Pierson, “The Problem of Value in the Socialist Community,” F.A. Hayek, ed., Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism (London: Routledge and Kegan Paul, 1935), pp. 41–85. Pierson's original 1902 essay was written in Dutch and therefore did not reach a wider public in Germany and Austria. It was translated into German and English only after Mises's essay had started the debate independently.

¹² Mises to Emil Lederer, letter dated January 14, 1920, in Mises Archive 73: 52ff. Mises's comparison in the last sentence refers to a debate initiated by Böhm-Bawerk, who had subjected Marx's theory of the average rate of profit to scathing and devastating criticism.

¹³ Mark Blaug, Economic Theory in Retrospect, 5th ed. (Cambridge: Cambridge University Press, 1997), p. 557.

¹⁴ He did not attend the January 1920 meeting of the Nationalökonomie Gesellschaft, but sent Mises his typewritten comments in an undated letter. See Mises Archive 73: 60ff., which is a typewritten reproduction of 73: 49ff.

¹⁵ Lederer claimed that a future socialist economic calculation:

would be essentially different from capitalistic calculation in that many moments would be included in the calculation, some would be lacking, and some would be evaluated differently; this all points to another kind of system, but a system, nevertheless. It is at that point within a system where universal factors are found that operative methods of calculation for the system originate. (Ibid.)

¹⁶ Mises to Lederer, letter dated January 14, 1920; Mises Archive 73: 54.

¹⁷ John Stuart Mill, Principles of Political Economy (London: Routledge, 1891), bk. 3, chap. 1, p. 298.

¹⁸ See Carl Menger, Grundsätze der Volkswirtschaftslehre (Vienna: Braumüller, 1871), p. 124. Among the predecessors of his imputation (order-of-goods) theory, see Johann F.E. Lotz, Revision der Grund-Begriffe der National-Wirthschaftslehre (Koburg and Leipzig: Sinner, 1811), vol. 1, p. 108; Johann A. Oberndorfer, System der Nationalökonomie (Landshut: Krüll, 1822), p. 307; F.B.W. Hermann, Staatswirthschaftliche Untersuchungen, 1st ed. (Munich: Fleischmann, 1832), p. 65. Notice however that Menger had no predecessor for his solution of the problem of joint production. See Yukihiro Ikeda, Die Entstehungsgeschichte der “Grundsätze” Carl Mengers (St. Katharinen: Scripta Mercaturae Verlag, 1997).

¹⁹ See Friedrich von Wieser, Der natürliche Werth (Vienna: Hölder-Pichler-Tempsky, 1889), chap. 3, pp. 67ff.

²⁰ Consider the number one German economics textbook of Menger's day, Karl Heinrich Rau, Grundsätze der Volkswirtschaftslehre, 7th ed. (Leipzig and Heidelberg, 1863), p. 166: “Nobody freely and deliberately enters into a losing deal; that is, a deal in which the exchanged value is of a lesser nature than that which was surrendered.”

²¹ He himself recognized this stipulation as a fiction, and he justified the use of fictions as a necessary device of scientific analysis. In fact, as significant as the political implications of Wieser's natural-value theory are in their own right, it is equally important to stress the impact of Wieser's methodology on the wider profession. Mathematical economists had made no secret of the fact that their reasoning relied on fictions, even though they believed that the error introduced by unrealistic stipulations was negligible in most cases. In contrast, verbal economists like Menger stressed the necessity for science to describe reality. They were reluctant to use mathematical tools precisely because they saw no way to reconcile the use of such tools with their quest for realism. Wieser broke with this tradition by consciously insisting on the legitimacy of “deductions from fiction.” See Wieser, Der natürliche Werth, part 2.

²² For an enlightening analysis of the shortcomings of Wieser's value theory, see Samuel Bostaph, “Wieser on Economic Calculation under Socialism,” Quarterly Journal of Austrian Economics 6, no. 2 (2003); idem, “Friedrich von Wieser's Theory of Socialism: A Magnificent Failure,” Politická ekonomie 53, no. 6 (2005).

²³ And, we might add, it was a truly “scientific” theory because it did not commit the academic economist to any particular political program—just as Maxwell's equations did not commit a physicist to any political party. Wieser fervently denounced the intimate relationship between the various schools of economic thought and the political agendas they were backing up, criticizing these schools for not pursuing “pure knowledge,” that is, for Wieser, knowledge untainted by political implications. In contrast, his approach covered “a certain most inner domain of economic truths—truths relating to elements that remain common to all social organizations.” Clearly, this guaranteed political impartiality and therefore, in his view, scientific objectivity. See Friedrich von Wieser, “Karl Menger,” Neue österreichische Biographie: 1815–1918 (Vienna, 1923), vol. 1, pp. 91f.

²⁴ The best illustration is the fact that Max Weber invited him to write a general treatise on economics for the prestigious Grundriss der Sozialökonomik series, which was supposed to portray the present state of the social sciences. Wieser thus wrote his Theorie der gesellschaftlichen Wirtschaft (Tübingen: Mohr, 1914). The work was first published in 1914 and remained the main work of reference in German-language economics until the early 1930s (a second edition appeared in 1924).

²⁵ Works on the technical problems of imputation theory abounded from the 1890s and proliferated until the 1930s, without leading to any solution. See for example, Leo Schönfeld-Illy, Wirtschaftsrechnung (reprint; Munich: Philosophia, 1924); Wilhelm Vleugels, Die Lösungen des wirtschaftlichen Zurechnungsproblems bei Böhm-Bawerk und Wieser (Halle: Niemeyer, 1930).

²⁶ Nikolai Bukharin, Economic Theory of the Leisure Class (New York: Monthly Review Press, 1972), p. 9.

²⁷ Ibid., p. 51.

²⁸ Ibid., p. 53.

²⁹ See Georg Simmel, Philosophie des Geldes (Frankfurt a.M.: Suhrkamp, [1901] 1991), p. 35; Joseph A. Schumpeter, Wesen und Hauptinhalt der theoretischen Nationalökonomie (Munich and Leipzig: Duncker & Humblot, 1908), p. 50.

³⁰ Carl Menger, Principles of Economics (New York: New York University Press, 1981), p. 115. Menger also defined value as “a judgment economizing men make about the importance of the goods at their disposal for the maintenance of their lives and well being. Hence value does not exist outside the consciousness of men” (ibid., p. 121).

³¹ See chapter 4—“Fin de siècle Economic Science.”

³² Mises, Theory of Money and Credit (Indianapolis: Liberty Fund, 1980), pp. 51f.

³³ Menger, Grundsätze der Volkswirtschaftslehre, p. viii; Principles of Economics (New York: New York University Press, 1976), p. 48. He went on:

Whether and under what conditions a thing is useful to me, whether and under what conditions it is a good, whether and under what conditions it is an economic good, whether and under what conditions it possesses value for me and how large the measure of this value is for me, whether and under what conditions an economic exchange of goods will take place between two economizing individuals, and the limits within which a price can be established if an exchange does occur—these and many other matters are fully as independent of my will as any law of chemistry is of the will of the practicing chemist.

³⁴ The posthumous second edition of his Principles (1923) reinforced the stress on the objective factors of the pricing process. Among other things, Menger here distinguishes between “imaginary” and “real” human wants. See our discussion in chapter 14.

³⁵ Mises, Theory of Money and Credit, pp. 52f.

³⁶ See Mises Archive 55: 2ff. He had published parts of it beforehand: the chapter on economic calculation. He also tried to publish chapter 3 (“The Social Order and the Political Constitution”) in a festschrift for Max Weber. But this project did not materialize because Socialism appeared before the other book. See the April 1922 letter from Karl Geibel of Duncker & Humblot to Mises in Mises Archive 55: 6.

³⁷ This fact is revealing as to Mises's priorities and his sense for business.

³⁸ Mises received 19,200 marks for the book in July 1922. See Mises Archive 75: 27ff. This was the equivalent of $38.92. A few months later, by October 1922, the mark still in precipitous decline, the dollar equivalent of Mises's honorarium shrank to $6.04. We may suppose, however, that Mises was quick to exchange his marks against kronen, which had a stable dollar exchange rate.

³⁹ See Ludwig Pohle, Die gegenwärtige Krisis in der deutschen Volkswirtschaftslehre (Leipzig: Deichert, 1911), p. 6.

⁴⁰ See Max Weber, Economy and Society: An Outline of Interpretive Sociology, Guenther Roth and Claus Wittich, eds. (Berkeley: University of California Press, 1978), vol. I, pp. 100–03. The following quotes are taken from this passage, in particular, from pages 102f. In the German original see Max Weber, Wirtschaft und Gesellschaft, 3rd ed. (Tübingen: Mohr, 1947), vol. 1, chap. 2, § 12, pp. 53–58.

⁴¹ See Otto Neurath, Bayrische Sozialisierungserfahrungen (Vienna: Neue Erde, 1920); idem, “Vollsozialisierung: Von der nächsten und übernächsten Zukunft,” Deutsche Gemeinwirtschaft 15 (1920). In the spring of 1919, Neurath was a member of a short-lived revolutionary Bavarian government in Munich, acting as director of the Zentralwirtschaftsamt (Office of the Centrally Planned Economy). After the suppression of the revolution, Max Weber defended him in court. See Allan Mitchell, Revolution in Bavaria, 1918–1919: The Eisner Regime and the Soviet Republic (Princeton, N.J.: Princeton University Press, 1965), pp. 293ff.

⁴² Weber died on June 14, 1920 and thus might have read Mises's Archiv paper, which had come out in February or March of that year. The editors of Economy and Society referred to Mises's work at the end of the chapter on “calculation in kind,” stating: “During the printing of this work an essay by Ludwig von Mises dealing with these problems came out” (ibid., p. 107).

⁴³ See Max Weber, Der Sozialismus (Vienna: Phöbus, 1918).

⁴⁴ Heinrich Herkner, “Die Zukunft der Sozialpolitik,” Jubiläumstagung des Vereins für Sozialpolitik in Eisenach 1922 (Munich and Leipzig: Duncker & Humblot, 1923), p. 95.

⁴⁵ Heinrich Herkner, “Sozialpolitische Wandlungen in der wissenschaftlichen Nationalökonomie,” Der Arbeitgeber 13, no. 3 (1923): 35.

⁴⁶ See Franz Boese, Geschichte des Vereins für Sozialpolitikx (Berlin: Duncker & Humblot, 1939), p. 181.

⁴⁷ Heinrich Pesch, Lehrbuch der Nationalökonomie 5 (Freiburg i.Br.: Herder, 1923), p. ix. Pesch was the leading champion of “solidarism”—a version of socialism that Mises had criticised in his book.

⁴⁸ See Mises, A Critique of Interventionism (New Rochelle, N.Y.: Arlington House, 1977), p. 101.

⁴⁹ See Mises Archive 75: 50.

⁵⁰ Mises, Theory and History (New Haven, Conn.: Yale University Press, 1957), p. 65.

⁵¹ Mises, Human Action, Scholar's edition (Auburn, Ala.: Ludwig von Mises Institute, 1998), p. 332; emphasis added. A few years later, he wrote:

Value is not intrinsic. It is not in things and conditions but in the valuing subject. It is impossible to ascribe value to one thing or state of affairs only. Valuation invariably compares one thing or condition with another thing or condition. It grades various states of the external world. It contrasts one thing or state, whether real or imagined, with another thing or state, whether real or imagined, and arranges both in a scale of what the author of the judgment likes better and what less. (Mises, Theory and History, p. 23)

⁵² In the first edition of his treatise on money, he had written: “As a feeling, value cannot be measured; it is [however] possible to compare it with other, similar feelings” (Theorie des Geldes und der Umlaufsmittel, 1st ed. [Munich and Leipzig: Duncker & Humblot, 1912], p. 16). Significantly, in the second edition of 1924, Mises adopted a non-psychological theory of value, conceiving of value as an act rather than a feeling. He deleted the above sentence from his book and replaced it with the following: “Acts of valuation are not susceptible of any kind of measurement” (Theory of Money and Credit, p. 52).

⁵³ Mises, Socialism: An Economic and Sociological Analysis (Indianapolis: Liberty Fund, 1981), p. 203.

⁵⁴ Carl Landauer, “Übersicht über die neuesten Publikationen Deutschlands und des Auslands,” Jahrbücher für Nationalökonomie und Statistik 121, no. 2 (1923). Copy in Mises Archive 42: 4.

⁵⁵ Joseph T. Salerno, “Mises and Hayek Dehomogenized,” Review of Austrian Economics 6, no. 2 (1993); Hans-Hermann Hoppe, “Socialism: A Property or Knowledge Problem?” Review of Austrian Economics 9, no. 1 (1996); Jörg Guido Hülsmann, “Knowledge, Judgment, and the Use of Property,” Review of Austrian Economics 10, no. 1 (1997).

Chapter 11. A Treatise on Socialism

¹ The book was also notable in that Mises here used the only diagram he would ever display in one of his publications, depicting typical shapes of the curve of the utility of labor, as a function of labor-time. See Mises, Gemeinwirtschaft, 1st ed. (Jena: Gustav Fischer, 1922), p. 154. Significantly, Mises adopted this figure from William Stanley Jevons's Theory of Political Economy (London: Macmillan, 1888).

² These were the words Felix Kaufmann used to describe Mises to his future wife, Margit Serény, after they first met in 1925. See Margit von Mises, My Years with Ludwig von Mises, 2nd enlarged ed. (Cedar Falls, Iowa: Center for Futures Education, 1984), p. 14.

³ See F.A. Hayek, “Einleitung,” introduction to Ludwig von Mises, Erinnerungen (Stuttgart: Gustav Fischer Verlag, 1978), pp. xif. See also Erich Voegelin, Autobiographical Reflections, vol. 34 of the Collected Works of Eric Voegelin (Baton Rouge: Louisiana State University Press, 1989), p. 10.

⁴ Fritz G. Steiner to Mises, letter dated December 8, 1930; Mises Archive 66: 23: “It was always my opinion that its current title was the reason this brilliant book did not find the broad circulation it could have earned.”

⁵ Mises, Socialism: An Economic and Sociological Analysis (Indianapolis: Liberty Fund, 1981), p. 31.

⁶ Some 160 years earlier, Adam Smith had analyzed the economic impact of unequal land ownership in very similar terms. He argued that this inequality had a negligible impact on how the land was actually used. Land owners, he said “are led by an invisible hand to make nearly the same distribution of the necessaries of life which would have been made had the earth been divided into equal portions among its inhabitants.” Adam Smith, The Theory of Moral Sentiments (Indianapolis: Liberty Fund, [1759] 1976), p. 304.

⁷ Ibid., pp. 61f. He notes that Marsilius of Padua seemed to have argued along similar lines in Defensor Pacis. Today this line of argument is often attributed to Karl Popper, The Open Society and Its Enemies (London: Routledge, 1945), vol. 1, chap. 7. But the young Popper is likely to have learned it, as did many other intellectuals of his time, from Socialism.

⁸ Notice that the premise of Mises's argument—that governments cannot rule against the will of the majority—had a long tradition in Western thought. See in particular Thomas Aquinas, “Über die Herrschaft der Fürsten,” Staatslehre des Thomas von Aquino, F. Schreyvogel, ed. (Vienna, [1274] 1923), part 2, chap. 2, pp. 65f. (more recent scholarship argues that this chapter must actually be counted as chap. 10 of part 1); Etienne de la Boétie, The Politics of Obedience: The Discourse of Voluntary Servitude (New York: Free Life Editions, [1562] 1975), p. 50; and David Hume, “Of the First Principle of Government,” Essays, Moral and Political (Minneapolis: Liberty Fund).

⁹ Quoting Max Weber, Mises said:

Democracy is not less democracy because leaders come forth from the masses to devote themselves entirely to politics. Like any other profession in the society dividing labour, politics demand the entire man; dilettante politicians are of no use. (Socialism, pp. 63–64)

¹⁰ Ibid., p. 64.

¹¹ Ibid., p. 66.

¹² At the time of his writing, this was still the case in various western countries. For example, in an early case of social engineering, the French Code Napoléon had enshrined male dominance into the law by making the husband the sole legal owner of all family assets; see Xavier Martin, L'homme des droits de l'homme et sa compagne (Bouère: Dominique Martin Morin, 2001). The female right to vote had been introduced in Austria only in 1918. The dates for other countries: Germany (1919), Canada (1920), Great Britain (1928), France (1946), Italy (1946), Japan (1947), Switzerland (1971); see article “Wahlen,” Staatslexikon, 7th ed. (Freiburg i.Br.: Herder, 1989), col. 830.

¹³ Mises, Socialism, pp. 90–91. On another page we find:

So far as Feminism seeks to adjust the legal position of woman to that of man, so far as it seeks to offer her legal and economic freedom to develop and act in accordance with her inclinations, desires, and economic circumstances—so far it is nothing more than a branch of the great liberal movement, which advocates peaceful and free evolution. When, going beyond this, it attacks the institutions of social life under the impression that it will thus be able to remove the natural barriers, it is a spiritual child of Socialism. (p. 87)

¹⁴ Ibid., p. 90.

¹⁵ Otto Weininger, Geschlecht und Charakter, 19th ed. (Vienna: Braumüller, 1920), chap 2, pp. 106–08. In chapter 12, Weininger goes on to argue that the only vital positive interest of women is in sexual intercourse. Only because women are also essentially passive and receptive, they tend to adopt male values such as chastity and interest in art and science. Thus is comes to an inner conflict between their true sexual nature and the values that they officially endorse. The natural reaction is hysteria, about which Weininger has not much to say except that Breuer and Freud study it with a promising new method.

¹⁶ Mises, Socialism, p. 86.

¹⁷ Ibid., p. 90.

¹⁸ Ibid., p. 139.

¹⁹ Ibid., p. 163.

²⁰ Ibid., p. 169.

²¹ Ibid., pp. 167–68.

²² Ibid., p. 161.

²³ Ibid., p. 178.

²⁴ Ibid., p. 186.

²⁵ Ibid., p. 191.

²⁶ This not only concerned questions of business management, but also “private” decisions about the number and timing of offspring. In socialist systems, individuals had no incentive to “harmonize the number of births with the limitations of the means of subsistence.” Mises concluded: “Without coercive regulation of the growth of population, a socialist community is inconceivable” (p. 175). This too turned out to be a prophetic statement. The People's Republic of China found it necessary to limit births with the help of the death penalty.

²⁷ Ibid., pp. 154f.

²⁸ Ibid., pp. 155–56. See also p. 152.

²⁹ Mises, Liberalism: In the Classical Tradition (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, [1927] 1985), p. 195.

³⁰ Mises, Socialism, pp. 260f. He goes on to illustrate the principle:

If, through his superiority to B, A needs three hours' labour for the production of one unit of commodity p compared with B's five, and for the production of commodity q two hours against B's four, then A will gain if he confines his labour to producing q and leaves B to produce p. If each gives sixty hours to producing both p and q, the result of A's labour is 20p + 30q, of B's 12p + 15q, and for both together 32p + 45q. If however, A confines himself to producing q alone he produces sixty units in 120 hours, whilst B, if he confines himself to producing p, produces in the same time twenty-four units. The result of the activity is then 24p + 60q, which, as p has for A a substitution value of 3: 2q and for B one of 5: 4q, signifies a larger production than 32p + 45q.

³¹ See Vilfredo Pareto, Cours d'économie politique (reprint, Geneva: Droz, [1896] 1964]), vol. 2, p. 859. Edwin Seligman, Principles of Economics (New York: Longmans, Green, 1905), § 95, pp. 225f. and § 200, pp. 491f.

³² Mises used this expression only in his later treatises on economics. See Mises, Nationalökonomie (Geneva: Editions Union, 1940), pp. 126ff.; idem, Human Action (New Haven, Conn.: Yale University Press, 1949), pp. 158ff. Here he spoke of “Das Ricardo'sche Vergesellschaftungsgesetz” and of “The Ricardian law of Association.” But the generalization of Ricardo's discovery had occurred already in Socialism.

³³ Mises, Socialism:

Historically division of labour originates in two facts of nature: the inequality of human abilities and the variety of the external conditions of human life on the earth. These two facts are really one: the diversity of Nature, which does not repeat itself but creates the universe in infinite, inexhaustible variety. (p. 259)

³⁴ Ibid., p. 261.

³⁵ Mises to Ballvé, letter dated December 26, 1950; Grove City Archive: Ballvé files.

³⁶ Mises, Socialism, p. 272.

³⁷ Ibid., p. 275. He emphasized:

There is no evidence that social evolution must move steadily upwards in a straight line. Social standstill and social retrogression are historical facts which we cannot ignore. World history is the graveyard of dead civilizations, and in India and Eastern Asia we see large-scale examples of civilization at a standstill.

³⁸ Schumpeter just recently had endorsed this theory. See Joseph A. Schumpeter, “Sozialistische Möglichkeiten von heute,” Archiv für Sozialwissenschaften und Sozialpolitik 48, no. 2 (1921): 314. See also idem, Capitalism, Socialism, and Democracy (New York: Harper & Row, 1942).

³⁹ Mises would defend his position against anti-trust policies for the rest of his life, often isolated in his stance, most notably when, as an octogenarian, he made the case for concentration in the debates of the Mont Pèlerin Society in the 1960s. See for example Mises, “Ein Wort zum Monopolpreisproblem,” Peter Muthesius, ed., Vom Sinn der Konzentration (Frankfurt: Knapp, 1965).

⁴⁰ Quite apart from the corruption that plagued the implementation of anti-trust policies (Mittelstandspolitik), these policies often proved to be disastrous in practice because they benefited the more inefficient shops at the expense of the better ones, without improving their overall situation vis-à-vis the big industry. There was no critical study accounting for these practical failures. Mises obtained information from Hofrat Pösendeiner, a civil servant charged with the implementation of “industrial policy.” He tried to persuade him to put these experiences into print. See Mises to Brodnitz, letter dated April 5, 1927; Mises Archive 62: 21.

⁴¹ Mises, Socialism, p. 344.

⁴² Ibid., p. 346.

⁴³ Ibid., p. 348. Mises, Gemeinwirtschaft, 2nd ed. (Jena: Gustav Fischer, 1932), p. 359.

⁴⁴ Before 1922, the most elaborate exposition of the theory of monopoly price could be found in the work of John Bates Clark, who was much admired among Viennese theoreticians. Clark had claimed that monopoly weakens free competition, and that private monopoly was worse than public monopoly. See John Bates Clark, Essentials of Economic Theory (New York and London: Macmillan, 1914), pp. 374ff., 397.

⁴⁵ Mises to Hans Hellwig, letter dated November 29, 1956; Grove City Archive: Hellwig file. Mises here also refers to a passage in Nationalökonomie (p. 336), where he stated the issue even more clearly.

⁴⁶ See Murray N. Rothbard, Man, Economy, and State with Power and Market, Scholar's edition (Auburn, Ala.: Ludwig von Mises Institute, 2003), chap. 10.

⁴⁷ Rudolf Hilferding, Das Finanzkapital (Berlin: Dietz, [1910] 1947), chaps. 21 and 22 had made very similar observations in his influential book. However, the Austro-Marxist theoretician argued that state monopolies were an outgrowth of capitalism. Mises was therefore unable to endorse Hilferding's analysis and preferred to recommend a study by the Freiburg professor Robert Liefmann, which detailed how the German government had created monopolies in the recent past. See Robert Liefmann, Kartelle und Trusts (Stuttgart: Moritz, 1924).

⁴⁸ Mises, Socialism, p. 350.

⁴⁹ Ibid., p. 370.

⁵⁰ The same point had been made, though from a completely different point of view, in Carl Schmitt, Politische Theologie (Berlin: Duncker & Humblot, 1922). A great critic of classical-liberal legal doctrines, Schmitt attacked the notion that modern juridical scholarship had done away with the theological foundation of politics. Othmar Spann too was a Catholic intellectual of the old school, who believed with Pius IX that all things had to be remade in Christ. In Mises's own circle of friends, Erich Voegelin was most interested in these questions. See Voegelin's early work Die politischen Religionen (Stockholm: Bermann-Fischer, 1939).

⁵¹ See Rudolf Sieghart, Die letzten Jahrzehnte einer Grossmacht (Berlin: Ullstein, 1932), pp. 299f.

⁵² Mises, Socialism, pp. 375f.

⁵³ See ibid., p. 376. Again, this thesis parallels a contemporary work by the anti-liberal Carl Schmitt, Römischer Katholizismus und politische Form (Berlin: Duncker & Humblot, 1923). Schmitt however did not believe that Christ's teachings were utterly otherworldly. He held that the Catholic Church survived because she always enjoyed the margin of liberty necessary to accomplish her mission.

⁵⁴ Mises, Socialism, p. 379.

⁵⁵ Ibid., p. 380.

⁵⁶ Mises, Gemeinwirtschaft, 1st ed., p. 421; my translation. For unknown reasons, the published English translation sounds less categorical than the original:

In face of all this evidence, it would seem that only a negative answer can be made to the question asked above: whether it might not be possible to reconcile Christianity with a free social order based on private ownership in the means of production. A living Christianity cannot, it seems, exist side by side with Capitalism. (Mises, Socialism, p. 386)

⁵⁷ Mises, Socialism, pp. 386f.

⁵⁸ Mises to Parker, letter dated May 14, 1953; Grove City Archive: Tax Foundation file. Mises had Nell-Breuning sent a copy of the Tax Foundation's handbook Fiscal Facts for '53.

⁵⁹ The Bolshevist reaction was predictable: he was presented as a “theoretician of fascism.” See the article by F. Kapeljush in The Bolshevik 15 (August 15th, 1924); Mises Archive 1: 9ff. The file contains a German translation of this piece, which Mises received in the fall of 1925 from the Austrian Mission in Moscow.

⁶⁰ Ibid., p. 414.

⁶¹ Mises to an unknown correspondent, letter dated February 9, 1926; Mises Archive 80: 24. The correspondent was presumably the author of the (lost) novel Polythea.

⁶² Carl Ludwig Haller, “Über einige Parteienbenennungen zum besseren Verständnis der Zeitungen und anderer moderner Schriften,” Satan und die Revolution—und andere Schriften (Vienna: Karolinger, 1991), p. 78.

⁶³ Mises to Meyendorff; letter dated July 10, 1928; Mises Archive 88:6. See also Meyendorff's letter to Mises in 88: 8.

Chapter 12. Winds of War

¹ During the 1920s and 1930s, many testimonies and analyses appeared in France, Britain, and the United States that condemned the treaty as a prolongation of the hostilities by other means, and thus as a heavy burden on future peace in Europe. See for example the account by the French diplomat Alcide Ebray, La Paix malpropre (Versailles)—pour la reconciliation par la vérité (Milano: Unitas, 1924); see also the testimony of the British diplomatic journalist Sisley Huddleston, In My Time (New York: Dutton & Co., 1938). Useful general discussions of the consequences of Versailles and Saint-Germain by contemporary witnesses are in John Maynard Keynes, The Economic Consequences of the Peace (New York: Harcourt, Brace and Howe, 1920); Sisley Huddleston, War Unless (London: Victor Gollancz, 1933); idem, Popular Diplomacy and War (Rindge, N.H.: Richard Smith, 1954); Christian Eckert, “Friedensverträge. II. Vom staatswissenschaftlichen Standpunkte,” Handwörterbuch der Staatswissenschaften, 4th ed. (Jena: Gustav Fischer, 1927), vol. 4, in particular pp. 509–12; Felix Ermacora, Der unbewältigte Friede—St. Germain und die Folgen (Vienna and Munich: Amaltha, 1989); and Jacques Bainville, Les conséquences politiques de la paix (Paris: Fayard, 1920).

² Schutzstelle für österreichisches Vermögen im Auslande.

³ See the reports in Friedensrecht 1, no. 11 (June 20, 1922). This journal was the official publication of the Bureau.

⁴Friedensrecht 4, no. 2 (February 1925).

⁵Neue Freie Presse (November 18, 1924), p. 12.

⁶ F.A. Hayek, “Einleitung,” introduction to Ludwig von Mises, Erinnerungen (Stuttgart: Gustav Fischer, 1978,) p. xii.

⁷ The Laura Spelman Rockefeller Fund had followed a 1922 suggestion by Beardsley Ruml to move into the field of the social sciences. In 1923 the Fund started investing in social research with an explicit long-term “scientistic” orientation. In the same year, the Social Science Research Council was established, also on the initiative of Ruml. See Raymond Blaine Fosdick, The Story of the Rockefeller Foundation (New York: Harper, 1952), p. 193ff.

⁸ On the boat to New York he started translating Pierson's article on the value problem in socialist societies. The translation was probably ready in August and Hayek submitted it to Weiss, who at the time was the editor of the Zeitschrift. See Hayek to Mises, letter of August 1923; Mises Archive 79: 15f.

⁹ “I also usually have work on the side. At present I am at the National Bureau for Economic Research collecting material for Professor Mitchell's study of the Business Cycle.” Hayek to Mises, letter dated January 12, 1924; Mises Archive 81: 23.

¹⁰ Hayek, “Einleitung,” p. xi.

¹¹ F.A. Hayek, Hayek on Hayek: An Autobiographical Dialogue (Chicago: Chicago University Press, 1994), p. 67.

¹² Mises to Hayek, letter dated February 8, 1924; Mises Archive 81: 24. Mises here thanks Hayek for sending a report on his time in New York and talks about the position in the Kammer library.

¹³ See records in the files of the Vienna Chamber of Commerce.

¹⁴ See for example the documents concerning a May 24, 1921 meeting on the premises of the Bank to discuss exchange rate policies. Among the participants were Spitzmüller, Wieser, Schumpeter, Schwiedland, Schiff, and Mises. See Mises Archive 74: 3ff.

¹⁵ Ludwig von Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” Schriften des Vereins für Sozialpolitik 164, no. 2 (1923): 19f.; my translation. Mises pointed out that it was not possible to “compensate the owners of claims denominated in marks for losses they have suffered from 1914 to 1923” because the “present owners of the claims are not always identical with those who have suffered the loss. The bulk of the fungible claims and a considerable part of all other claims have changed hands over the years.”

¹⁶ From Mises's second comment at the 1924 meeting of the Verein für Sozialpolitik; see Mises Archive 22: 80ff. Spitzmüller remained faithful to his line even many years after the event. In March 1929, he gave two lectures on the policy of the Austrian central bank. He attacked the stance taken by the bank and by the industry, and in his second lecture also dealt several times with Mises whom he criticized for an alleged lack of consistency. See Mises Archive 80: 81.

¹⁷ Mises reacted to a statement to this effect of Spitzmüller's in a comment made at the 1924 meeting of the Verein für Sozialpolitik; see Mises Archive 22: 80ff. See also the identical statement by E. Weidenhoffer, secretary of the Hauptverband der Industrie Österreichs in Styria, which he made in a March 1924 letter to Mises; Mises Archive 80: 81.

¹⁸ See the newspaper report in Mises Archive 107: 24.

¹⁹ Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” pp. 6f.; translated as “Stabilization of the Monetary Unit—From the Viewpoint of Theory,” On the Manipulation of Money and Credit, Percy L. Greaves, trans. (New York: Free Market Books, 1978), pp. 8f.

²⁰ This concerned in particular the Austrian directors, who were predominantly statist and inflationist. The Hungarian directors were generally advocates of the gold standard. Mises made this point in a 1924 Verein für Sozialpolitik debate with Spitzmüller. See Mises Archive 22: 80ff.

²¹ Mises Archive 74: 31. The editor of the Neue Freie Presse, Moritz Dub, thanked Mises especially for the latter piece in which he had quoted from a speech by Carl Menger, who was himself a former editor of the NFP.

²² Mises's letter to Moriz Dub, June 24, 1922, Mises Archive 74: 37. Moriz (or Moritz) Dub was the economics editor of the Neue Freie Presse and author of several popular books on economic problems. In the postwar period, he published two works on the “catastrophic boom” induced by inflation of the money supply. See Moriz Dub, Katastrophenhausse und Geldentwertung (Stuttgart: Enke, 1920); idem, Die weitere Entwicklung der Katastrophenhausse in Oesterreich mit Streiflichtern auf Deutschland (Stuttgart: Enke, 1922).

²³ Mises Archive 17: 53, 53b, 55.

²⁴ Mises Archive 17: 55, 55b.

²⁵ Mises Archive 17: 3f.

²⁶ Mises Archive 17: 5. The record seems to be incomplete.

²⁷ Mises Archive 20: 7ff. The record seems to be incomplete. There are no records for 1922–1923.

²⁸ Hayek, Hayek on Hayek, p. 66.

²⁹ Hayek to Mises, letter dated August 17, 1923; in Mises Archive 79: 15.

³⁰ Mises, Erinnerungen, p. 64; my translation.

³¹ Eric Voegelin, Autobiographical Reflections, vol. 34 of the Collected Works of Eric Voegelin (Baton Rouge: Louisiana State University Press, 1989), pp. 2f.

³² Spann's anti-Semitism was notorious. His full professorship in 1919 signaled a somewhat broader anti-Semitic movement that began infecting university life in the early years of the Republic, turning the University of Vienna into a battlefield for Mises and other liberal Jews. Kelsen proved to be one of the last Jews to obtain a full professorship, which he attained in 1918. See ibid., p. 6.

³³ See the discussion of this question in Ludwig von Mises, Epistemohgical Problems of Economics (Auburn, Ala.: Ludwig von Mises Institute, [1933] 2003), pp. 42–50.

³⁴ F.A. Hayek, “Friedrich Freiherr von Wieser,” Jahrbuch für Nationalökonomie und Statistik 125 (3rd series vol. 70 [1926]): 526.

³⁵ The book appeared again in the prestigious series Grundriss der Sozialökonomik (Outline of Social Economics). The series was published in twelve volumes from 1914 to 1930. Especially the first volumes, some of which have appeared in two editions (prewar and postwar) and which deal with the history of economic science and with general economic theory, still have lasting value. Especially noteworthy is the first volume, Wirtschaft und Wirtschaftswissenschaft (1914, 1924) which contains the following essays: Karl Bücher, “Volkswirtschaftliche Entwicklungsstufen;” Joseph Schumpeter, “Epochen der Dogmen und Methodengeschichte;” Eugen von Philippovich, “Entwicklungsgang der wirtschafts- und sozialpolitischen Systeme und Ideale. I. Die Entwicklung bis zum Kriege;” Eduard Heimann, “Entwicklungsgang der wirtschafts- und sozialpolitischen Systeme und Ideale. I. Die jüngste Entwicklung.” Equally remarkable is volume three, which contains Friedrich von Wieser's Theorie der gesellschaftlichen Wirtschaft (1914, 1924) and volume four, which features Max Weber's famous Wirtschaft und Gesetischaft (1922).

³⁶ Werner Neudeck points out that Mayer was simply higher up in a pecking order that gave much weight to seniority. Mayer had already been a paid professor (Ordinarius) in Prague and Graz, whereas Mises had only an unpaid position (Extraordinarius) in Vienna. See Werner Neudeck, “Der Einfluss von Ludwig von Mises auf die Österreichische akademische Tradition gestern und heute,” Wirtschaftspolitische Blätter 28, no. 4 (1981): 26.

³⁷ “The simplicity of argument and great accessibility of Cassel's book ensured its success. It was translated into many languages and was probably the most widely-read textbook on economics in the interwar period.” Mark Blaug, Great Economists before Keynes: An Introduction to the Lives and Works of One Hundred Great Economists of the Past (Cambridge: Cambridge University Press, 1986), p. 42.

³⁸ Schumpeter and Cassel are self-declared Walrasians. On Wieser's Walrasianism, see Mises, Erinnerungen, p. 21; George Stigler, Production and Distribution Theories: The Formative Period (New York: Macmillan, 1949), p. 158; Hans-Hermann Hoppe and Joseph T. Salerno, “Friedrich von Wieser und die moderne Österreichische Schule der Nationalökonomie,” Herbert Hax, ed., Friedrich von Wiesers “ Über den Ursprung und die Hauptgesetze des wirthschaftlichen Werthes,” in Vademecum zu einem Klassiker der österreichischen Schule (Düsseldorf: Handel und Finanzen, 1999); Bruce Caldwell, “Wieser, Hayek, and Equilibrium Theory,” Journal des Economistes et des Etudes Humaines 12, no. 1 (2002); Joseph T. Salerno, “Friedrich von Wieser and F.A. Hayek: The General Equilibrium Tradition in Austrian Economics,” Journal des Economistes et des Etudes Humaines 12, no. 2&3 (2002).

³⁹ The Handwörterbuch also revealed the pecking order in business cycle theory. Here the lengthy entry came from the pen of Arthur Spiethoff, a Schmollerite to the core who opposed all monetary theories of the trade cycle. See Arthur Spiethoff, “Krisen,” Handwörterbuch der Staatswissenschaften, 4th ed. (Jena: Gustav Fischer, 1925), vol. 6.

⁴⁰ Joseph A. Schumpeter, “Das Sozialprodukt und die Rechenpfennige,” Archiv für Sozialwissenschaften und Sozialpolitik 44 (1917).

⁴¹ In his contribution to the festschrift that celebrated Wieser's seventy-fifth birthday in 1926, Mises picked the subject of “the role of money in the realm of economic goods.” Here he attacked the dominant Wieserian income theory of money, arguing that money in general and gold in particular was an economic good—not mere tokens for other “real” goods—and that marginal value theory could therefore be applied directly to money, rather than merely indirectly through the value of some underlying real goods. The piece was published only six years later. Friedrich von Wieser had died in 1926 and the editor of the festschrift, Hans Mayer, then chose to publish a comprehensive overview of contemporary economic science in four volumes. Mises's contribution appeared as “Die Stellung des Geldes im Kreise der wirtschaftlichen Güter,” Hans Mayer, ed., Die Wirtschaftstheorie der Gegenwart (Vienna: Springer, 1932), vol. 2, pp. 309–18; translated as “The Role of Money in the Realm of Economic Goods,” Money, Method, and the Market Process: Essays by Ludwig von Mises, Richard Ebeling, ed. (Boston: Kluwer, 1990).

⁴² Hayek, Hayek on Hayek, p. 66. The Wieserian approach had found its way into Spann's thought, see Shigeki Tomo, “The Year 1922: A Watershed for Mises and Hayek” (Auburn, Ala.: Ludwig von Mises Institute working paper, September 2003). Similarly, the idea of imputation was familiar to legal theorists. Hans Kelsen had pioneered the pure theory of law, which imputed every single norm back to a fundamental norm. See in particular Hans Kelsen, Hauptprobleme der Staatsrechtslehre (Tübingen: Mohr, 1911). In the early 1920s, he had reiterated this thesis in works relating to the problem of sovereignty. See Kelsen, Das Problem der Souveränität und die Theorie des Völkerrechts (Tübingen: Mohr, 1920); idem, Der soziologische und der juristische Staatsbegriff (Tübingen: Mohr, 1922).

⁴³ F.A. Hayek, “Bemerkungen zum Zurechnungsproblem,” Jahrbuch für Nationalökonomie und Statistik 124 (3rd series vol. 69 [1926]): 3; translated as “Some Remarks on the Problem of Imputation,” Money, Capital, and Fluctuations: Early Essays, Roy McCloughry, ed. (Chicago: University of Chicago Press, 1984), p. 35.

⁴⁴ Hayek, “Bemerkungen zum Zurechnungsproblem,” p. 6; trans., p. 39.

⁴⁵ This argument would remain a staple of Hayekian thought. See for example Hayek, “Competition as a Discovery Procedure,” Quarterly Journal of Austrian Economics 5, no. 3 ([1968] 2002).

⁴⁶ Hayek, “Bemerkungen zum Zurechnungsproblem,” p. 18; trans., p. 53.

⁴⁷ Étienne Bonnot, Abbé de Condillac, Commerce and Government: Considered in Their Mutual Relationship (Cheltenham, U.K.: Edward Elgar, 1997), pp. 261f.:

When trade is perfectly free, the quantity and the need are apparent in all the markets. Then goods put themselves at their true price, and plenty spreads equally everywhere.... But when one has once taken all freedom from trade, it is no longer possible to judge, either if there is really an imbalance between the quantity and the need, or what it is.

See also Hermann Heinrich Gossen, Entwickelung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für menschliches Handeln (Braunschweig: Vieweg & Sohn, 1854), pp. 90ff., 231; Adolph Thiers, De la propriété (Paris: Paulin, Lheureux & Cie, 1848).

⁴⁸ See F.A. Hayek, Individualism and Economic Order (Chicago: University of Chicago Press, 1948).

⁴⁹ Hayek, “Einleitung,” pp. xivf. The Mayer line ended with his student Wilhelm Weber, who became “the first important teacher of Keynesianism in Austria.” Werner Neudeck, “Der Einfluss von Ludwig von Mises auf die Österreichische akademische Tradition gestern und heute,” Wirtschaftspolitische Blätter28, no. 4 (1981): 32. Neudeck asserts that Mises was the last economist who managed to establish an internationally recognized school in Austria (see ibid., p. 31).

⁵⁰ “Strictly speaking, only Fritz Machlup was originally a disciple of Mises” (Hayek, “Einleitung,” p. xii). On Machlup see Jacob Dreyer, Breadth and Depth in Economics: Fritz Machlup—The Man and His Ideas (Lexington, Mass.: Lexington Books, 1978).

⁵¹ Gerhard Jagschitz, Die Jugend des Bundeskanzlers Dr. Engelbert Dollfuss (University of Vienna: Doctoral dissertation, 1967), pp. 144f. and passim. The main organizational vehicle in the campaign was the Katholisch-Deutscher Akademikerausschuss.

⁵² Kenneth Boulding quoted in Gottfried von Haberler, “Fritz Machlup: In Memoriam,” Cato Journal 3, no. 1 (1983): 14.

⁵³ Fritz Machlup, Der Golddevisenstandard (Halberstadt, 1925); idem, Börsenkredit, Industriekredit und Kapitalbildung (Vienna: Springer, 1931).

⁵⁴ Dr. Machlup-Wolf is an excellent economist.... The second book (Börsenkredit, Industriekredit und Kapitalbildung) is really a master piece” (Mises to Kittredge, letter dated March 31, 1933; Mises Archive 67: 5. This was a letter of recommendation for the Rockefeller Foundation.) Mises concluded:

There is no doubt that Machlup is in all respects the worthiest man for a Rockefeller fellowship. This is not merely my opinion who was his teacher for many years, but everybody's. Last year he lectured at the London School of Economics and Political Science and had a great success.

⁵⁵ In those years, Mises was asked to co-author two entries for the new 12th edition of the Encyclopaedia Britannica (this edition was in fact a two-volume supplement to the 11th edition). See Mises's contributions in “Austrian Empire,” Encyclopaedia Britannica, 12th ed. (1921), vol. 30, pp. 323–24; “Republic of Austria,” ibid., pp. 348–49.

⁵⁶ In November 1922, Mises said he had “talked to an English professor” about a translation of his book Die Gemeinwirtschaft into English (see Mises to Zimmermann, letter dated November 22, 1922; Mises Archive 75: 20). This was probably Gregory, who was the only Englishman among the recipients of a complimentary copy (see the list in Mises Archive 75: 8). Documented contacts to William Beveridge date back to the summer of 1924, when Mises had him (and Gregory) sent complimentary copies of the second edition of his Theorie des Geldes und der Umlaufsmittel (see correspondence between Mises and his publisher Duncker & Humblot, dated June 24, 1924 in Mises Archive 78: 28, 35). In early November 1924, Mises traveled to London and talked with Robbins about the translation of Gemeinwirtschaft (75: 11). He then had him sent a complimentary copy of Gemeinwirtschaft, probably as a Christmas gift (see 57: 51). By this time, his command of English was fairly good, as evidenced by his comments on the translation that Robbins (and later also Schwartz) made of parts of Gemeinwirtschaft (83: 23ff., 4ff.). Still in his meetings with Gregory and Robbins, Mises probably spoke German. Gregory was an excellent speaker of the language, and Robbins could follow a conversation in German even though he was not himself fluent in it.

⁵⁷ On Lionel Robbins see in particular his Autobiography of an Economist (London: Macmillan, 1971); D.P. O'Brien, Lionel Robbins (London: Macmillan, 1988).

⁵⁸ Robbins, Autobiography of an Economist, pp. 73–74.

⁵⁹ Ibid., p. 106. In those days, LSE students had to prove their ability to translate from two foreign languages after their first year of study.

⁶⁰ Tugendhat was probably the same person who took part in Mises's first private seminar in the winter semester of 1919–1920. In this case there was a strong early personal connection between the circles in London and Vienna.

⁶¹ Mises to Fischer, letter dated October 7, 1924; Mises Archive 75: 49.

⁶² Himself a monarchist, his great achievement was to reconcile Austrian Catholicism with the republic and thus to spare Austria the fate of other countries, such as France, Italy, and Spain, where after the establishment of the republic the political Right split into conservative monarchists and republican democrats. See Heinrich Dimmel, “Ignaz Seipel,” Tausend Jahre Österreich, Walter Pollack, ed. (Vienna: Verlag Jugend und Volk, 1974), vol. 3, pp. 299ff.

⁶³ For an ex-post analysis of this dependence, see the statements of Spitzmüller and others in Verhandlungen des Vereins für Sozialpolitik in Zürich 1928. Schriften des Vereins für Sozialpolitik 175 (1929).

⁶⁴ For details see Franz Baltzarek, “Ludwig von Mises und die österreichische Wirtschaftspolitik der Zwischenkriegszeit,” Wirtschaftspolitische Blätter 28, no. 4 (1981): 132; Mises, Erinnerungen, pp. 50–54.

⁶⁵ Mises to Mellish, letter dated January 25, 1962; Grove City Archive: “M” files. See also Mises, Erinnerungen, p. 51. Seipel's economic and political views were of course shaped to a large extent by prevailing Catholic moral views on social organization, in particular by Pope Leo XIII's encyclical Rerum novarum (1891). He was also known as a sharp critic of racial anti-Semitism; in his eyes the Austrian Jews were a national minority and should enjoy all minority rights. See his article “Minoritätenschutz und Judenfrage nach dem christlichsozialen Programm,” Volkswohl 10, no. 2 (February 1919).

⁶⁶ The former director, Mises's friend Emil Perels, moved on to another position. He was appointed director of the Kreditimtitut für öffentliche Arbeiten (Credit Institute for Public Works).

⁶⁷ Eckert, “Friedensverträge. II. Vom staatswissenschaftlichen Standpunkte,” pp. 512ff.

⁶⁸ Mises, Erinnerungen, pp. 54, 62.

⁶⁹ R.G. Hawtrey, Monetary Reconstruction, 2nd ed. (London: Longmans, Green & Co., 1926), chap. 6.

⁷⁰ Some Austrians then claimed the new international system had been invented by their finance minister, Steinbach, in 1897. In fact, however, the system was devised by David Ricardo in “Proposals for an Economical and Secure Currency,” Works and Correspondence, Piero Sraffa, ed. (Cambridge: Cambridge University Press, 1951–1973), vol. 4.

⁷¹ Mises, Geldwertstabilisierung und Konjunkturpolitik (Jena: Gustav Fischer, 1928).

⁷² Mises Archive 74: 25.

⁷³ The government had a tobacco monopoly and one for salt, but the receipts were meager. See Mises's statement in Mises Archive 57: 16.

⁷⁴ From the end of August till the end of December 1922, the number of unemployed receiving government assistance in the city of Vienna alone rose from 24,000 to 58,000. On February 24, 1923, there were 112,000 unemployed in Vienna and the surrounding districts, of whom 98,000 received government assistance. See Mises's undated letter to an unknown recipient in Mises Archive 57: 16. This document summarizes Mises's view on economic conditions in Austria in early 1923. Mises wrote it in reply to an unknown Anglo-Saxon friend, who had visited Vienna some time earlier. Throughout 1923, unemployment was at 110,000. It would further increase over the following years, reaching some 200,000 by 1929. See Redaktionskomitee der Wirtschaftskommission, Bericht über die Ursachen der wirtschaftlichen Schwierigkeiten Österreichs (Vienna: Österreichische Staatsdruckerei, 1930), p. 25.

⁷⁵ Murray N. Rothbard, America's Great Depression, 5th ed. (Auburn, Ala.: Ludwig von Mises Institute, 2000); Benjamin Anderson, Economics and the Public Welfare (Indianapolis: Liberty Press, 1979), esp. chap. 18. See also the figures in Milton Friedman and Anna J. Schwartz, Monetary History of the United States (Princeton, N.J.: Princeton University Press, 1963), pp. 710ff.

⁷⁶ Mises, Erinnerungen, p. 58; Notes and Recollections (Spring Mills, Penn.: Libertarian Press, 1978), p. 90.

⁷⁷ From the winter 1929–1930 report of the Industrieller Klub. See Mises Archive 66a: 53ff.

⁷⁸ Ibid.

⁷⁹ See Mises, “Die Sanierung der europäischen Staatsfinanzen,” in Mises Archive 40b; 57: 53. The Magyar Cobden-Szövetség (Hungarian Cobden Association) was a group of free-market businessmen, economists, and journalists in Budapest. Before Mises, Sombart, Oppenheimer, Rist, and George Paish had spoken at its meetings. They were all received in the most luxurious conditions (Hotel Ritz) and were probably very well paid as well. One of Mises's main contacts in Budapest was a certain Felix Schwarz, who was no academic. Schwarz visited regularly with Mises in Vienna and had contacts with the Pester Lloyd, a Budapest journal that frequently ran reviews of Mises's books (see Mises Archive 78: 34f., 45; 80: 50).

⁸⁰ Many years later he wrote:

When my money book appeared in the year 1912, all German reviewers rejected it with very unfriendly words. It was only due to the monetary collapse, which destroyed much more than the monetary system that, when the currency catastrophe approached, even the Verein für Sozialpolitik had second thoughts and asked me—rather than Knapp or Bendixen—to write a report on the problems of monetary stabilization, and that the second edition of my book in 1924 had a much better reception. (Mises to Volkmar Muthesius, letter dated May 18, 1959; Grove City Archive: Hahn files)

⁸¹ Mises to Adolf Grote, letter dated June 29, 1959; Grove City Archive: Grote file.

⁸² Albert Hahn, Volkswirtschaftliche Theorie des Bankkredits (Tübingen: Mohr, 1920). Hahn eventually changed his mind under the impact of the German hyperinflation and of criticism, most notably from Hayek and other members of the Austrian School (see the 1930 third edition of his book). Still later, he wrote a piece comparing his 1920 statements with the corresponding passages in John Maynard Keynes's General Theory of Employment, Interest, and Money (New York and London: Harcourt, Brace, 1936). See Albert Hahn, “Continental European Pre-Keynesianism,” The Economics of Illusion, chap. 16; reprinted in Henry Hazlitt, ed., The Critics of Keynesian Economics, 2nd ed. (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1995), pp. 287–303.

⁸³ Duncker & Humblot (the Verein's publisher) to Mises, letter dated February 26, 1923; Mises Archive 78: 6.

⁸⁴ Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” Schriften des Vereins für Sozialpolitik 164, no. 2 (Munich: Duncker & Humblot, 1923); 4f., 8f.; translated as “Stabilization of the Monetary Unit—From the Viewpoint of Theory,” pp. 6, 11.

⁸⁵ Anton Burghardt, Soziologie des Geldes und der Inflation (Vienna: Böhlaus, 1977), p. 65. On the German inflation see F.D. Graham, Exchanges, Prices, and Production in Hyperinflation: Germany, 1920–23 (Princeton, N.J.: Princeton University Press, 1930); Costantino Bresciani-Turroni, The Economics of Inflation: A Study of Currency Depreciation in Post-War Germany (London: Allen and Unwin, 1937); Rudolph Stucken, Deutsche Geld- und Kreditpolitik, 1914–1963, 3rd ed. (Tübingen: Mohr, 1964), chaps. 3 and 4.

⁸⁶ Mises to Duncker & Humblot, letter dated May 25, 1923; Mises Archive 78: 14. The delay was caused by the other contributor to the volume, ex-minister Klein, who was unable to return his proof pages in the agreed time; see Duncker & Humblot's letter to Mises, dated May 18, 1923 in Mises Archive 78: 12. Publications of the Verein für Socialpolitik were usually meant to have an impact on current policy; see Franz Boese, Geschichte des Vereins für Sozialpolitik, 1872–1932 (Berlin: Duncker & Humblot, 1939), pp. 164, 183f.

⁸⁷ Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” p. 10; translation p. 13.

⁸⁸ Ibid., p. 15.

⁸⁹ Stucken, Deutsche Geld- und Kreditpolitik, 1914–1963, p. 49.

⁹⁰ Ibid., p. 52.

⁹¹ Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” p. 13.

⁹² Ibid. The expression “100% marginal gold standard” is, I believe, Prof. Philippe Nataf's.

⁹³ Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” p. 16; my translation.

⁹⁴ Ibid., p. 33; my translation. The deficiences he alludes to concern the absence of legal limitations on checking accounts and other money substitutes.

⁹⁵ But the 1953 Mises Plan was substantially the same plan he first presented in 1923. See Mises, Theory of Money and Credit (New Haven, Conn.: Yale University Press, 1953), part 4.

⁹⁶ Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” p. 17; my translation.

⁹⁷ Ibid., pp. 34f.

⁹⁸ Mises, Human Action: A Treatise on Economics (New Haven, Conn.: Yale University Press, 1949), p. 780.

⁹⁹ Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” p. 30.

¹⁰⁰ Ibid., p. 32; my translation.

¹⁰¹ Nicholas Oresme, “A Treatise on the Origin, Nature, Law, and Alterations of Money,” Charles Johnson, ed., The De Moneta of Nicholas Oresme and English Mint Documents (London: Nelson & Sons, 1956).

¹⁰² Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” p. 36; my translation.

¹⁰³ Hawtrey, Monetary Reconstruction, chap. 4.

¹⁰⁴ See Mises, Erinnerungen. He probably could have increased his revenue several times, if it is licit to extrapolate pre-WW I data. Indeed, before the war, the leading executives of the Credit-Anstalt (Spitzmüller) and of the Bodenkreditanstalt (Sieghart) had a basic annual income of 50.000 kronen, whereas civil servants of the rank Mises attained in the 1920s (Ministerialrat) earned 12.000 kronen. See Bernard Michel, Banques et banquiers en Autriche au début du 20e siècle (Paris: Presses de la Fondation nationale des sciences politiques, 1976), pp. 324f.

¹⁰⁵ See the correspondence between Mises and Duncker & Humblot in Mises Archive 78: 7, 9, 17, 38. Mises had Duncker & Humblot send 14 of the 50 complimentary copies directly to the recipients. He himself distributed the remaining 36 copies (see Mises Archive 78: 28).

¹⁰⁶ Mises, Theory of Money and Credit (Indianapolis: Liberty Fund, 1980), p. 34.

¹⁰⁷ Mises, “Zur Klassifikation der Geldtheorie” (On the classification of monetary theories), Archiv für Sozialwissenschaft und Sozialpolitik 44 (1917/1918): 198–213.

¹⁰⁸ Mises, Theory of Money and Credit, p. 35.

¹⁰⁹ See Mises's manuscript in Mises Archive 78: 32. He had planned to give the new introduction the title “The Place of the Theory of Money and Fiduciary Media Within the System of Theoretical Economics” (see Mises Archive 78: 33), but also abandoned this idea.

¹¹⁰ See the correspondence in Mises Archive 78: 7, 20, 22, 26, 38.

¹¹¹ Here are the sales figures (see Mises Archive 78: 2, 52): 1924: 839/721, 1925: 420/409, 1926: 144/139, 1927: 78/77, 1928: unknown, 1929: unknown, 1930: 70, 1931: 110. Remaining copies on May 21, 1932: 150. In 1932, Dunckler & Humblot already talked about a third edition of the book, and in light of the sales it is certain that this edition would have been forthcoming. The rise of National Socialism in Germany prevented this project.

¹¹² Herbert Döring, Die Geldtheorien seit Knapp, 2nd ed. (Greifswald: Bamberg, 1922); Melchior Palyi, Der Streit um die Staatliche Theorie des Geldes (Munich: Duncker & Humblot, 1922); G.M. Verrijn Stuart, Inleiding tot de Leer der Waardevastheid van het Geld (The Hague: Mouton, 1919); Walter Eucken, Kritische Betrachtungen zum deutschen Geldproblem (Jena: Gustav Fischer, 1923). The latter work is not mentioned in Mises's book, but Mises refers to it in correspondence; see Mises Archive 80: 52.

¹¹³ Mises Archive 78: 21. In his book, Keynes had adopted the position of Irving Fisher and Gustav Cassel, according to which monetary policy should strive to stabilize the purchasing power of money.

¹¹⁴ Eckert, “Friedensverträge. II. Vom staatswissenschaftlichen Standpunkte,” p. 490.

¹¹⁵ Two years before, at the fiftieth anniversary convention in Eisenach, Mises's friend Georg Jahn had unsuccessfully agitated for the transformation of the Verein into a pure research association (see Boese, Geschichte des Vereins für Sozialpolitik, 1872–1932, pp. 176ff.). Two motivations seemed to be at work in this attempt. On the one hand, Max Weber's ideal of a value-free social science had won many followers among the younger generation. On the other hand, the socialist November revolutions of 1918 had produced a political radicalization of its members and of the larger society. This radicalization diminished the status of the middle-of-the-road mainstream, which in the past had been the main agent of political compromise within the Verein and of its application in government policy.

¹¹⁶ Boese, Geschichte des Vereins für Sozialpolitik, 1872–1932, pp. 186ff.

¹¹⁷ See “Verhandlungen des Vereins für Sozialpolitik in Stuttgart 1924,” Schriften des Vereins für Sozialpolitik 170 (1925): 139ff.

¹¹⁸ Georg Jahn, “Freihandelslehre und Freihandelsbewegung,” Handwörterbuch der Staatswissenschaften, 4th ed. (1927): 369f., vol. 5.

¹¹⁹ By the end of October 1924, he had not signed it. See the copy of the proclamation and the list of its supporters in Grove City Archive: “I” file.

¹²⁰ Mises spoke from notes consisting of keywords. He later developed these notes into two manuscripts that he sent to the Verein's manager, Franz Boese, who handled the publication of the proceedings (see Mises Archive 80: 56). The manuscripts with Mises's comments are contained in Mises Archive 22: 71ff.

¹²¹ Mises Archive 80: 55.

¹²² Criticizing the effectiveness of monetary policy, Mises also seemed to advance an early version of the rational-expectations argument. He stressed that he did not want to argue that future inflation would be prevented by more enlightened monetary authorities. His point was rather that economic enlightenment of the general public would deny inflationary monetary policy any effect. As soon as the public became aware of falling exchange rates, everybody would turn to smuggling, at which point the government could not finance itself by printing banknotes.

¹²³ Mises to Eric Voegelin, letter dated June 12, 1925; Mises Archive: 79: 11:

Next week I will travel to Brussels [to the Chamber of Commerce convention]... and then to London, where I will again look up my English friends. I have great expectations for the visit, even if I can only stay in London for a short time.

¹²⁴ The conversion rate was 10,000 kronen = 1 schilling. The krone had been introduced in 1892 in substitution for the Gulden banknotes, which however circulated during the next few years. The substitution process was ended by January 1, 1900.

¹²⁵ For Menger's writings in the context of the 1892 reform, see Carl Menger, Gesammelte Werke, F.A. Hayek, ed. (Tübingen: Mohr, 1968), vol. 4.

¹²⁶ The name of the association was Deutscher Hauptverband der Industrie. The meeting took place at the association's headquarters in Teplitz on March 15, 1924; see Mises Archive 57: 20ff. Mises might have given a similar talk to the Association of Merchants and Industrialists in Berlin (Verein Berliner Kaufleute und Industrieller). See Oscar Heimann to Mises, letter dated December 31, 1923; Mises Archive 57: 1.

¹²⁷ Mises Archive 57: 24.

¹²⁸ Mises, “Finanz- und währungspolitische Fragen in der Gegenwart,” Mitteilungen des deutschen Hauptverbandes der Industrie 5 (12): 201–09, Teplitz-Schönau, March 20, 1924.

¹²⁹ Mises Archive 57: 11.

¹³⁰ Mises Archive 80: 64. Janovsky later became a Misesian. See his February 3, 1932 letter to Mises, in which he criticizes the currency proposal of a certain Jellinek as not conducive to the aims he has set himself (in Mises Archive 71: 62). In the fall of 1932, Janovsky gave a speech before the Gesellschaft österreichischer Volkswirte. Mises was instrumental in arranging this talk (see Mises Archive 71: 126).

¹³¹ Mises, “Die Goldwährung,” Neues Wiener Tagblatt (April 12, 1925). A copy is in Mises Archive: 106: 18.

¹³² Margit von Mises, My Years With Ludwig von Mises, 2nd ed. (Cedar Falls, Iowa: Center for Futures Education, 1978), p. 13. The book is, as the author correctly points out, the only available testimony on Mises the man from a firsthand source. But its statements are not fully reliable, as two examples show. First, the author lied about her age, claiming to be six years younger than she really was. Even on her gravestone, the birth year is incorrectly given as 1896. Her correct birth year is stated, in her marriage certificate as well as in U.S. immigration paperwork, as 1890 (see the 1941 U.S. “Affidavit of Identity and Nationality;” a copy is in Grove City Archive: Mexico 1942 files). Second, Margit states that she “was the only woman he wanted to marry from the first moment he met her.” While this statement might be true, the following sentence, in which she claims that Ludwig “never changed his feelings or his mind about this decision,” is demonstrably wrong, as we will see in a later chapter. These examples show that Margit von Mises's biographical recollections must be read with caution. The present work uses her statements only where other evidence does not contradict them.

¹³³ Ibid., pp. 3, 9.

¹³⁴ Mises, Socialism: An Economic and Sociological Analysis (Indianapolis: Liberty Fund, 1981), pp. 85f. Mises's treatment of the genius (p. 166) was anticipated by George Bernard Shaw in his “Earning a Living and Creative Work.” Mises did not know this passage from Shaw at the time. Twenty-five years later, a German correspondent pointed out the parallel. See Johannes Bahner to Mises, letter dated June 12, 1947; Grove City Archive: “B” file.

¹³⁵ Margit von Mises, My Years with Ludwig von Mises, p. 36.

Chapter 13. A System of Political Philosophy

¹ Mises, Kritik des Interventionismus (Jena: Gustav Fischer, 1929; reprint Darmstadt: Wissenschaftliche Buchgesellschaft, 1976); A Critique of Interventionism, Hans F. Sennholz, trans. (New York: Arlington House, 1977). Just how important Mises considered this project can be gathered from the fact that during those years he worked on hardly any other research project and even rejected an offer to write a standard textbook on monetary policy. See Mises's letter to the editor of the prestigious series Grundriss der Wirtschaftspolitik, dated December 12, 1924; Mises Archive 80: 57. Mises said he was very busy and had “a number of projects” that he wanted to complete before accepting any new obligations.

² It is significant that Mises presented his theory of international trade as a generalization of Ricardo's model, rather than of John Stuart Mill's.

³ Mises, “Vom Ziel der Handelspolitik,” Archiv für Sozialwissenschaft und Sozialpolitik 42, no. 2 (1916): 567, 570.

⁴ Mises, Nation, Staat und Wirtschaft (Vienna & Leipzig: Manz, 1919), pp. 57ff.

⁵ “But I do not want to forgo your cooperation on the new edition of the Handwoerterbuch der Staatswissenschaften. Would you not be able to pen the entry on price controls?” Wieser to Mises, letter dated April 1, 1922; Mises Archive 74: 32.

⁶ Mises, “Preistaxen. I. Theorie,” Handiwörterbuch der Staatswissenschaften, 4th ed. (Jena: Gustav Fischer, 1925), vol. 6; reprinted as “Theorie der Preistaxen” in Mises, Kritik des Interventionismus, pp. 123–36; A Critique of lnterventionism, pp. 139–51.

⁷ Mises, Kritik des Interventionismus, p. 125.

⁸ Ibid., p. 123. Following Archbishop Whately, Mises called economics the “science of catallactics.” See Richard Whately, Introductory Lectures on Political Economy, 3rd ed. (London: Parker, [1832] 1847), p. 5.

⁹ Mises, Kritik des Interventionismus, p. 136; A Critique of Interventionism, p. 151.

¹⁰ Mises, Kritik des Interventionismus, p. 128; my translation. Mises distinguished these “genuine” price controls from controls that merely sanctioned the state of affairs that the market would have brought about anyway.

¹¹ Ibid., p. 131; my translation.

¹² Mises's account of the dynamics of wartime interventions into the price system came to be reflected in Götz Brief's entry for the Handwörterbuch der Staatswissenschaften:

The beginning of war-economy prices meant highest price policies in Austria as well. Experiences here were exactly like those in Germany: artificially high prices misallocated goods so that they were not directed to the most desired channels of trade and consumption. After the Italians entered the war and the blockade became a reality in Austria, in particular, the growing scarcity of raw materials and goods left no alternative but the path down which Germany had already turned: official confiscation, centralized rationing and disbursement of goods. (Götz Briefs, “Kriegswirtschaftslehre und Kriegswirtschaftspolitik,” Handwörterbuch der Staatswissenschaften, 4th ed. [1923], vol. 5, p. 1017)

¹³ Mises, Kritik des Interventionismus, p. 133; A Critique of lnterventionism, p. 31, 56ff.

¹⁴ Before Sombart's appearance, the German universities received Marx's writings very critically. In the United States, too, the rise of Marxism encountered the same reservations in academic circles until, some forty-five years after Sombart, Joseph Schumpeter popularized Marx as an important thinker in his Capitalism, Socialism, and Democracy (New York: Harper & Row, 1942).

¹⁵ Werner Sombart, Der proletarische Sozialismus (“Marxismus”), 10th ed., 2 vols. (Jena: Gustav Fischer, 1924).

¹⁶ Here is the most favorable thing Mises had to say about Sombart: “He was highly gifted, but at no time did he endeavor to think and work seriously.... And yet, it was more stimulating to talk to Sombart than to most other professors. At least he was not stupid and obtuse.” Mises, Erinnerungen (Stuttgart: Gustav Fischer Verlag, 1978), p. 68; Notes and Recollections (Spring Mills, Penn.: Libertarian Press, 1978), p. 103.

¹⁷ Mises, “Antimarxismus,” Weltwirtschaftliches Archiv 21 (1925) reprinted in Mises, Kritik des Interventionismus, pp. 91–122; translated as “Anti-Marxism,” in A Critique of Interventionism, pp. 107–38.

¹⁸ Mises, Kritik des Interventionismus, pp. 124f.; A Critique of Interventionism, pp. 140f.

¹⁹ Keynes was convinced that, in attacking and criticizing individualism, he had destroyed the case for laissez-faire. See John Maynard Keynes, The End of Laissez-Faire (London: Hogarth Press, 1926), pp. 39f. The postulate of a dichotomy between individualism and collectivism led Keynes to anticipate the now-famous Coasean view on the problem of optimal social organization. Thus Keynes surmised that the “ideal size for the unit of control and organization lies somewhere between the individual and the modern State” (ibid., p. 41). The Coasean theory is best expressed in Ronald Coase, The Firm, the Market, and the Law (Chicago: University of Chicago Press, 1988).

²⁰ Heinrich Dietzel, “Individualismus,” Handwörterbuch der Staaswissenschaften, 4th ed. (1923), vol. 5; Alfred Pribram, Die Entstehung der individ-ualistischen Sozialphilosophie (Leipzig: Hirschfeld, 1912); Othmar Spann, Der Wahre Staat (Leipzig: Quelle & Meyer, 1921).

²¹ Mises, Kritik des Interventionismus, pp. 95f., 111. He stated:

In the final analysis, there is no conflict of interest between society and the individual, as everyone can pursue his interests more efficiently in society than in isolation. The sacrifices the individual makes to society are merely temporary, surrendering a small advantage in order to attain a greater one. This is the essence of the often cited doctrine of the harmony of interests. (A Critique of Interventionism, pp. 112f.)

²² “What society is, how it originates, how it changes—these alone can be the problems which scientific sociology sets itself.” Mises, Socialism: An Economic and Sociological Analysis (Indianapolis: Liberty Fund, 1981).

To be perfectly clear, Mises believed that the positive analysis of the emergence and transformation of social wholes had to rely on methodological individualism. Based on this analysis, one could apply the utilitarian method, that is, raise the question whether any given policy was suitable to attain its goals. Othmar Spann rejected not only individualism as a political orientation, but also as a methodological device.

²³ Mises, Kritik des Interventionismus, p. 96; A Critique of Interventionism, p. 112.

²⁴ Mises, Kritik des Interventionismus, p. 100; A Critique of lnterventionism, p. 116. Mises quotes here Paul Barth, Die Philosophie der Geschichte als Soziologie, 3rd ed. (Leipzig: Reisland, 1922), p. 260.

²⁵ Mises, Kritik des Interventionismus, pp. 101f.; A Critique of Interventionism, pp. 117f.

²⁶ Keynes, The End of Laissez-Faire, pp. 42f.

²⁷ Mises, Kritik des Interventionismus, p. 121; A Critique of Interventionism, p. 137.

²⁸ See Ralph Raico, Die Partei der Freiheit (Stuttgart: Lucius & Lucius, 1999), chap. 6.

²⁹ Mises, “Sozialliberalismus,” Zeitschrift für die gesamte Staatswissenschaft 81 (1926); reprinted in Mises, Kritik des Interventionismus, pp. 55–90; translated as “Social Liberalism,” in A Critique of Interventionism, pp. 71–106.

³⁰ As Raico, Die Partei der Freiheit, chap. 6 explains, Naumann inspired several postwar movements with often contradictory agendas.

³¹ Hobhouse (1864–1929), a professor of sociology at LSE, became famous with his Liberalism (London: Williams and Norgate, 1911). Among the writings of John Dewey (1859–1952), see in particular Liberalism and Social Action (New York: Putnam, 1935).

³² An extreme case of this confusion was Keynes, who not only held that politics was about the ends to be pursued, but about emotional attitudes to these ends. Thus he held that the “essential characteristic of Capitalism [was] the dependence upon an intense appeal to the money-making and money-loving interests of individuals as the main force of the economic machine” (Keynes, The End of Laissez-Faire, p. 50).

³³ Mises, Kritik des Interventionismus, pp. 67f.; A Critique of Interventionism, p. 84. Similarly, he observed:

In fact, unearned income flows from control over the means of production. He who opposes unearned income must oppose private property in the means of production. Therefore, a liberal cannot sympathize with such efforts. If he does so nevertheless, he is no longer a liberal. (Kritik des Interventionismus, p. 65; A Critique of Interventionism, p. 81)

³⁴ Mises, Kritik des Interventionismus, p. 68; A Critique of Interventionism, p. 84.

³⁵ See Ayn Rand, Capitalism: The Unknown Ideal (New York: Penguin, 1967).

³⁶ Mises, Kritik des Interventionismus, p. 70; A Critique of Interventionism, p. 86.

³⁷ Mises himself had, in an early article, explained that labor unions could possibly raise wage rates for all workers in the short run; see Mises, “Die all-gemeine Teuerung im Lichte der theoretischen nationalökonomie,” Archiv für Soziahwissenschaften und Sozialpolitik 37 (1912): 570f. His studies on interventionism in the 1920s convinced him that this short-run rise was invariably bought at the price of capital consumption.

³⁸ Mises, Kritik des Interventionismus, p. 80; A Critique of lnterventionism, p. 96.

³⁹ Mises, Kritik des Interventionismus, p. 90; A Critique of Interventionism, p. 106.

⁴⁰ See his letter to Brodnitz, editor of the Zeitschrift für die gesamte Staatswissenschaft, dated February 26, 1926; Mises Archive 80:20.

⁴¹ Mises, “Interventionismus,” Archiv für Sozialwissenschaften und Sozialpolitik 56 (1926); reprinted in Kritik des Interventionismus; translated as “Interventionism,” in A Critique of Interventionism, pp. 15–55.

⁴² Mises, Kritik des Interventionismus, p. 6; A Critique of Interventionism, p. 20.

⁴³ See Mises's university lecture of November 16, 1927; Mises Archive 24: 6.

⁴⁴ Mises used the term “anarchism” to refer to the Proudhonian idea of a society without the defense of private property rights, and “anarchy” to designate the chaos he believed to be inevitable for such a society. He did not have in mind the anarchism of his later student Murray Rothbard, who used these same words to advocate a free market society without a modern state—a system in which even the defense of property rights would be provided privately. See Murray N. Rothbard, For a New Liberty, 2nd ed. (San Francisco: Fox & Wilkes, 1978); idem, The Ethics of Liberty, 2nd ed. (New York: New York University Press, 1998).

⁴⁵ Mises, Kritik des Interventionismus, p. 4; A Critique of Interventionism, p. 18.

⁴⁶ See on this change of views of the economics profession Thomas DiLorenzo and Jack High, “Antitrust and Competition, Historically Considered,” Economic Inquiry (July 1988). The authors show that, during the 1920s, the rising neoclassical movement more and more abandoned the project of modeling reality, in favor of squeezing reality into the Procrustean bed of their models. See also Frank Machovec, Perfect Competition and the Transformation of Economics (London: Routledge, 1995).

⁴⁷ Mises, Kritik des Interventionismus, p. 20; A Critique of Interventionism, p. 34.

⁴⁸ Mises, Kritik des Interventionismus, p. 17; A Critique of Interventionism, p. 31.

⁴⁹ Mises, Kritik des Interventionismus, p. 39; A Critique of lnterventionism, p. 53.

⁵⁰ See Friedrich von Wieser, “Karl Menger,” Anton Bettelheim, ed., Neue österreichische Biographie: 1815–1918 (Vienna, 1923), vol. 1, pp. 84–92, reprinted in idem, Gesammelte Abhandlungen, F.A. Hayek, ed. (Tübingen: Mohr, 1929).

⁵¹ The personal values of the economist do not come into play here at all. Mises illustrated this point with the following example:

When I say that price controls are illogical, I mean to assert that they do not achieve the objective they are usually meant to achieve. Now, a Communist could reply: “I favor price controls just because they prevent the smooth functioning of the market mechanism, because they turn human society into a ‘senseless chaos’ and all the sooner lead to my ideal of communism.” Then, the theory of price controls cannot answer him, as physiology cannot answer the man who wants to kill with hydrocyanic acid. (Kritik des Interventionismus, p. 27; A Critique of Interventionism, p. 41)

⁵² Economic analysis shows that all government interventions are unsuitable to attain the ends they are professed to attain (statement of matter of fact). In the light of this result, classical liberalism advocated that there shall be no intervention (judgment of value):

government shall be limited to the protection of private property and the elimination of all obstacles to free market access for individuals or groups of individuals. This is nothing but another wording of the principle: laissez faire, laissez passer. (Mises, Kritik des Interventionismus, pp. 37f.; A Critique of Interventionism, pp. 51f.)

⁵³ Mises, Kritik des Interventionismus, p. 28; A Critique of Interventionism, p. 41.

⁵⁴ See Robert Liefmann, Allgeineine Volkswirtschaftslehre (Leipzig: Teubner, 1924); Franz Oppenheimer, Theorie der reinen und politischen Ökonomie, 2nd ed. (Berlin: Reimer, 1911); Friedrich von Gottl-Ottlilienfeld, Wirtschaft und Technik, 2nd ed. (Tübingen: Mohr, 1923).

⁵⁵ Of course Liefmann did not intend to discredit economic science. Mises's point was that the effect was the unintentional result of Liefmann's rhetoric. Things were completely different in the case of Keynes, who consciously sought to discredit economic science in his crusade to vindicate government interventionism. Keynes claimed that the case for laissez-faire had no scientific basis, but was entirely founded on postulates of political philosophy (private property as a natural right) and theology (harmony of interests). See Keynes, The End of Laissez-Faire, pp. 11, 26. Without quoting Keynes, Mises showed that these claims missed the point. Private property does not require natural law for justification, but can be vindicated on the basis of suitability analysis alone. Further, the theological garment of the harmony-of-interest doctrine was just that. Already in his “Anti-Marxism,” Mises had proven that the “attacks on the thought of ‘preestablished harmony’ do not touch the substance, merely the wording, of the utilitarian social theory.” Kritik des Interventionismus, p. 98; A Critique of Interventionism, p. 114.

⁵⁶ Mises, Kritik des Interventionismus, pp. 29f.; A Critique of Interventionism, pp. 43f.

⁵⁷ Mises, Kritik des Interventionismus, p. 41; A Critique of Interventionism, p. 55.

⁵⁸ The relationship between these models and the real world that they supposedly portray is still as problematic as it has been from the outset.

⁵⁹ John R. Hicks, Capital and Time: A Neo-Austrian Theory (Oxford: Clarendon Press, 1973), p. 12.

⁶⁰ See in particular Israel Kirzner, “The Austrian School of Economics,” New Palgrave Dictionary of Economics (New York: Macmillan, 1986); idem, “The Socialist Calculation Debate: Lessons for Austrians,” Review of Austrian Economics 2 (1987).

⁶¹ Mises later wrote that political economy, “as developed by several generations of English thinkers, brilliantly expounded by Hume and Adam Smith and perfected by Ricardo, was the most exquisite outcome of the philosophy of the Enlightenment.” And regarding the classical theory of free trade and protectionism, he observed that the “critics did not embark upon the (hopeless) task of discovering some false syllogisms in the chain of Ricardo's reasoning.” Mises, The Historical Setting of the Austrian School of Economics (Auburn, Ala.: Ludwig von Mises Institute, [1969] 1984), pp. 20, 23.

⁶² Mises, Liberalismus (Jena: Gustav Fischer, 1927; reprint Sankt Augustin: Academia Verlag, 1993).

⁶³ Emphasis on the centrality of this point had a venerable tradition in western thought ever since Saint Thomas Aquinas wrote on the nature of government in the thirteenth century. See Thomas Aquinas, “Über die Herrschaft der Fürsten,” F. Schreyvogel, ed., Staatslehre des Thomas von Aquino (Jena: Gustav Fischer, 1923), part 1, chap. 1, pp. 11f. It is more than likely that Mises was acquainted with this edition of Saint Thomas's classic work, because it was published in a series under the direction of Othmar Spann.

⁶⁴ An analysis of Marx's views on interventionism is in Mises, “Marxism and the Labor Movement,” Omnipotent Government (New Haven, Conn.: Yale University Press, 1944), chap. 7, sect. 2.

⁶⁵ Here again Mises championed essentially the same view as Saint Thomas, who stressed that the maintenance of peace was the supreme goal of government, precisely because the fruits of the division of labor could not be obtained otherwise. See Thomas Aquinas, “Über die Herrschaft der Fürsten,” part 1, chap. 2, p. 19.

⁶⁶ Mises to Erkelenz, undated letter; Mises Archive 56: 6ff. He made the same point in a 1942 lecture on the “principle of equality and social order,” in which he distinguished two currents of thought in eighteenth-century liberalism: the natural-law doctrine stressing the inborn equality of men, and the “more realistic” utilitarian point of view: “Men are different, but the laws should not discriminate.” See the two versions of his lecture notes contained in Grove City Archive: Mexico 1942 file 3.

⁶⁷ Presciently, he stated:

The victory of Fascism in a number of countries is only an episode in the long series of struggles over the problem of property. The next episode will be the victory of Communism. The ultimate outcome of the struggle, however, will not be decided by arms, but by ideas. It is ideas that group men into fighting factions, that press the weapons into their hands, and that determine against whom and for whom the weapons shall be used. (Mises, Liberalism: In the Classical Tradition, Ralph Raico, trans. [Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1985], p. 51)

⁶⁸ This sentence is preceded by the following statement that is often quoted out of context to “demonstrate” the absurd contention that Mises endorsed fascism:

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 the kind which could promise continued success. (ibid., p. 51)

⁶⁹ Ibid., p. 60.

⁷⁰ Mises to Faustino Ballvé, letter dated October 29, 1949; Grove City Archive: Ballvé files.

⁷¹ Gustav Fischer to Pierre Hamilius, letters dated December 8, 1950 and November 14, 1951; Grove City Archive: Hamilius files. Hamilius sent these letters to Mises following a meeting they had in New York in early September 1959.

Chapter 14. Booms

¹ This is one of the central findings of Irmela Gorges's comprehensive study of the research subjects and methodological orientations of three representative social science organisations of the time: the Verein für Sozialpolitik, the Deutsche Gesellschaft für Soziologie, and the Cologne Forschungsinstitut für Sozialwissenschaften. See Gorges, Sozialforschung in der Weimarer Republik 1918–1933 (Frankfurt a.M.: Anton Hain, 1986), pp. 694–98.

² One observer who met him first as a young man in 1928 would later recall:

What Edwin Cannan has been for England, Frank H. Knight for the USA and Luigi Einaudi for Italy, Ludwig von Mises was for the German speaking world: Austria, Germany and Switzerland, the initiator for a renaissance of liberalism and the market economy. (Albert Hunold, editorial of The Mont Pèlerin Quarterly 3, no. 3 [October 1961]: 3)

This leadership in policy debate was based on similar leadership in the field of positive analysis, as can be inferred from a 1925 festschrift for Lujo Brentano that set out to portray the state of the art in economics after World War I. Here Mises figures among the thirteen most-cited authors, along with Böhm-Bawerk, Brentano, Cassel, Eulenburg, Keynes, Marx, J.S. Mill, Ricardo, Schumpeter, Sombart, Spann, Walras, and Wieser. See Moritz J. Bonn and Melchior Palyi, Die Wirtschaftswissenschaft nach dem Kriege (Leipzig: Duncker & Humblot, 1925).

³ See William H. Beveridge, The London School of Economics and Its Problems, 1919–1937 (London: Allen & Unwin, 1960), esp. pp. 50, 83, 85, 88ff., 109. The founders of LSE were Sidney and Beatrice Webb. The Laura Spelman Memorial was named after the wife of John D. Rockefeller, and later absorbed into the Rockefeller Foundation. In 1923–1924, LSM donated almost $100,000 to LSE; in 1926, it gave another $500,000 for research on the “natural bases” of economics, and $175,000 for other projects.

⁴ The idea that economics could be turned into applied mathematics or applied biology is a good illustration of Keynes's famous dictum that each generation labors under the ideas “of some defunct economist.” See John Maynard Keynes, General Theory of Employment, Interest, and Money (Cambridge: Cambridge University Press, [1936] 1973), p. 383. William Stanley Jevons and his followers such as Edgeworth had been very influential within British academia in pressing the case for mathematics in economic science. The great champion of the case for biology was Alfred Marshall: “The Mecca of the economist lies in economic biology rather than in economic dynamics” (Principles of Economics: An Introductory Volume, 8th ed. [London: Macmillan, 1920], p. xiv). Keynes knew what he was talking about.

⁵ He had a mailbox with the Laura Spelman Rockefeller Memorial in New York City. See Mises to Brodnitz, letter dated February 26, 1926; Mises Archive 80: 20.

⁶ See the Department's report in Mises Archive 57: 79; see also the Baker-Kellog investment letter, dated April 24, 1926; Mises Archive 57: 70. Mises obtained this letter apparently through a certain Mr. W.W. Welsh in Chicago.

⁷ “After the death of Böhm-Bawerk and Wieser... Mises was manifestly the leader of the school” (Fritz Machlup, “Ludwig von Mises: The Academic Scholar Who Would Not Compromise,” Wirtschaftspolitische Blätter 28, no. 4 [1981]: 9). See also Werner Neudeck, “Der Einfluss von Ludwig von Mises auf die Österreichische akademische Tradition gestern und heute,” ibid., p. 27.

⁸ Mises to U.S. Department of State, letter dated December 20, 1941; Grove City Archive: Mexico 1942 files. The local coordinator for the Rockefeller Foundation in Vienna was British-born Alfred Francis Pribram (not related to Karl and Ewald Pribram).

⁹ This lecture was delivered to the German Hauptverband der Industrie in Czechoslovakia. See Mises to Magazin der Wirtschaft, letter dated December 20, 1926; Mises Archive 80: 10.

¹⁰ Mises Archive 57: 65ff.; 83a.

¹¹ He probably also delivered a version of this paper, in the fall of the same year, in a two-hour lecture on “Government and the National Economy.” He gave the talk at a summer university designed for American students visiting Vienna (Internationale Hochschulkurse). See Mises to Martha Stefanie Braun, letter dated July 20, 1926; Mises Archive 83: 59.

¹² Mises to Brodnitz, letter dated September 16, 1926; Mises Archive 80: 5.

¹³ John Maynard Keynes, The Economic Consequences of the Peace (New York: Harcourt, Brace and Howe, 1920). For a critique of the fundamental errors in Keynes's assessment of Germany's ability to comply with the Treaty's economic stipulations (war reparations), see Henry Hazlitt, “The 1919 Prophecies of Maynard Keynes,” New York Times Book Review (March 11, 1945), p. 5; Etienne Mantoux, The Carthaginian Peace or The Economic Consequences of Mr. Keynes (Oxford: Oxford University Press, 1946).

¹⁴ Mises to Montes de Oca, letter dated February 26, 1949; Grove City Archive: Montes de Oca files.

¹⁵ To what extent Keynes was welcomed with open arms can be gathered from Friedrich von Wieser's endorsement in his very last work, of Keynes's proposals for replacing the gold exchange standard by fiat paper money:

An economist with the broad vision and scientific acuity of Keynes could raise the question of whether it would be possible to replace the gold standard altogether with another system that would allow for stable exchange rates at lower costs. (Friedrich von Wieser, “Theorie des Geldes,” Handwörterbuch der Staatswissenschaften, 4th ed. [Jena: Gustav Fischer, 1927], vol. 4, p. 716)

¹⁶ These complications arise, according to Keynes,

(1) when the efficient units of production are large relative to the units of consumption..., (2) when overhead costs or joint costs are present, (3) when internal economies tend to the aggregation of production, (4) when the time required for adjustments is long, (5) when ignorance prevails over knowledge, and (6) when monopolies and combinations interfere with equality in bargaining. (John Maynard Keynes, The End of Laissez-Faire [London: Hogarth Press, 1926], pp. 32f.)

¹⁷ Ibid., pp. 47f.

¹⁸ Mises, “Das Ende des Laissez-Faire, Ideen zur Verbindung von Privat-und Gemeinwirtschaft” (The end of laissez-faire: ideas for combining the private and public economy), Zeitschrift für die gesamte Staatswissenschaft 82 (1927): 190–91. Apparently, Mises sent a pre-publication copy of this review to Gregory in London; see Mises Archive 83: 58.

¹⁹ Mises was probably in attendance, but it is possible that he was among those “Austrian gentlemen” who reportedly did not attend the sessions they were supposed to attend, to the great dismay of the Verein's secretary, Franz Boese.

²⁰ Franz Boese, Geschichte des Vereins für Sozialpolitik, 1872–1932 (Berlin: Duncker & Humblot, 1939), pp. 194f.

²¹ Immediately after the 1926 Verein für Sozialpolitik meeting in Vienna, Mises recommended Konrad Zweig to Adolf Löwe for a position in Kiel. Zweig was just about to receive his doctorate. Mises knew him from his University seminar. Löwe eventually hired Zweig, emphasizing the “angenehmen Beziehungen” (pleasant relationship) he had established with Mises. See Löwe to Mises, letter dated October 2, 1926; Mises Archive 80: 17f.

²² One hundred dollars could buy roughly five ounces of gold, thus at present (February 2006) more than $2,500.

²³ See Manfred Mautner and Franz Nemschak, Zum 25 jährigen Bestand des Österreichischen Institutes für Wirtschaftsforschung (Vienna: Österreichisches Institut für Wirtschaftsforschung, 1952), p. 9. The study of business cycles was at the time one of the most fashionable topics and one that seemed to be relevant for international economic cooperation. The League's initiative could rely on funding by the Rockefeller Foundation.

²⁴ From a legal point of view, the Institut was set up as a private association and publicly registered on December 2, 1926. See the copy of the bylaws in Mises Archive 57: 85ff. On the early years of the Institut, see Mautner and Nemschak, Zum 25 jährigen Bestand des Österreichischen Institutes für Wirtschaftsforschung; see also Carl Theodore Schmitt, “The Austrian Institute for Business Cycle Research,” Journal of Political Economy 39, no. 1 (February 1931): 101–03.

²⁵ Mohr/Siebeck to Mises, letter dated April 25, 1931; Mises Archive 93: 13.

²⁶ The Rockefeller Foundation provided funding from 1929 to 1938. See Mautner and Nemschak, Zum 25 Jährigen Bestand des Österreichischen Institutes für Wirtschaftsforschung, p. 12. The first seven volumes in this series have passed the test of time and are today classics of Austrian economics: F.A. Hayek's Geldtheorie und Konjunkturtheorie (1929); Fritz Machlup's Börsenkredit, Industriekredit und Kapitalbildung (1931), Hayek's Preise und Produktion (1933), Erich Schiff's Kapitalbildung und Kapitalaufzehrung im Konjunkturverlauf (1933), Oskar Morgenstern's Grenzen der Wirtschaftspolitik (1934), Machlup's Führer durch die Krisenpolitik (1934), and Richard Strigl's Kapital und Produktion (1934). After Mises's departure from Vienna in 1934, Morgenstern, who in 1931 had succeeded Hayek as the director of the Institute, began to publish works with a markedly less Austrian orientation: Ragnar Nurkse's Internationale Kapitalbewegungen (1935), Gerhard Tintner's Die Preise im Konjunkturverlauf (1935), and Abraham Wald's Berechnung und Ausschaltung von Saisonschwankungen (1936). Apart from this series of monographs, the most important outlet for theoretical research was the Zeitschrift für Nationalökomonie (established in 1930), which under the editorship of Hans Mayer featured many pioneering articles on the role of time in economics, on equilibrium analysis, on capital theory, and on business cycle theory.

²⁷ Franz Nemschak to Mises, letter dated January 3, 1964; Grove City Archive: Österreichisches Institut für Wirtschaftsforschung files.

²⁸ Mises later summarized the experience of the second half of the 1920s in a report to the Austrian government that he co-authored at the government's behest in 1930. See Redaktionskomitee der Wirtschaftskommission, Bericht über die Ursachen der wirtschaftlichen Schwierigkeiten Österreichs (Vienna: Staatsdruckerei, 1930).

²⁹ Rudolf Sieghart, Die letzten Jahrzehnte einer Grossmacht (Berlin: Ullstein, 1932), p. 195. Sieghart went on:

Later these same circles reproached the directors of the bank [he means the large and influential Boden-Credit-Anstalt, which he directed in those years] with having too generously complied with the credit wishes of these same industries.

³⁰ He delivered the address to the plenary meeting of the Niederösterreichischen Gewerbeverein (Commercial Association of Lower Austria). A copy of the published version of his talk is in Mises Archive 62: 41.

³¹ Prior to 1925, tax laws and other regulations prohibited Austrian firms from calculating capital consumption in terms of gold prices. The legally permissible balance sheets therefore presented an unrealistically optimistic picture of the firms. See Redaktionskomitee der Wirtschaftskommission, Bericht über die Ursachen der wirtschafilichen Schwierigkeiten Österreichs, p. 12.

³² Also, because of the rent control laws, the local, state, and federal governments, which already in 1914 owned more than half of all urban rental housing, significantly reduced their income.

³³ In those days, demonstrations were armed demonstrations as a matter of course. The socialist party had its own private army, the Republikanische rSchutzbund or “republican alliance for mutual protection.” Established in 1924, it counted some 80,000 men in 1928; see Ernst Hoor, Österreich 1918–1938 (Vienna: Bundesverlag für Unterricht, Wissenschaft und Kunst, 1966), p. 101. Similarly, on the other side of the political spectrum, there was the Heimwehr or “home defence” movement, a private military organisation that had emerged shortly after 1918 and which later split into a patriotic “Austrian” and a national socialist wing; in September 1933, the Austrian wing joined the new Vaterländische Front or “patriotic front.”

³⁴ Mises to Steiner, letter dated July 21, 1927; Mises Archive: 62: 20. Fritz Georg Steiner had been one of the top students in Mises's seminar at the University of Vienna. See Martha Steffy Browne [Braun], “Erinnerungen an das Mises-Privatseminar,” Wirtschaftspolitische Blätter28, no. 4 (1981): 111.

³⁵ Mises to Freihandelsbund gegen Teuerung und Wirtschaftszwang, letter dated November 11, 1924; Mises Archive 80: 60.

³⁶ Mises, “Die Lehre vom Gelde,” Forschungen und Fortschritte (Berlin, February 1928).

³⁷ Mises to Fischer, letter dated March 17, 1928; Mises Archive 87a: 17.

³⁸ Mises received a fee of 550 marks. He had Fischer send him a check from a German bank. Fischer sent 15 complimentary copies directly to their recipients, and 15 complimentary and 10 more paid copies to Mises. See the correspondence in Mises Archive 87a: 3, 7.

³⁹ Mises, Geldwertstabilisierung und Konjunkturpolitik (Jena: Gustav Fischer, 1928), p. 58.

⁴⁰ Ibid., pp. 61, 65f., 73ff., 81ff.

⁴¹ Browne [Braun], “Erinnerungen an das Mises-Privatseminar,” p. 116. See also Gertrud Pütz-Neuhauser, “Zur Entwicklung der Konjunkturtheorie im deutschen Sprachraum in der Zwischenkriegszeit,” B. Schefold, ed., Studien zur Entwicklung der ökonomischen Theorie VIII (Berlin: Duncker & Humblot, 1989), pp. 97f. The conference was attended by about 300 participants.

⁴² University of London Press to Mises, letter dated May 25, 1928; Mises Archive 62: 69.

⁴³ Mises to Frederick Nymeyer, letter dated May 14, 1953; Grove City Archive: Nymeyer files. He had also joined the American Economic Association, for the same reasons.

⁴⁴ Mises to Ugo Papi, letter dated March 17, 1933; Mises Archive 94: 3. In his 1922 Habilitation monograph on business cycles, Wilhelm Röpke did not even mention Mises; see Wilhelm Röpke, Die Konjunktur (Jena: Gustav Fischer, 1922). Ten years later, he had read the Austrians; see his Krise und Konjunktur (Leipzig: Quelle & Meyer, 1932). He had first met Mises in 1922 at the meeting of the Verein. In the early 1920s, he worked in the German reparations office. It is likely that he often met Mises at international conferences dealing with war debt.

⁴⁵ Mises Archive 22: 8ff. At the heart of the German-language debate on business cycle theory in the late 1920s was the question whether this theory was, or could be, part of Léon Walras's general equilibrium theory; or whether it required a different approach. Christof Rühl discusses the approaches of Hayek, Löwe, Lutz, and Schumpeter, in Rühl, “Der Beitrag deutschsprachiger Ökonomen zur konjunkturtheoretischen Debatte der Zwischenkriegszeit,” H. Hagemann, ed., Zur deutschsprachigen wirtschaftswissenschaftlichen Emigration nach 1933 (Marburg: Metropolis, 1997), pp. 243–92. Mises took no active part in this methodological debate. He later addressed the main issues when he set out to formulate his own equilibrium theory in the late 1930s. We will deal with his contribution in chapters 16 and 17. On the development of monetary business cycle theories from Wicksell to Hayek, see Carl-Ludwig Holtfrerich, “Zur Entwicklung der monetären Konjunkturtheorien: Wicksell, Schumpeter, Mises und Hayek,” in Schefold, ed., Studien zur Entwicklung der ökonomischen Theorie 8, pp. 103–40.

⁴⁶ Mises was elected in absentia at the meeting of the reform committee on March 6–7, 1929. He received a report from one of his closest allies in those years, Georg Jahn, a professor from Halle. See Jahn to Mises, letter dated March 9, 1929; Mises Archive: 22: 42.

⁴⁷ See the discussion in “A Copernican Shift,” chapter 10 in this volume.

⁴⁸ Vilfredo Pareto, Manuel d'économie politique, 4th ed. (Geneva: Droz, 1966 [1909]), vol. 3, § 36; Gustav Cassel, Grundgedanken der theoretischen Ökonomie (Leipzig and Erlangen: Hatschek & Scholl, 1926).

⁴⁹ Enrico Barone in F.A. Hayek, ed., Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism (London: Routledge, 1935). Mises referred to §§ 17, 80, and 168 of this work. See Mises to Wieser letter dated December 12, 1929; Mises Archive 91: 4. The correspondence was a followup to personal discussions in Cologne. On Tuesday, December 3, 1929, Mises had lectured in Cologne on “economic interests and political parties.” Rudolf Seyffert, who was the head of the department of economics and social sciences, directed the lecture series “contemporary political theories” and invited Mises to give one of the talks. See Seyffert to Mises, letter dated October 18, 1929; Mises to Seyffert, letter dated October 28, 1929; Mises Archive 62: 107, 112.

⁵⁰ In the original texts we read: “Als Gefühl ist der Wert jeder Messung unzugänglich; Vergleiche mit anderen, gleichartigen Gefühlen sind möglich,” Theorie des Geldes und der Umlaufsmittel, 1st ed. (Munich and Leipzig: Duncker & Humblot, 1912), p. 16. Twelve years later, he changed this to: “Der Wertungsakt ist jeder Messung unzugänglich” (2nd ed., Munich and Leipzig: Duncker & Humblot, 1924, p. 11). In the English edition: “Acts of valuation are not susceptible of any kind of measurement,” Theory of Money and Credit (Indianapolis: Liberty Fund, 1980), p. 52. Similarly, speaking about his book Nation, Staat und Wirtschaft in the fall of 1925, Mises said in a letter to Robbins that he would have to rewrite the book thoroughly for a new edition. See Mises to Lionel Robbins, letter dated October 9, 1925; Mises Archive 83: 61.

⁵¹ Mises, “Remarks on the Fundamental Problem of the Subjective Theory of Value,” Epistemological Problems of Economics, 3rd ed. (Auburn, Ala.: Ludwig von Mises Institute, 2003), chap. 5, p. 178. The original publication was “Bemerkungen zum Grundproblem der subjektivistischen Wertlehre,” Archiv für Socialwissenschaft und Sozialpolitik (February 1928).

⁵² Mises, “Remarks on the Fundamental Problem of the Subjective Theory of Value,” p. 180.

⁵³ Mises went on:

All attention was turned toward this law, and it was mistakenly regarded the chief and basic law of the new theory. Indeed, the latter was more often called the theory of diminishing marginal utility than the doctrine of the subjectivist school, which would have been more suitable and would have avoided misunderstandings.” (Ibid., p. 180)

⁵⁴ See Ludwig von Mises and Arthur Spiethoff, Probleme der Wertlehre (Munich and Leipzig: Duncker & Humblot, 1931). This was volume 183/I in the series of the Verein publications. A companion volume 183/II, which contained the proceedings of the Dresden meeting, was published in 1933.

⁵⁵ Mises, “On the Development of the Subjective Theory of Value,” Epistemological Problems of Economics:

All conscious conduct on the part of men involves preferring an A to a B. It is an act of choice between two alternative possibilities that offer themselves. Only these acts of choice, these inner decisions that operate upon the external world, are our data. We comprehend their meaning by constructing the concept of importance. If an individual prefers A to B, we say that, at the moment of the act of choice, A appeared more important to him (more valuable, more desirable) than B. (p. 149)

⁵⁶ The actual selection process merely can be based on the profitability calculus, but does not preclude other decisions. Nothing prevents a businessman from building a social hall for his friends rather than a factory for his customers. Yet the benefit of the money calculus remains even in this case, for it tells the businessman exactly what he is giving up for his personal consumption—the satisfaction of providing unpaid catering for his friends. Without prices, he could not calculate the opportunity cost of his decision.

⁵⁷ It is not possible to say whether 1,000,000 gallons of milk are somehow more (or less) than the 1,000 cows that produce this milk, just as it is impossible to say whether a palace garden is more (or less) than the 100 gardeners who brought it into shape. The reason is that all these things are heterogeneous and therefore cannot be compared quantitatively—the problem of adding apples and oranges. For the same reason it is also impossible to tell whether using the cows to produce the milk is more efficient than using the gardeners to bring the garden into shape. But once all these things are exchanged against money, we can make such quantitative comparisons, namely, by comparing their money prices. Depending on what these prices are, we can say that the milk exchanges for more (or less) money than the cows, and that the garden exchanges for more (or less) money than the services of the gardeners. And depending on the ratios of selling and buying prices (the profitability) we can assert that our money is more (or less) efficiently used in producing milk than in producing a palace garden.

⁵⁸ Friedrich von Wieser, “Das Wesen und der Hauptinhalt der theoretischen Nationalökonomie—kritische Glossen,” Gesammelte Abhandlungen, F.A. Hayek, ed. (Tübingen: Mohr, [1911] 1929).

⁵⁹ Pareto, Manuel d'économie politique, chap. 2, §§ 1–18. Pareto is a subjectivist only in the sense that he recognizes the subjective character of the goals of human action (see ibid., chap. 3, §§ 29f.), which is why he strictly distinguishs between (objective) utility and (subjective) “ophelimity.” Yet Pareto's subjectivism stops short when it comes to dealing with the means of action because here he professes to consider only the case of “logical action.”

⁶⁰ Ibid., chap. 3, § 152.

⁶¹ Vilfredo Pareto, Manual of Political Economy (New York: Augustus M. Kelley, 1971), chap. 3, p. 155. He went on:

The use of prices is the simplest and easiest means for solving the equations of equilibrium; if one insisted on not using them, he would probably end up by using them under another name, and there would then be only a change of language, and not of things.

⁶² See in particular Gary Becker, Economic Theory (New York: Knopf, 1971); idem, A Treatise on the Family (Cambridge, Mass.: Harvard University Press, 1991).

⁶³ Mises, Kritik des Interventionismus (Jena: Gustav Fischer, 1929; reprint Darmstadt: Wissenschaftliche Buchgesellschaft, 1976), p. 72; see also idem, Gemeinwirtschaft, 1st ed. (Jena: Gustav Fischer, 1922), p. 355.

⁶⁴ Mises, Kritik des Interventionismus, p. 28.

⁶⁵ Mises, “Soziologie und Geschichte,” Archiv für Sozialwissenschaft und Sozialpolitik 61, no. 3 (1929): 465–512; reprinted in Mises, Grundprobleme der Nationalökonomie (Jena: Gustav Fischer, 1933), chap. 2; translated as “Sociology and History,” Epistemological Problems of Economics, 3rd ed. (Auburn, Ala.: Ludwig von Mises Institute, 2003), chap. 2.

⁶⁶ Mises praised in particular the “Southwest German School of New Criticism” (Windelband, Rickert, and Weber) for developing the concept of “understanding”—the specific tool of the science of history. See Wilhelm Windelband, Präludien, 8th ed. (Tübingen: Mohr, 1922), vol. 2, pp. 136ff.; Heinrich Rickert, 2nd ed. (Tübingen: Mohr, 1913); idem, Kulturwissenschaft und Naturwissenschaft, 3rd ed. (Tübingen: Mohr, 1915); Max Weber, Gesammelte Aufsätze zur Wissenschaftslehre, 7th ed. (Tübingen: UTB, 1988); Henri Bergson, L'éevolution créatrice (Paris: Presses Universitaires de France, [1907] 1991).

⁶⁷ Max Weber, Wirtschaft und Gesellschaft, 3rd ed. (Tübingen: Mohr, 1947), chap. 1, § 1.

⁶⁸ The essay “Sociology and History” would be the last time Mises would use the term in this sense. He had used it in the first edition of Gemeinwirtschaft (Jena: Gustav Fischer, 1922).

⁶⁹ Mises, Epistemological Problems of Economics, pp. 114f.

⁷⁰ Ibid., p. 118.

⁷¹ Ibid., p. 98. Mises here quotes Weber, Gesammelte Aufsätze zur Wissenschaftslehre (Tübingen: Mohr, 1922), p. 191.

⁷² Mises, Epistemological Problems of Economics, pp. 85f.

⁷³ Ibid., pp. 98f.

⁷⁴ Ibid., p. 114.

⁷⁵ Ibid., pp. 122f. A year earlier, in Geldwertstabilisierung und Konjunkturpolitik (Jena: Gustav Fischer, 1928), Mises still maintained more empiricist notions about the epistemology of economics. Although he emphasized that some sort of theory was necessary to interpret observed fact (pp. 39–42), he at one point went so far as to assert that the Harvard business barometer delivered a statistical verification of the circulation-credit theory (p. 69).

⁷⁶ Mises, Epistemological Problems of Economics, pp. 128f.

⁷⁷ On this and the following see Margit von Mises's typewritten record of the events—Mises Archive 105—which was probably written in November 1927.

⁷⁸ Margit von Mises, My Years with Ludwig von Mises, 2nd enlarged ed. (Cedar Falls, Iowa: Center for Futures Education, 1984), pp. 18f.

⁷⁹ We are still paraphrasing Margit von Mises's rather vague record of the events (document in Mises Archive 105). From the phrase “she would have to become Jewish again” one must infer that she had been Jewish before getting married to Ferdinand Serény, a protestant. The phrase “training period for marriage” is liable to several plausible interpretations and has probably been selected for precisely this reason.

⁸⁰ Mises to Margit Serény, letter dated November 3, 1927; Mises Archive 62: 35f. Mises wrote this letter at the behest of Professor Adler, Margit's doctor, who had conveyed Margit's wish that he explain in full why he refused to see her again. The physician in question must have been Ludwig Adler; see Margit von Mises, My Years with Ludwig von Mises, p. 8.

⁸¹ On September 16, he was still in the hospital. See the letter that Mises's secretary sent to the Königsberger Hartungsche Zeitung, dated September 16, 1927; Mises Archive 62: 10.

⁸² Margit von Mises, My Years with Ludwig von Mises, p. 19.

Chapter 15. Crises

¹ Mises, Erinnerungen (Stuttgart: Gustav Fischer Verlag, 1978), p. 53.

² Mises to Simon, letter dated April 9, 1930; Mises Archive 66a: 28; see also Mises to unknown correspondent, letter dated April 28, 1930; Mises Archive 66a: 45. Mises used the occasion to meet his friends at LSE, although he had not announced the trip to them much in advance, if at all. Thus he missed Robbins, who had been out of town for some time and then tried to meet him for lunch, but met Meyendorff in King's College on Monday, April 1. Meyendroff probably introduced him to Alistor Phillips from Trinity College Dublin. They had also planned to meet Hearnshaw, but the latter was not in London. See Mises to Robbins, letter dated April 12, 1930; Mises Archive 83: 21; Meyendorff to Mises, letter dated March 30, 1930; Mises Archive 88: 2.

³ Margit von Mises, My Years with Ludwig von Mises, 2nd enlarged ed. (Cedar Falls, Iowa: Center for Futures Education, 1984), p. 21.

⁴ Mises to Fritz Arnstein, letter dated December 17, 1931; Mises Archive 95: 6.

⁵ She could not believe her eyes when she saw she was invited to give a talk, and her teachers laughed at her, saying it could not possibly be a serious invitation: Mises was only being polite to a student of his friends from the Frankfurt circle. But Mises was serious. When he thanked her for accepting the invitation to Vienna she exclaimed, “But it is I who have to thank you for letting me rise, as if through the touch of a magic wand, from the mass of nameless scientists!” See the correspondence in Mises Archive 71: 22–35.

⁶ Richard von Schüller was the official president of the committee, but he did not take part in the writing. See Franz Baltzarek, “Ludwig von Mises und die österreichische Wirtschaftspolitik der Zwischenkriegszeit,” Wirtschaftspolitische Blätter 28, no. 4 (1981): 136; Mises, Erinnerungen, p. 49.

⁷ Redaktionskomitee der Wirtschaftskommission, Bericht über die Ursachen der wirtschaftlichen Schwierigkeiten Österreichs (Vienna: Staatsdruckerei, 1930), p. 19.

⁸ Neither were the other members of the committee. The report was widely perceived as a manifesto of Manchester capitalism. Mises's hand in it was obvious. See Baltzarek, “Ludwig von Mises und die österreichische Wirtschaftspolitik der Zwischenkriegszeit,” p. 136. The author states that Mises's views had a major impact on Austrian policy debates in the early years of the crisis.

⁹ See the syllabus in Mises Archive 40: 14.

¹⁰ See syllabus in Mises Archive 17: 219; see also the letter by Bloch referring to Köppel's lecture in Mises Archive 17: 202a, 203.

¹¹ Österreichischer Klub in Wien to Mises, letter dated October 14, 1930; Mises Archive 66: 2f. Mises apparently also gave another public talk, in Vienna, on Monday December 1, 1930; see Steiner to Mises, letter dated December 8, 1930; Mises Archive 66: 23. On Eisler see Irving Fisher, Stabilised Money: A History of the Movement (London: George Allen & Unwin, 1935), pp. 100–02.

¹² Mises to Siebeck, letter dated February 19, 1931; Mises Archive 92: 36.

¹³ Mises, Die Ursachen der Wirtschaftskrise (Tübingen: Mohr, 1931). On February 19, 1931, Mises had approached Mohr's CEO Paul Siebeck for the publication of his lecture in Czechoslovakia in the series “Recht und Staat.” Siebeck was glad to accept this proposal and by March 2, they had agreed on the terms: Mises would obtain 30 complimentary copies, 80 marks per 16 pages, and the total number of copies in any edition would not exceed 2000 (see Mises Archive 92: 32ff.). Mises then also changed the title of the work from “The Causes of the World Economic Crisis” to “The Causes of the Economic Crisis” (see Mises Archive 92: 11). In mid-April, shortly before leaving for the United States, he was through with the revisions. On top of his thirty complimentary copies he ordered another twenty-five copies, and had twenty out of these fifty-five copies sent directly to their recipients. The money (170 marks, see Mises Archive 93: 14) was wired to his Postscheck account (see Mises Archive 92: 13).

¹⁴ Mises, Die Ursachen der Wirtschaftskrise, p. 14.

¹⁵ Ibid, pp. 14f.

¹⁶ His opinion was already on record. See his remarks in the 1926 essay “Sozialliberalismus,” reprinted in Kritik des Interventionismus (Jena: Gustav Fischer, 1929). In January 1926, the Neues Wiener Tagblatt approached Mises to get his opinion on how unemployment was to be reduced (see Mises Archive 80: 26). And on March 6, 1930 the Vienna journal Welt am Morgen published Mises's advocacy of the abolition of unemployment relief (see Mises Archive 66a: 40). Among the other economists who argued along these lines, see in particular, A.C. Pigou, Industrial Fluctuations (London: Macmillan, 1927); Jacques Rueff, “L'assurance chômage cause du chômage permanent,” Revue politique et parlementaire (December 10, 1925); Lionel Robbins, The Great Depression (London: Macmillan 1934).

¹⁷ Mises, Die Ursachen der Wirtschaftskrise, p. 15.

¹⁸ Five years before, in his piece on “Interventionism,” Mises had characterized this free-market unemployment as a “frictional phenomenon” that would not exist in a static state—that is, in equilibrium. See Mises, Kritik des Interventionismus, pp. 13, 20.

¹⁹ Mises, Die Ursachen der Wirtschaftskrise, pp. 16f.

²⁰ Ibid., p. 18.

²¹ Ibid., pp. 26, 32.

²² Ibid., pp. 31f.

²³ Mises to Fritz Georg Steiner, letter dated January 29, 1932, Mises Archive 71: 11.

²⁴ Otto Conrad, “Der Interventionismus als Ursache der Wirtchaftskrise—eine Auseinandersetzung mit Ludwig Mises” (Interventionism as cause of the economic crisis—a dispute with Ludwig Mises”), typewritten manuscript, Mises Archive 23: 42ff. Mises's response had the title “Interventionismus der Unternehmer? Entgegnung auf die vorstehenden Ausführungen Otto Conrads” (Interventionism of the entrepreneurs? Reply to Otto Conrad's aforesaid remarks), typewritten manuscript, Mises Archive 23: 31ff.

²⁵ Bermann to Mises, letter dated August 24, 1931; Mises Archive 95: 23ff. Bermann had been a student of Mises's in 1918. Later Mises brought the gifted Bermann into the Kammer and also maintained close private contact. See their correspondence in Mises Archive 51: 31f.; 95: 32.

²⁶ Mises to Bermann, letter dated September 10, 1931; Mises Archive 95: 22.

²⁷ Emil Lederer, Technischer Fortschritt und Arbeitslosigkeit (Tübingen: Mohr, 1931). He had advocated these views for many years, along with the opinion that inflation can somehow create additional goods. See for example his editorial “Der technische Fortschritt” in the Vienna journal Arbeiter-Zeitung (September 4, 1927): 12.

²⁸ Mises, “Das festangelegte Kapital,” Economische Opstellen: Aangeboden aan Prof. C.A. Verrijn Stuart (Haarlem: De Erven F. Bohn N.V., 1931), pp. 214–28.

²⁹ Erich Carell, review of Mises's Ursachen der Wirtschaftskrise in Jahrbücher für Nationalökonomie 135 (1931): 924f.

³⁰ Wilhelm Röpke, review of Mises's Ursachen der Wirtschaftskrise in Zeitschrift für Nationalökonomie 4, no. 2 (1932): 273–75.

³¹ Mises, Die Ursachen der Wirtschaftskrise, p. 31.

³² Walter Tschuppik in Süddeutsche Sonntagspost (November 8, 1931); Mises Archive 45: 66.

³³ Dr. Eugen Altschul in Magazin der Wirtschaft (June 19, 1931).

³⁴ Albert Lauterbach in Der Holzarbeiter 40, no. 4 (February 18, 1932).

³⁵ Wolfrum to Mises, letter dated May 4, 1931; Mises Archive 77: 22.

³⁶ See correspondence in Mises Archive 66: 28; 66a: 85, 98, 109, 129; 68: 51; 83: 14.

³⁷ See Murray N. Rothbard, America's Great Depression, 5th ed. (Auburn, Ala.: Ludwig von Mises Institute, 1999), esp. chap. 11: “The Hoover New Deal of 1932.”

³⁸ Mises to Wilhelm Klein, letter dated June 10, 1931; Mises Archive 66a: 100.

³⁹ Mises to Fritz Wolfrum, letter dated June 10, 1931; Mises Archive 77: 23.

⁴⁰ The meeting took place on March 20, 1931. See the report by Gustav Linert in Mises Archive 66a: 175.

⁴¹ Anselm von Rothschild had founded the Credit-Anstalt in 1855 as a public-private venture to stimulate economic development. Its difficulties in 1931 were essentially due to the fact that, two years before, the Rothschild family had given in to demands from the Austrian government to save the semi-public Boden-Credit-Anstalt after it had been subject to a bank run of several weeks. Merging with this bankrupt institution proved to be too much even for the financial acumen of Louis von Rothschild, who owned some 30 percent of the Credit-Anstalt.

⁴² Only three years later did he feel free to analyze these events in an article published in a prominent review: “Der Weg der österreichischen Finanzpolitik” [The path of Austrian financial policy], Wirtschaftliche Nachrichten 18, no. 1 (January 10, 1935): 38–39.

⁴³ See Aurel Schubert, The Credit-Anstalt Crisis of 1931 (Cambridge: Cambridge University Press, 1991); Howard S. Ellis, Exchange Control in Central Europe (Cambridge, Mass.: Harvard University Press, 1941).

⁴⁴ See Mises's letter, dated June 10, 1931 in Mises Archive 66a: 107.

⁴⁵ Mises to Josephus Jitta, letter dated June 10, 1931; Mises Archive 66a: 102. Jitta was the president of the Rotary Club in Den Haag. Mises never met him on his prewar trips to Holland (1926–1936). The two men met for the first time at the second (1949) Mont Pèlerin Conference. See the correspondence in Grove City Archive: Jitta file.

⁴⁶ F.A. Hayek, Das Mieterschutzproblem. Nationalökonomische Betrachtungen (Vienna: Steyrermühl-Verlag, 1930). Mises was fond of this publication and recommended it in private correspondence; see for example Mises to Wolfrum, letter dated June 10, 1931; Mises Archive 77: 23. Another good study was published by Josef Schell, Gerechtigkeitsidee und Mietengesetzgebung (Vienna: Manz, 1927). Schell was married to a young woman who had attended Mises's classes at the Handelsakademie. See Schell to Mises, letter dated January 29, 1955; Grove City Archive: Schell file.

⁴⁷ He held this opinion after 1921. See Mises, Erinnerungen, p. 46.

⁴⁸ Coase started his recollections of his early years at LSE with the following words: “I will be discussing what happened in economics in England, but these were times when, to a very considerable extent, this was what happened in economics.” Ronald Coase, Essays on Economics and Economists (Chicago: University of Chicago Press, 1994), p. 19.

⁴⁹ Mises to Sulzbach, letter dated January 12, 1931; Mises Archive 66a: 70.

⁵⁰ Martha Braun later said that Robbins had tried for years to get Hayek to LSE. Martha Steffy Browne [Braun], “Erinnerungen an das Mises-Privatseminar,” Wirtschaftspolitische Blätter 28, no. 4 (1981): 115.

⁵¹ This work earned Hayek a Habilitation degree at the University of Vienna. It was published in 1929 as “Gibt es einen Widersinn des Sparens?” Zeitschrift für Nationalökonomie 1, no. 3 (1930).

⁵² Keynes suggested that a deliberate policy of lowering interest rates “would mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalists to exploit the scarcityvalue of capital.” John Maynard Keynes, General Theory of Employment, Interest, and Money (New York and London: Harcourt, Brace, 1936), p. 376.

⁵³ Coase, Essays on Economics and Economists, p. 19.

⁵⁴ Lionel Robbins, Autobiography of an Economist (London: Macmillan, 1971), p. 127. Robbins went on (p. 128):

I do not think nowadays that the analytical constructions which excited us so much in the lectures on Prices and Production had all the width or appropriateness of assumption which some of us—including conspicuously the present writer—were disposed to claim for them.

⁵⁵ Hayek to Mises, letter dated November 21, 1931; Mises Archive 81: 19ff. Hayek went on: “I must tell you this because I here feel more indebted to you than anytime before. Moreover, given that Robbins and Plant provide excellent support to championing your ideas, I hope to have some success.”

⁵⁶ Mises to Hayek, letter dated December 7, 1931; Mises Archive 81: 18.

⁵⁷ Hayek to Mises, letter dated January 11, 1932; Mises Archive 81: 2.

⁵⁸ Robbins to Mises, letter dated May 25, 1932; Mises Archive 83: 1. Lionel Robbins, Nature and Significance of Economic Science (London: Macmillan, 1932).

⁵⁹ He was a notorious champion of intervention most notably in the free labor market. See William Beveridge, Unemployment: A Problem of Industry, 2nd ed. (London: Longmans, Green & Co., 1930).

⁶⁰ Hayek to Mises, letter dated March 10, 1933; Mises Archive 81: 5. Mises replied: “I am sorry that the impact of Gemeinwirtschaft on Sir William was not the intended one. By the way, has he already read the English version?” Mises to Hayek, letter dated March 17, 1933; Mises Archive 81: 6. Thus the manuscript must have been available by March 1933. Beveridge's opposition could explain why the book came out only in 1936.

⁶¹ Significantly, he hailed Hayek's article on “Capital Consumption” as the best and clearest of all his writings—after Hayek had published his two early books on money and the trade cycle. See Mises to Hayek, letter dated December 18, 1931; Mises Archive 81: 17.

⁶² Hicks had taught advanced classes in economics from 1929 onwards, that is, from the moment Robbins assumed leadership of the department. See Robbins, Autobiography of an Economist, p. 129.

⁶³ F.A. Hayek, Prices and Production (London: Routledge, 1931); idem, Monetary Theory and Trade Cycle Theory (London: Routledge, 1933); Mises, Theory of Money and Credit (London: Jonathan Cape, 1934); idem, Socialism (London: Jonathan Cape, 1936).

⁶⁴ In the few years following the creation of the Institut für Konjunkturforschung, his political views became indistinguishable from those of Mises. See the description of his activities in Hans Jörg Hennecke, Friedrich August von Hayek (Düsseldorf: Wirtschaft und Finanzen, 2000), pp. 87–91.

⁶⁵ The best illustration of this is F.A. Hayek, Pure Theory of Capital (London: Macmillan, 1941). The product of ten years at LSE, it was a book with neither head nor tail.

⁶⁶ See the correspondence in Mises Archive 66a: 142; 69: 8. The Bank of England suspended payments on September 19, 1931.

⁶⁷ The incident is reported in John R. Hicks, A Market Theory of Money (Oxford: Clarendon, 1989), p. 101. Ursula Webb was at the time studying in Vienna. A few years later she married John Hicks.

⁶⁸ In London, Mises stayed at Robbins's house. See Mises to Robbins, letter dated November 23, 1931; Mises Archive 83: 9. See also Mises to Lederer, letter dated October 6, 1931; Mises Archive 73: 10. He had probably arranged this trip at the end of September in order to avoid celebrations of his fiftieth birthday in Vienna. He asked his secretary to stifle all such attempts. He would be more agreeable if the organizers of birthday parties returned in twenty years. See Thieberger to Mises, letter dated August 12, 1941; Grove City Archive: Thieberger files.

⁶⁹ Mises to Wolfrum, letter dated October 24, 1931; Mises Archive 77: 21.

⁷⁰ For example, Reisch published a paper arguing that, although all fiduciary media are by their very nature inflationary, this inflation was not harmful if the fiduciary media were issued only as short-term commercial credits. See Richard Reisch, “Das Kreditproblem der Volkswirtschaft,” Zeitschrift für Nationalökonomie 3, no. 1 (1932). Reisch, it will be recalled, was the president of the Oesterreichische Nationalbank. Mises commented on the paper in private correspondence: “horrendous.” Mises to Steiner, letter dated January 29, 1932; Mises Archive 71: 11.

⁷¹ Loveday (League of Nations) to Mises, letter dated July 1, 1930; Mises Archive 91a: 3ff.

⁷² League of Nation to Mises, letter dated October 13, 1931; Mises Archive 66a: 141. Keynes and others had meanwhile published the Macmillan Report (London: HMSO, 1931), which made a highly successful case for inflationary finance to stop the fall of the price level.

⁷³ Mises to Robbins, letter dated November 23, 1931; Mises Archive 83: 9. The original German term for the Board was “Devisenbeirat” or, more explicitly, “Beirat für die Devisenzuteilung in der Nationalbank.”

⁷⁴ Mises to Hayek, letter dated December 7, 1931; Mises Archive 81: 18.

⁷⁵ Frowein to Mises, letter dated January 16, 1932; Mises Archive 71: 16; Mises to Frowein, letter dated January 21, 1932; Mises Archive 71: 17. After the war, Frowein became the honorary president of the ICC and remained on good terms with Mises. See their correspondence in Grove City Archive: “F” files.

⁷⁶ And for other private reasons: he had a small account at the Österreichisches Creditinstitut für öffentliche Unternehmungen und Arbeiten, through which all foreign payments were channeled. Mises used it to pay for his books, for example, for the Encyclopaedia of the Social Sciences, to which he had subscribed before the foreign exchange controls were instituted. Yet this “private clearing” involved a markup of 22 percent. See the correspondence in Mises Archive 71: 107ff.

⁷⁷ See for example Fischer to Mises, letter dated September 26, 1932; Mises Archive 68: 7.

⁷⁸ Hayek in London had heard reports about it. See Hayek to Mises, letter dated November 21, 1931; Mises Archive 81: 21.

⁷⁹ Mises, “Die Krise und der Kapitalismus,” Neue Freie Presse (October 17, 1931).

⁸⁰ Hedwig Lemberger to Mises, dated November 15, 1931; Mises Archive 66a: 158.

⁸¹ Mises to Lemberger, dated November 21, 1931; Mises Archive 66a: 157.

⁸² Jorge Radványi to Mises, letter dated May 21, 1959; Grove City Archive: Buenos Aires file.

⁸³ A collection of press articles that Machlup, Morgenstern, Haberler, Hayek, and others wrote from 1931 to 1934 for Graetz's Neues Wiener Tagblatt has recently been published in Hansjörg Klausinger, Machlup, Morgenstern, Haberler, Hayek und andere (Marburg: Metropolis, 2005).

⁸⁴ See Ernst Hoor, Österreich 1918–1938 (Vienna: Bundesverlag für Unterricht, Wissenschaft und Kunst, 1966), pp. 142f.

⁸⁵ Fritz Wolfrum, “Das Geldproblem,” typewritten manuscript dated November 12, 1931, pp. 8f.; Mises Archive 77: 17f.

⁸⁶ Robbins to Mises, letter dated December 19, 1931; Mises Archive 83: 5ff. “Streng” means severe.

⁸⁷ Mises, “Die Goldwährung und ihre Gegner,” Neue Freie Presse (December 25 and 30, 1931).

⁸⁸ See their correspondence and related documents in Mises Archive 71: 52, 58f., 158ff.

⁸⁹ Gesell's views found a spokesman in the eloquent and authoritative Keynes. See Keynes, General Theory of Employment, Interest, and Money, chap. 23, sec. 6.

⁹⁰ Mises to Hahn, letter dated April 9, 1932; Mises Archive 71: 45.

⁹¹ Mises to G.M. Verrijn Stuart, letter dated June 30, 1932; Mises Archive 71: 136.

⁹² Mises to James Gardner, letter dated March 30, 1964; Grove City Archive: “G” file. Mises here states that he advocated “the classical old gold standard (and not... the gold exchange standard)” and that “I changed my mind concerning the functioning of the gold exchange standard as it happened more than 30 years ago.”

⁹³ See Mises, Theorie des Geldes under Umlausfmittel, 1st ed. (Leipzig: Duncker & Humblot, 1912), pp. 44, 48, 56f.

⁹⁴ He was underlining something said by Spahr. See the typewritten manuscript of Mises's comment in Grove City Archive: Courtney files. Mises later incorporated these views in Human Action: A Treatise on Economics (New Haven, Conn.: Yale University Press, 1949, p. 780) and in the new 1953 edition of his Theory of Money and Credit (London: Jonathan Cape, 1934), pp. 450ff.

⁹⁵ See their thesis papers in Mises Archive 40: 21f.

⁹⁶ See the schedule in Mises Archive 17: 233.

⁹⁷ The ICC conference in Innsbruck took place in the third week of April, the Welthandels-Woche in the first week of May, and the ICC conference in Munich started on May 18. See correspondence in Mises Archive 68: 10, 13; 71: 38; 81: 14; 85: 5.

⁹⁸ The Weltwirtschaftskonferenz Berlin 1932 was part of a Welthandels-Woche, a weeklong conference organized by the newspaper Berliner Tageblatt. Mises was back in Vienna by Friday morning, May 6, for urgent Kammer business. See documents and correspondence in Mises Archive 71: 10; 77: 6.

⁹⁹ See the schedule in Mises Archive 17: 258, 261.

¹⁰⁰ Fischer to Mises, letter dated April 24, 1931, Mises Archive 68: 52.

¹⁰¹ See their correspondence in Mises Archive 57: 34; 75: 15, 37.

¹⁰² Steiner to Mises, letter dated December 8, 1930; Mises Archive 66: 23.

¹⁰³ Mises to Fischer, letter dated October 26, 1931; Mises Archive 68: 47.

¹⁰⁴ See the correspondence between Robbins and Mises, dated November 12 and 23, 1931; Mises Archive 83: 9f. Mises in fact reproduced in his book the entire survey on recent contributions to the analysis of socialist calculation that he had published some years before in the Archive. See Mises, “Neue Beiträge zum Problem der sozialistischen Wirtschaftsrechnung,” Archiv für Sozialwissenschaft und Sozialpolitik 51 (December 1923): 488–500.

¹⁰⁵ See correspondence between Mises and Fischer, dated October 26 and 27, 1931; Mises Archive 68: 46f.

¹⁰⁶ See their correspondence in Mises Archive 68: 31ff., 46.

¹⁰⁷ He received thirty complimentary copies of the book, ten of which were hardcover. Twenty of these (six with hard covers) were sent to Vienna. Mises had Fischer send the remaining ten, plus nine more copies for which he himself paid, to the following people: hardcover copies went to Robbins, Anderson, Sulzbach, and Beveridge; paperbacks went to Gregory, Hayek, both Verrijn Stuarts, Adolf Weber, Passow, Wiese, Oswalt, Vleugels, Halm, Hahn, Röpke, Wolfrum, Brutzkus, and Lederer.

¹⁰⁸ Anonymous, “Die Gemeinwirtschaft,” Der Deutsche Volkswirt. Literatur-Beilage no. 1 (December 23, 1932). One reviewer said:

The battle between individualism and socialism, which by now has been waged almost one hundred years, has now entered its final phase. In a few years or decades, at most, victory will be on one side or the other. At the high point of this battle, Mises's book is a crucial action. It is impossible to estimate its intellectual, economic, and, in the long run, even its political implications. (Anonymous, “Sozialismus—eine Utopie,” 1. Htmdelsbeilage der “Berliner Börsen-Zeitung” [November 3, 1932])

¹⁰⁹ E.W.E., “Die Planwirtschaft und ihre Gegner,” Die Tat 24 (10).

¹¹⁰ Review of “Die Gemeinwirtschaft,” Kartellrundschau 7/8 (1932).

¹¹¹ W.W. [Weiss-Wellenstein], “‘Die Gemeinwirtschaft.’ Die zweite Auflage des Werkes von Ludwig Mises,” Mittekuropäische Wirtschaft. Wochen-beilage der “Neuen Freien Presse” (December 10, 1932).

¹¹² Halm to Mises, letter dated April 16, 1932; Mises Archive 71: 89. The response:

I find that Lederer in his amply unclear brochure “Centrally Planned Economy” makes it obvious that socialist theory is completely bankrupt. In fact, the use of money is in his eyes the only basis for economic calculation, but he fails to see that, in a society in which the means of production are not privately owned, there is no pricing process for means of production. Moreover, and characteristically, he falls prey to the other error of Kautsky in that he wants to use past prices as a starting point. The few pages dedicated to this problem deliver nothing new and are even more confused than the previous justification attempts by socialist writers. (Mises to Halm, letter dated April 26, 1932; Mises Archive 71: 37)

¹¹³ Mises to Hayek, letter dated December 18, 1931; Mises Archive 81: 17. The phrase “abolition of usury” alludes to point 11 of the National Socialist Worker Party program of February 24, 1920.

¹¹⁴ Mises to Lederer, letter dated April 9, 1932; Mises Archive 73: 4; Mises to Amonn, letter dated April 27, 1932; Mises Archive 71: 143.

¹¹⁵ “I have not yet entirely abandoned all hope that it will be possible to do fruitful work within the Verein für Sozialpolitik. All depends on the course of the Dresden meeting and on the new president.” Mises to Georg Jahn, letter dated July 15, 1932; Mises Archive 71: 133.

¹¹⁶ See Mises and Arthur Spiethoff, eds., Probleme der Wertlehre (Schriften des Vereins für Sozialpolitik 183, no. 1, Munich and Leipzig: Duncker & Humblot, 1931), vol. 1.

¹¹⁷ His speech was subsequently printed, without title, in Mises and Arthur Spiethoff, eds., Probleme der Wertlehre (Schriften des Vereins für Sozialpolitik 183, no. 2, Munich and Leipzig: Duncker & Humblot, 1933), vol. 2, pp. 1–12; reprinted with the title “Der Streit um die Werttheorie” in Mises's book Grundprobleme der Nationalökonomie (Jena: Gustav Fischer, 1933), chap. 7; translated by George Reisman as “The Controversy Over the Theory of Value,” Epistemohgical Problems of Economics, 3rd ed. (Auburn, Ala.: Ludwig von Mises Institute, 2003), chap. 7.

¹¹⁸ Martha St. Braun, “Die diesjährigen Verhandlungen des Vereines für Sozialpolitik,” Neue Freie Presse (October 8, 1932).

¹¹⁹ Weber had sent Mises a copy of his book in November 1931. Mises replied: “I greet the success of your book as a sign that public opinion is beginning a gradual shift in the direction of sound ideas.” Mises to Adolf Weber, letter dated November 15, 1931; Mises Archive 66a: 156.

¹²⁰ Mises was very grateful. See his letter to Budge, dated June 13, 1931; Mises Archive 66a: 98. Some two years later, shortly after Hitler had seized power in Germany, Mises stated that his monetary theory had become in Germany, after World War I, the dominant theory of the business cycle. See Mises to Ugo Papi, letter dated March 17, 1933; Mises Archive 94: 3.

¹²¹ Mises said: “Your work needs to be welcomed not only as a scientific achievement, but also as a political deed.” Mises to Karl Wagner, letter dated June 8, 1931; Mises Archive 66a: 117.

¹²² Franz Boese, Geschichte des Vereins für Sozialpolitik, 1872–1932 (Berlin: Duncker & Humblot, 1939), pp. 229ff.

¹²³ Ibid., pp. 232ff.

¹²⁴ Martha St. Braun, “Die diesjährigen Verhandlungen des Vereines für Sozialpolitik,” Neue Freie Presse (October 8, 1932).

¹²⁵ Louise Sommer, “Für die freie Verkehrswirtschaft! (Die Dresdner Tagung des Vereines für Sozialpolitik),” Wiener Wirtschafts-Woche (October 12, 1932), pp. 7f. Sommer was by then a private lecturer in economics at the University of Geneva.

¹²⁶ See the letters and other materials printed in ibid., pp. 273ff. The Verein was re-established after World War II, in 1948. Mises did not wish to have anything to do with this postwar organization. See Mises to Sommer, letter dated June 11, 1957; Grove City Archive: Sommer file.

¹²⁷ Robbins to Mises, letter dated May 19, 1933; Grove City Archive: Robbins files. See also Robbins, Autobiography of an Economist, pp. 143f.

¹²⁸ See Eugen Dietzgen, ed., Gesammelte Werke, 3rd ed. (Stuttgart: Dietz, 1922), in particular vol. 3, which contains Josef Dietzgen's “Letters on Logic” and his “Excursions of a Socialist into the Field of Epistemology.”

¹²⁹ Karl Mannheim, Ideologie und Utopie (Bonn: Cohen, 1929).

¹³⁰ Mises, “Economics and Politics,” Grove City Archive: Mexico 1942 file 6.

¹³¹ Ibid. See also Lothar Gottlieb Tirala, Rasse, Geist und Seele (Munich: Lehmann, 1935). The author was a medical doctor.

¹³² Mises, “Economics and Politics,” lecture given at the National University of Mexico, January or February 1942; quoted from Margit von Mises's handwritten lecture notes contained in Grove City Archive: Mexico 1942 file 6. In this lecture Mises presented material that he eventually published in Omnipotent Government (New Haven, Conn.: Yale University Press, 1944), chap. 6, sect. 6.

¹³³ Mises, “The Controversy over the Theory of Value,” chap. 7 of Epistemological Problems of Economics, pp. 218f. He had only touched on this point, which he now regarded as fundamental, in a paper he wrote for Probleme der Wertlehre, the volume that served as a basis for the discussion in Dresden. See Mises, “The Psychological Basis of the Opposition to Economic Theory,” chap. 6 of Epistemological Problems of Economics, p. 201.

¹³⁴ Mises, “The Psychological Basis of the Opposition to Economic Theory,” p. 214.

¹³⁵ Lederer in Mises and Spiethoff, eds., Probleme der Wertlehre, vol. 2, pp. 114f.

¹³⁶ Mises in ibid., p. 117.

¹³⁷ Mises, Grundprobleme der Nationalökonomie: Untersuchungen über Verfahren, Aufgaben und Inhalt der Wirtschafts- und Gesellschaftslehre (Jena: Gustav Fischer, 1933). Almost three decades later, Mises's American student George Reisman produced a translation. The American edition eventually appeared under the somewhat different title of Epistemological Problems of Economics (Princeton, N.J.: Van Nostrand, 1960).

¹³⁸ Mises, “Aufgabe und Umfang der allgemeinen Wissenschaft vom Handeln,” Grundprobleme der Nationalökonomie, chap. 1; translated as “The Task and Scope of the Science of Human Action,” Epistemological Problems of Economics, chap. 1, pp. 1–69.

¹³⁹ Thus he insisted: “For the purposes of science, we must start from the action of the individual because this is the only thing of which we can have direct cognition” (ibid., p. 44). And he also stated:

Science cannot proceed otherwise than discursively. Its starting points must have as much certainty as human knowledge is capable of, and it must go on from there, making logical deductions step by step. It can begin as an aprioristic science with propositions necessary to thought that find their support and warrant in apodictic evidence; or as an empirical science it can start with experience. (ibid., p. 49)

¹⁴⁰ Ibid., pp. 13f. He went on to argue that the theory of human action ultimately coincides with the science of logic:

Human thought serves human life and action. It is not absolute thought, but the forethought directed toward projected acts and the afterthought that reflects upon acts done. Hence, in the last analysis, logic and the universally valid science of human action are one and the same.

¹⁴¹ Ibid., p. 15.

¹⁴² Ibid., p. 30.

¹⁴³ Mises to Machlup, letter dated July 12, 1934; Hoover Institution: Machlup-Mises correspondence file.

¹⁴⁴ During his sojourn in Vienna, Hugh Gaitskell set out to make a new translation of Böhm-Bawerk's Capital and Interest, which was still available only in a translation from the first edition. Mises later recalled that other English economists too were ready to shoulder the task, and even publication was not a problem in these days when the public interest in Austrian economics was at its peak in Great Britain: “They abstained from this undertaking because they expected that Gaitskell would execute his plan.” But the young man in Mises's Vienna seminar never finished the job. Gaitskell opted instead for an acceleration of his career in politics, becoming Minister of Fuel and Power in the postwar British Labour government. See Mises to Nymeyer, letters dated November 22, 1947 and November 8, 1950; Grove City Archive: Nymeyer files.

¹⁴⁵ Mises, “Leitsätze zur Erörterung der methodologischen Probleme der Sozialwissenschaften und zur Kritik des Kaufmann'schen Standpunktes” (Basic principles for the discussion of the methodological problems of the social sciences and for a critique of the Kaufmannian position); typewritten manuscript, dated March 9, 1934, 6 pp.; Mises Archive 32: 2–4.

¹⁴⁶ Felix Kaufmann, Robert Wälder, Erich Schiff, Oskar Morgenstern.

¹⁴⁷ See Erik von Kuehnelt-Leddihn, Von Sarajevo nach Sarajevo (Vienna: Karolinger, 1966), p. 47; Hoor, Österreich 1918–1938, pp. 74, 106, 114.

¹⁴⁸ The alliance with Italy was cemented in the “Protocols of Rome,” signed on March 17, 1934.

¹⁴⁹ Mises became a member on March 1, 1934 at the Patriotic Front's Kammer branch office. Membership was probably mandatory for all employees of public and semi-public organizations. Mises's membership card (number 282632) can now be found in the Grove City Archive: file #6/9/1/1. He was also a member of the “Werk Neues Leben,” a subdivision of the Patriotic Front. See his membership card (number 406183) in Grove City Archive: Kammer der gewerblichen Wirtschaft für Wien file.

¹⁵⁰ Arguably, his true significance lay elsewhere. Historian Ernst Hoor presents Dollfuss as the first and only stateman of the first Austrian republic who consciously and explicity reclaimed an Austrian nation—as distinct from the German nation—and who framed his policies accordingly. See Hoor, Österreich 1918–1938, p. 75.

¹⁵¹ Lauchenauer to Mises, letter dated December 30, 1932; Mises Archive 97: 3. Arguably, these young politicians gave the papal encyclical a stronger statist reading than was really warranted by its contents. Mises would later acknowledge that the man who wrote the first draft of the encyclical, Jesuit Pater O. von Nell-Breuning, was “one of the few German economists who in the Interwar period advocated economic freedom.” See Mises to Parker, letter dated May 14, 1953; Grove City Archive: Tax Foundation file.

¹⁵² See Mises, Erinnerungen, pp. 89–91; Kuehnelt-Leddihn, Von Sarajevo nach Sarajevo, p. 52; Hoor, Österreich 1918–1938, p. 115. Italy changed its alliances in the autumn of 1936, when France and Great Britain sanctioned the Italian invasion and annexation of Abyssinia. The new alliance between Hitler and Mussolini spelled the doom for Austrian independence.

¹⁵³ Translations by Arlene Oost-Zinner.

Chapter 16. The Geneva Years

¹ See the report on an interview with him in “Von Mises to Speak Tonight,” Santa Ana Register (October 17, 1944); a copy is in Grove City Archive: Hoiles files.

² Rappard to Mises, letter dated March 19, 1934; Mises to Rappard, letter dated March 23, 1934; Grove City Archive: Graduate Institute Archive.

³ Kammeramtsdirektor to Mises, letter dated October 31, 1934; Grove City Archive: Kammer für Handel, Gewerbe und Industrie files. The file also concerns salary statements for the years 1936 and 1937. In both years, Mises had a gross annual income of 14,620 schillings.

⁴ Martine Brunschwig Graf, Jean-Claude Frachebourg, Norman Scott, and Peter Tschopp, HEI 1927–2002 (Geneva: Graduate Institute of International Studies, 2002), p. 40. See also p. 50.

⁵ His mother was a scion of the Hoffmann-Laroche family from Basel. In July 1919, William Emmanuel Rappard became secretary general of the new League of Red Cross Societies, a position he quit in 1921. Before 1919, he was already a member of the International Committee of the Red Cross. His magnum opus was Die Bundesverfassung der Schweizer Eidgenossenschaft, 1848–1948—Vorgeschichte, Ausarbeitung, Weiterentwicklung (Zurich: Polygraphischer Verlag, 1948).

⁶ See the testimonies by Léopold Boissier and Carl J. Burckhardt in the memorial volume edited by Rappard's family: William-E. Rappard (Geneva: Kundig, 1961), pp. 45, 57.

⁷ This was the same Flexner who had written the famous Flexner Report: Medical Education in the United States and Canada: A Report to the Carnegie Foundation for the Advancement of Teaching (1910) which led the the closure of four out of six medical schools in the United States.

⁸ Brunschwig et al., HEI 1927–2002. Of particular interest is the section dealing with the years 1927 to 1978, authored by Norman Scott.

⁹ Ibid., pp. 37, 72, 81.

¹⁰ During the war, he had served as a personal interpreter between his college friend Albert Thomas and Lloyd George, both of whom were commissioned to coordinate the reorganization of the British and French munitions industries. At the end of the war, George was Prime Minister and Thomas would soon become the first president of the International Labour Organization in Geneva. “The die was cast. Mantoux's new career was made” (ibid., p. 51).

¹¹ See the untitled typewritten statement dated July 9, 1934; Grove City Archive: Kammer für Handel, Gewerbe und Industrie file. Michael Heilperin later stated that Rappard and the economists had particular affinities with Charles Rist, Jacques Rueff, Jacob Viner, and Lionel Robbins. See his statement in William-E. Rappard, p. 78.

¹² Alfred Zimmern to Mises, letter dated December 12, 1929; Grove City Archive: Institut des Hautes Etudes Internationales files. Zimmern was a professor at the University of Geneva and head of international affairs at the Institute for Intellectual Cooperation. Before the establishment of the Institut, he had run “summer vacation schools on international affairs”—the Zimmern School—for some years. He then moved to Oxford University. See Scott in Brunschwig et al., HEI 1927–2002, p. 29.

¹³ This strong financial connection (dependence) was downplayed by all sides. In 1942, Tracy Kittredge wrote in a letter to the U.S. State Department that the

Foundation has been familiar with the work of Professor von Mises for more than ten years and has contributed toward research projects under his direction in Vienna and in Geneva, and to his present stipend at the National Bureau of Economic Research.

Kittredge to Acheson, letter dated January 5, 1942; Grove City Archive: Mexico 1942 files. In fact, the Rockefeller Foundation paid the NBER stipend in full.

¹⁴ When Kelsen was ousted from his chair at the University of Cologne in 1933, he received offers from the Institute, from LSE, and from the New School for Social Research. The language issue prompted him to opt for Geneva, where professors could teach in French. See Rudolf Aladár Métall, Hans Kelsen (Vienna: Verlag Franz Deuticke, 1968), p. 64.

¹⁵ Mises to Wilhelm Hertz (Geneva), letter dated November 9, 1961; Grove City Archive: “H” files. In this letter Mises recalled the quiet years of study and exchange with like-minded friends and mentioned in particular these four.

¹⁶ Neil de Marchi, “League of Nations Economists and the Ideal of Peaceful Change in the Decade of the “Thirties,” CD. Goodwin, ed., Economics and National Security (Durham, N.C.: Duke University Press, 1991), pp. 143–78.

¹⁷ Scott in Brunschwig et al., HEI 1927–2002, pp. 53f. Mantoux was not present all the time—already in 1928, he had moved his home to Paris because the city on the Seine offered better educational possibilities for his children and also because he continued to work on the official records of the Versailles Conference. This had prompted Rappard to join him as a co-director of the Institut in the same year.

¹⁸ Rappard quoted from Scott in Brunschwig et al., HEI 1927–2002, p. 56.

¹⁹ Rappard to Mises, letter dated March 19, 1934; Graduate Institute Archive. The dollar amount can be calculated on the basis of the following data: 20 SWF = 0.1867 ounces of gold; 35 USD = 1 ounce of gold. The essential terms of his contract (3 hours of teaching, 25,000 SWF compensation) applied throughout the entire period of his employment at the Institute; see the certificate from André Mussard (the Institute's secretary-general), dated June 6, 1940; Graduate Institute Archive.

²⁰ Adam Smith quoted in Hayek to Mises, letter dated October 15, 1937; Grove City Archive: Hayek files:

I have thought a great deal upon this subject, and have inquired very carefully into the constitution and history of several of the principal universities of Europe; I have satisfied myself that the present state of degradation and contempt into which the greater part of these societies had fallen in almost every part of Europe arises principally, first, from the large salaries which in some Universities are given to professors, and which render them altogether independent of their diligence.

²¹ Mises to Rudolf Berthold, letter dated November 4, 1959; Grove City Archive: Berthold file.

²² Mises to Machlup, letter dated October 23, 1934; Hoover Institution: Machlup-Mises correspondence file.

²³ This information is taken from the school's catalogue pertaining to the 1939–1940 academic year.

²⁴ Typewritten copy of an extract of Parker T. Hart's report to the Institute of International Education of New York. Rappard had obtained a copy of the report from the president of the Federal Technical University of Zurich, Mr. Rohn, who organized student exchanges between the United States and Switzerland. See Rappard to Mises, letter dated March 25, 1937; Graduate Institute Archive.

²⁵ Haberler later singled out J. Marcus Fleming and Alexandre Kafka. See Gottfried von Haberler, “Mises's Private Seminar” in “Erinnerungen an das Mises-Privatseminar,” Wirtschaftspolitische Blätter 28, no. 4 (1981): 123.

²⁶ Hal Lary quoted from Scott in Brunschwig et al., HEI 1927–2002, p. 67.

²⁷ See the sales contract (dated September 30, 1936) and his driver's license (dated November 13, 1936) in Grove City Archive: file # 6/10/1/1. The price of the car was 5,900 Swiss francs, about a quarter of his annual salary.

²⁸ See the route protocols in Grove City Archive: file #6/10/1/2. His first independent ride was on December 20, 1936 (85 km). The day tour with Heilperin took place on January 17, 1937 (235 km).

²⁹ Margit von Mises, My Years with Ludwig von Mises, 2nd enlarged ed. (Cedar Falls, Iowa: Center for Futures Education, 1984), p. 27.

³⁰ At a 1965 conference, Machlup had attributed the attempt to restore a gold standard to special interest politics. Mises was in the audience and thereafter refused to talk to Machlup. According to his wife he said: “He was in my seminar in Vienna... he understands everything. He knows more than most of them and he knows exactly what he is doing.” Margit von Mises, My Years with Ludwig von Mises, p. 146. Machlup's view of the event is reprinted in ibid., pp. 192f.

³¹ Mises to Machlup, letter dated January 11, 1936; Hoover Institution: Machlup-Mises correspondence file.

³² Mises to Machlup, letter dated June 29, 1937; Hoover Institution: Machlup-Mises correspondence.

³³ Scott in Brunschwig et al., HEI 1927–2002, p. 63.

³⁴ The product of these lectures was a book with the title International Economic Planning (London: Macmillan, 1937).

³⁵ Mises to Robbins, letter dated December 10, 1935; Grove City Archive: Robbins file. Mises commented on the second edition of Lionel Robbins, The Nature and Significance of Economic Science (London: Macmillan, 1932) in particular on Robbins's use of the word “experience.” Speaking about the significance and role of tautologies, Mises said that he had learned from Meyerson. See Émile Meyerson, De l'explication dans les sciences (Paris: Fayot, 1927).

³⁶ For a concise presentation of the Austrian impact on Robbins's intellectual development see Denis P. O'Brien, “Lionel Robbins and the Austrian Connection,” Bruce J. Caldwell, ed., Carl Menger and His Legacy in Economics (Durham, N.C.: Duke University Press, 1990), pp. 155–84. O'Brien stresses Robbins pervasive eclecticism. He points out that Mises's impact on Robbins was at all times matched, if not surpassed, by Wieser's and Mayer's.

³⁷ The deposit account would be quite substantial after the publication of Theory of Money and Credit and Socialism. In February 1936, Mises had more than 237 pounds in the account; by May 1939 it was almost 780 pounds. See Hayek to Mises, letter dated February 15, 1936, as well as the typewritten statement of the development of the accounts until May 1939 in Grove City Archive: Hayek files.

³⁸ Hayek to Mises, letter dated January 12, 1941; Grove City Archive: Hayek files.

³⁹ Machlup to Mises, letter dated September 25, 1934; Grove City Archive: Machlup files. Copies of Machlup's original questionnaire, and the answers formulated by Mises, Hayek, Haberler, Marschak, and Machlup himself are in the same file. One year later, Oskar Morgenstern demolished the idea that the average period production was an adequate measure of capital-intensity. See Morgenstern, “Zur Theorie der Produktionsperiode,” Zeitschrift für Nationalökonomie 6 (1935): 196–208. Historian Harald Hagemann suggests that this critique was instrumental for Hayek to abandon the period-of-production concept in later works. See Hagemann, “Einführung,” Harald Hagemann, ed., Zur deutschsprachigen wirtschaftswissenschaftlichen Emigration nach 1933 (Marburg: Metropolis, 1997), pp. 13f.

⁴⁰ F.A. Hayek, ed., Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism (London: Routledge, 1935). An appendix of the volume featured Barone's 1908 article arguing that a socialist directorate could use a system of general equilibrium equations as a planning device.

⁴¹ Hayek, “The Nature and History of the Problem,” in ibid., p. 33.

⁴² Hayek, “The Present State of the Debate,” in ibid., pp. 208ff. This distinctive perspective on the problem of economic calculation under socialism was a consequence of Hayek's acceptance of mathematical general equilibrium analysis as the most advanced expression of modern economic science. This was correctly noticed on all sides. For example,

Professors Hayek and Robbins of the London School of economics, who next to Mises are the leading opponents of socialism among economists, have apparently been influenced by Barone. They have taken up a second line of attack, the line that is usually taken after a principle has been admitted. They admit that a rational allocation of resources is theoretically possible in a socialist state, but deny that it can be worked out in practice. (Benjamin E. Lippincott, “Introduction,” On the Economic Theory of Socialism, ed., B.E. Lippincott [New York: McGraw-Hill, 1964], p. 13)

See also Eduard März, “Die Bauer—Mises-Schumpeter-Kontroverse,” Wirtschaftspolitische Blätter 28, no. 4 (1981): 73.

⁴³ Hayek, “The Present State of the Debate,” p. 238.

⁴⁴ He pointed out these problems in his original 1920 article and throughout his later works. See for example The Ultimate Foundation of Economic Science (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 2002), p. 110.

⁴⁵ Mises, “The Equations of Mathematical Economics and the Problem of Economic Calculation in a Socialist State,” Quarterly Journal of Austrian Economics 3, no. 1 (2000). The original version of this article was written in German, but never published. A French translation by Gaston Leduc appeared in 1938 in Charles Rist's Revue d'économie politique 97, no. 6 (1938): 899–906. The quoted English translation by Vera Smith was originally prepared for Economica, but not published there because the editorial board of the journal rejected all submissions that had already appeared elsewhere.

⁴⁶ Hayek to Mises, letter dated October 20, 1938; Grove City Archive: Hayek files.

⁴⁷ Hans Jörg Hennecke, Friedrich August von Hayek (Düsseldorf: Wirtschaft und Finanzen, 2000), pp. 131–34. The author quotes from a 1981 letter that Hayek wrote to Terence Hutchinson:

But the main intention of my 1936 lecture was to explain gently to Mises why I could not accept his a priorism. Curiously enough, Mises who did not readily accept criticism from his juniors, accepted my argument but insisted that it was not incompatible with his view.

⁴⁸ See section “Wieser's long shadow” in chapter “Winds of Change,” above.

⁴⁹ Hayek to Mises, letter dated May 10, 1937; Grove City Archive: Hayek files.

⁵⁰ A revision of the historical performance of nineteenth-century capitalism set things straight after World War II. The feeble beginnings are in F.A. Hayek, ed., Capitalism and the Historians (Chicago: University of Chicago Press, 1954).

⁵¹ Hayek, “The Nature and History of the Problem,” in Individualism and Economic Order (Chicago: University of Chicago Press, 1948), p. 135.

⁵² H.C. Simons, A Positive Program for Laissez-Faire. Some Proposals for a Liberal Economic Policy (Public policy pamphlet no. 15; Chicago: University of Chicago Press, 1934).

⁵³ Some of them, most notably Hayek, later turned toward a more laissez-faire stance. But this turn came at a time when the neo-liberal steamroller was already well underway.

⁵⁴ For an eyewitness account of these events, see Sisley Huddleston, In My Time (New York: Dutton & Co., 1938). Mises was also an eyewitness. He commented on the change of Soviet tactics in Theory and History: An Interpretation of Social and Economic Evolution (New Haven, Conn.: Yale University Press, 1957), p. 350.

⁵⁵ Western journalists and intellectuals played a shameful role covering up the reality of the Soviet regime. See for example Sally J. Taylor, Stalin's Apologist: Walter Duranty, the New York Times's Man in Moscow (Oxford: Oxford University Press, 1990), and Paul Hollander, Political Pilgrims, 4th ed. (New Brunswick, N.J.: Transaction, 1998).

⁵⁶John T. Flynn, The Roosevelt Myth (New York: Devin-Adair, 1948); reprinted with an introduction by Ralph Raico (San Francisco: Fox & Wilkes, 1998).

⁵⁷ To mention just a few of these new laws and bureaus: the Tennessee Valley Authority (1933), the Agricultural Adjustment Act (1933) establishing a system of price controls, the National Recovery Administration as part of the National Industrial Recovery Act, the Wagner Act (1935) attempting to establish compulsory unionization, the Undistributed Profits Tax (1936) confiscating up to 74 percent of profits, the Wages and Hours Act (1938) establishing compulsory higher minimum wages and a compulsory 40–hour work week.

⁵⁸ This is the first paragraph of Mises's preface to A.S.J. Baster, Le crépuscule du capitalisme américain—étude économique du New Deal (Paris: Librairie de Médicis, 1937).

⁵⁹ These premonitions turned out to be justified. See Thomas DiLorenzo, “Franklin Delano Roosevelt's New Deal: From Economic Fascism to Pork-Barrel Politics,” John V. Denson, ed., Reassessing the Presidency (Auburn, Ala.: Ludwig von Mises Institute, 2001), pp. 425–51.

⁶⁰ See the front page of El Sol (May 31, 1936). A copy is in Grove City Archive: Madariaga file.

⁶¹ Mises to Machlup, letter of June 1936; Hoover Institution: Machlup-Mises correspondence.

⁶² Mises to Baus, letter dated November 6, 1938; Grove City Archive: Baus file.

⁶³ John Maynard Keynes, Collected Writings (London: Macmillan, 1973), vol. 7, p. xxvi:

Nevertheless the theory of output as a whole, which is what the following book purports to provide, is much more easily adapted to the conditions of a totalitarian state, than is the theory of production and distribution of a given output produced under conditions of free competition and a large measure of laissez-faire.

Similarly, in 1933, Keynes allowed a German translation of his paper on “national self-sufficiency” to be purged of passages that might have been offending to the new Hitler government. See Knut Borchardt, “Keynes” ‘Nationale Selbstgenügsamkeit’ von 1933. Ein Fall von kooperativer Selbstzensur,” Zeitschrift für Wirtschafts- und Sozialwissenschaften, vol. 108, pp. 271–84.

⁶⁴ At the onset of the Keynesian Revolution, a few eminent historians of thought had pointed out that Keynes's views about the relationship between variations of the money supply, employment, and output had been anticipated and stressed in mercantilist thought. See Eli Heckscher, Mercantilism, 2nd ed. (New York: Macmillan, [1930] 1955); Jacob Viner, Studies in the Theory of International Trade (New York: Harper and Bros, 1937), chaps. 1 and 2. The implication is that Keynes was not so much a revolutionary, but a reactionary champion of the ancien régime. The single most detailed study of his magnum opus confirmed this implication in rather devastating terms:

Now though I have analyzed Keynes's General Theory in the following pages theorem by theorem, chapter by chapter, and sometimes even sentence by sentence, to what some readers may appear a tedious length, I have been unable to find in it a single important doctrine that is both true and original. (Henry Hazlitt, The Failure of the “New Economics,” 2nd ed. [Irvington-on-Hudson, N.Y.: Foundation for Economic Education, (1959) 1994], p. 6)

⁶⁵ Mises, “Stones into Bread, The Keynesian Miracle,” Henry Hazlitt, ed., The Critics of Keynesian Economics, 2nd ed. (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1995), p. 313. This paper was first published in the March 1948 issue of Plain Talk.

⁶⁶ Mises, “Lord Keynes and Say's Law,” in Hazlitt, ed., The Critics of Keynesian Economics, p. 319. This paper was first published in the October 1950 issue of The Freeman.

⁶⁷ See the volumes of the Travaux du IXe Congrès International de Philosophie (Paris: Hermann & Co., 1937). These conference proceedings appeared in the series Actualités scientifiques et industrielles. Mises's paper is printed in volume 5, pp. 49–55, Kotarbinski's in volume 4, pp. 190–94.

⁶⁸ Eugen Slutsky, “Ein Beitrag zur formal-praxeologischen Grundlegung der Ökonomik,” Annales de la classe des sciences sociales-économiques (Kiev: Académie Oukraïenne des Sciences, 1926), vol. 4. Mises quotes this paper in Epistemological Problems of Economics, 3rd ed. (Auburn, Ala.: Ludwig von Mises Institute, 2003), chap. 1, p. 6. This very passage contains the phrase “a universal praxeology” and thus suggests that Mises had adopted the word already in 1933. But in the original text, Mises used a slightly different expression, namely, “eine allgemeine Praktik,” meaning a general science of human practice or human action. See Grundprobleme der Nationalökonomie (Jena: Gustav Fischer, 1933), p. 14. The translation is however justified in the light of Mises's later adoption of the term.

⁶⁹ Robert Wälder, “Diskussionsbemerkungen zu den Leitsätzen von Professor v. Mises zur Erörterung der methodologieschen Probleme der Sozialwissenschaften,” typewritten paper, dated April 19, 1934, 10 pp.; Mises Archive: 32: 7–11. On page 6 of this paper, Wälder states that Mises had talked about “Praxeologie,” and on page 5 he uses the expression “System des praxeologischen A priori.”

⁷⁰ This work was published one year later as a French-language appendix to one of Kotarbinski's works. See Tadeusz Kotarbinski, “Considérations sur la théorie générale de la lutte,” Z Zagadnien Ogólnej Teorii Walki (Warsaw, 1938), pp. 65–92.

⁷¹ Alfred Espinas, “Les origines de la technologie” Revue philosophique 15 (July to December 1890); idem, Les origines de la technologie (Paris: Felix Alcan, 1897). Mises apparently did not have direct access to Espinas's work. Hayek looked up the reference for him in London, and it was also Hayek who discovered that the relevant passage from Espinas's book was taken verbatim from an article that Espinas had published some years earlier. See Hayek to Mises, handwritten note dated November 12, 1939; Grove City Archive: Hayek files.

⁷² Mises to Rudolf Berthold, letter dated November 4, 1959; Grove City Archive: Berthold file. Mises thus initiated a second praxeological tradition. Present-day followers of the early French school call themselves “praxiologists” and their discipline “praxiology.” These scholars, most of whom are academics from France and Poland, publish the series Praxiology: The International Annual of Practical Philosophy and Methodology (New Brunswick, N.J.: Transaction, 1992); see in particular vol. 7: The Roots of Praxiology—French Action Theory from Bourdeau and Espinas to Present Days, V. Alexandre and W.W. Gasparski, eds. (2000). Mises himself kept up with the praxiologists at a distance. In 1956, he noticed with interest the existence of a. Journal of Praxiology that was edited by a scholar at the University of Melbourne in Florida (Grove City Archive: Hugh P. King file). He distinguished the two approaches in a letter to Stephen B. Miles, dated April 19, 1961; Grove City Archive: “M” files.

⁷³ Occasionally he made interesting observations on the methodology and the logical character of economics in his correspondence. Of particular interest is a letter to Lionel Robbins commenting on the second edition of The Nature and Significance of Economic Science (New York: Macmillan). See Mises to Robbins, letter dated December 10, 1935; Grove City Archive: Robbins files. The letter also demonstrates that Mises was in touch with the positivistic Vienna Circle; he refers to correspondence with the mathematical economist Karl Menger (the son of the founder of the Austrian School).

⁷⁴ Mises to Machlup, letter dated March 5, 1938; Hoover Institution: Machlup-Mises correspondence file. The paper was eventually published in the proceedings of the conference, as “Les Hypothèses de Travail dans la Science Économique” (Working hypotheses in economic science), Cournot nella economia e nella filosofia (Padua: Cedam, 1939), pp. 97–122. In previous writings, he had no more than touched on methodological questions. See for example his observations on “the static method” and the possibility of “dynamic laws” in Mises, “Sociology and History,” in Epistemological Problems of Economics, pp. 117f.

⁷⁵ For some time, he had also advocated the use of equilibrium as a methodological device for the analysis of dynamic changes. See Mises, Gemeinwirtschaft, 1st ed. (Jena: Gustav Fischer, 1922), p. 151. Compare with Mises, Human Action (Auburn, Ala.: Ludwig von Mises Institute, 1998), p. 248. Notice that Mises was perfectly familiar with the pioneering works on

⁷⁶ See undated and non-addressed manuscript of a letter (written in the fall of 1937); Grove City Archive: Kammer für Handel, Gewerbe und Industrie files. mathematical equilibrium theory that Wald, Rosenstein-Rodan, Morgenstern and others had just published in the Zeitschrift für Nationalökonomie.

⁷⁷ Becker to Mises, letters dated February 8, 1938 and February 14, 1938; Grove City Archive: Kammer für Handel, Gewerbe und Industrie files. Eventually the reforms turned the Kammer into a pure bureaucracy. For an eyewitness account of the changes, see Mader to Mises, letter dated October 31, 1949; Grove City Archive: “M” file.

⁷⁸ Mises, “Leitsätze für die Neuordnung der Verhältnisse im Donauraum,” undated manuscript, 10 pp. He left a copy at the Graduate Institute in Geneva, but also took copies with him when he left for the United States in 1940.

⁷⁹ He went into more detail: The local governments and courts must take account of minorities by using all languages spoken by more than 15 percent of the local population. Because economic legislation, in particular free trade and the regulation of banking and money, must be uniform in all countries, one needs a central parliament and a central jurisdiction. The proceedings of these institutions would be in an official language, and Mises believed French or English should be chosen. The central organizations would have to be located in Vienna, which would have a special status corresponding to the status of Washington, D.C. within the United States. In order to avoid jealousy among the national populations, some of the federal officers would have to be of French or British nationality.

⁸⁰ He later developed his plan for the establishment of an Eastern Democratic Union in much more detail in two major papers that have only recently been published: “Entwurf von Richtlinien für den Wiederaufbau Österreichs” (May 1940, 51 pages) and “An Eastern Democratic Union: A Proposal for the Establishment of a Durable Peace in Eastern Europe” (October 1941, 43 pages); both papers have been translated and published in Richard Ebeling, ed., Selected Writings of Ludwig von Mises: Political Economy of International Reform and Reconstruction (Indianapolis: Liberty Fund, 2000).

⁸¹ Quoted from Margit von Mises, My Years with Ludwig von Mises, p. 27.

⁸² Joachim Fest, Hitler (Berlin: Deutsche Buch-Gemeinschaft, 1973), p. 753.

⁸³ See Mises, “Information” (March 4, 1939)—a rough list of the items that were in the room he had sublet in the apartment; Hoover Institution: Hayek-Mises correspondence.

⁸⁴ Mises's personal library went in different directions. The Nazis sent his book collection to a new Judenbibliothek in Berlin. This library was under the control of R. Heydrich's Sicherheitsdienst (SD) and located at Eisenacher Strasse 12. However, it is not known where Mises's books are today. During World War II, the collections of the Judenbibliothek were sent back and forth to the provinces to protect them against Allied bombings. They were also subject to various transfers, book exchanges with other libraries, and plunder. See Werner Schroeder, “Bestandsaufbau durch Plünderung—Jüdische Bibliotheken im RSHA 1936–1945,” paper presented at an international congress on Raub und Restitution in Bibliotheken (Vienna City Hall, April 23–24, 2003). By 1956, Mises knew that some of his books had “turned up in German second hand bookshops” and opined that some of his letters—two letters he had received from Sigmund Freud, for example—would “be found one day in the possession of an autograph dealer.” Mises to Eissler, letter dated October 11, 1956; Grove City Archive: Sigmund Freud Archives file.

⁸⁵ Nine years later, speaking of the reluctance of the Kammer to make restitution for those payments, his former secretary wrote: “But how right you were when you prophesied that we would be cheated of everything.” Thieberger to Mises, letter dated December 16, 1947; Grove City Archive: Thieberger files.

⁸⁶ See Mises to Köhler, letter dated November 17, 1955; handwritten manuscript of a letter written after May 25, 1959; letter dated April 1, 1960; Grove City Archive: Köhler files. See also the summary list of stolen coins that Mises composed in 1960 but apparently did not submit to the authorities. Köhler was a lawyer in Vienna. Mises got in touch with him after learning about the ratification of a U.S.-Austrian treaty in 1955. But the deadline for claims had already expired in 1953. Most of the gold coins were Polish and pre-1892 Austrian coins. In 1962, Mises eventually obtained restitution—not from Austrian, but from German authorities—in the value of the estimated weight of the collection: some 25 troy ounces.

⁸⁷ See Brockhausen's typewritten report on the incident in Grove City Archive: Brockhausen file.

⁸⁸ Mises later testified:

not all those persecuted were anti-Nazis. For instance, Professor Othmar Spann, one of the outstanding champions of the Nazi doctrine, spent some time in a concentration camp because he was connected with Gregor Strasser, the personal rival of Hitler. (“Nazis and Democrats in Austria,” typewritten manuscript dated March 18, 1946; Grove City Archive: U.S. Government Agencies file)

Ironically, the prison term that he served under Hitler eventually whitewashed him after the war. Spann's doctrines continued to be taught in Vienna until the late 1960s. See Karl Milford and Peter Rosner, “Die Abkopplung der Ökonomie an der Universität Wien nach 1920,” Harald Hagemann, ed., Zur deutschsprachigen wirtschaftswissenschaftlichen Emigration nach 1933, p. 481.

⁸⁹ Lionel Robbins, Autobiography of an Economist (London: Macmillan, 1971), p. 91.

⁹⁰ Engel-Janosi could not find a job in Turkey, where only Turks were allowed to teach modern history. See Richard von Mises to Mises, letter dated June 30, 1938; Grove City Archive: Richard von Mises files. To Machlup, Mises wrote: “I am completely clueless what to do with the masses of Viennese that turn to me for help. Nobody is allowed to stay in Switzerland.” Mises to Machlup, letter dated June 17, 1938; Hoover Institution: Machlup-Mises correspondence file. Margit later recalled: “We helped whenever we could. Our living room looked like a miniature Red Cross office. I was always writing, packing, shipping” (My Years with Ludwig von Mises, p. 39).

⁹¹ Margit von Mises, My Years with Ludwig von Mises, p. 31.

⁹² The original marriage certificate is in the files of the Graduate Institute of International Studies. Margit's records: Hungarian nationality, born on July 3, 1890, father's name was Albert Herzfeld, mother's name was Selica Fontheim.

⁹³ Margit von Mises, My Years with Ludwig von Mises, p. 36.

⁹⁴ Quoted from ibid., p. 33.

⁹⁵ She went on:

For the first time I saw a refrigerator—we did not have them yet in Vienna—and it was a real marvel to me. I loved Lu's sparkling kitchen, but otherwise I had my doubts. The apartment was small... I would not have known where to put my belongings. (Ibid., p. 31)

⁹⁶ Ibid., p. 36.

⁹⁷ Ibid., pp. 35–36.

⁹⁸ Mises also visited frequently with the local Guggenheims and Ginsbergs. See Ginsberg to Mises, letter dated June 19, 1941; Grove City Archive: “L” file.

⁹⁹ This would never change. They were both thoroughly fond of driving, but they were terrible drivers. They had at least two other serious car accidents: in 1948 and 1966.

¹⁰⁰ Richard von Mises refers to such statements from Margit in a letter to Ludwig, dated December 29, 1938; Grove City Archive: Richard von Mises files. At this point, Mises's treatise Nationalökonomie was “already very close to completion.” Mises to Machlup, letter dated December 18, 1938; Hoover Institution: Machlup-Mises correspondence file.

¹⁰¹ Walter Lippmann, Inquiry into the Principles of the Good Society (Boston: Little, Brown & Co., 1937).

¹⁰² Louis Rougier, “Préface,” Le Colloque Walter Lippmann (Paris: Librairie de Médicis, 1938).

¹⁰³ Walter Lippmann, La Cité Libre (Paris: Librairie de Médicis, 1938).

¹⁰⁴ Louis Rougier, “Préface.” He later emphasised that the purpose was to define neo-liberalism. See Louis Rougier, “Le Néo-libéralisme,” Synthèses (December 1958).

¹⁰⁵ See the leftwing Eduard Heimann, History of Economic Doctrines: An Introduction to Economic Theory (New York: New York University Press, 1945), p. 19. The anonymous reviewer of the French edition of Gemeinwirtschaft presented the author as “the uncontested head of the School of Austrian Economists” (Review of Le Socialisme in Les Industries Mécaniques [Paris, June 1938]). When Louis Baudin invited Mises to join the scientific committee of a new French journal of comparative economics in 1939, he told him that all political orientations would be represented in this committee, reason enough to have liberalism defended by masters such as Mises (see Baudin to Mises, letter dated May 18, 1939; Grove City Archive: Baudin file). The uniqueness of Mises's role was still recognized some twenty years later by one of the last surviving students of the French laissez faire school. Writing to Mises in September 1957, the professor A. Bastet said that Mises was the successor “to our master Yves Guyot”—who himself was the successor to Gustave de Molinari (1819–1912). And Molinari was successor to the great “proto-Austrian” Frédéric Bastiat (1801–1850). See Bastet to Mises, letter dated September 5, 1957; Grove City Archive: “B” file.

¹⁰⁶ Wilhelm Röpke, “Einführung,” in Walter Lippmann, Die Gesellschaft freier Menschen (Bern: Francke, 1937), p. 32. As this preface shows, Röpke was deeply impressed by Lippmann's work, which he believed had had a tremendous impact on the neo-liberal movement.

¹⁰⁷ Rüstow prided himself on having coined the phrase “liberaler Interventionismus” (classical-liberal interventionism) as early as 1932. See the copy of his letter to Volkmar Muthesius, dated May 23, 1955; Grove City Archive: Muthesius file. He probably referred to his talk at the 1932 Dresden meeting of the Verein.

¹⁰⁸ “In my course at Geneva dealing with the economic and sociological doctrines in modern political thought I used to devote many hours to [a full refutation of the Nazi doctrines]” (Mises, “Post-war Reconstruction,” typewritten manuscript dated May 28, 1941, 22 pages, quote is from p. 9). Translated and publishd in Ebeling, ed., Selected Writings of Ludwig von Mises.

¹⁰⁹ Mises, “Post-war Reconstruction,” pp. 3, 4, 12.

¹¹⁰ Mises, “Gedanken über die Wirtschaftspolitik nach dem Kriege” (Thoughts on postwar economic policy), undated manuscript (probably 1940), 19 pages; see pp. 17f.

¹¹¹ Mises, “Entwurf von Richtlinien für den Wiederaufbau Österreichs,” report dated May 1940, 51 pages. In the Grove City Archive there is also a first version of this report, which contains 48 pages.

¹¹² Then, however, Mises proceeded to an astounding contention:

Free trade does not mean that all import duties are abolished. It only means that one does not try to increase domestic prices through import duties in order to enable domestic producers to sell their products at higher prices than their foreign competitors. Thus two kinds of import duties are in accordance with free trade: (a) financial duties [which have to correspond to domestic sales taxes], and (b) retortion duties on the import of all, or certain, commodities from countries pursuing a policy which is hostile to the interests of Austrian trade. (“Entwurf von Richtlinien für den Wiederaufbau Österreichs,” p. 24)

¹¹³ Ibid., p. 26. He spelled out a definite list of taxes: (a) sales taxes for alcohol and tobacco; (b) a sales tax that is only levied on commodities bought by consumers; (c) an income tax on wages to finance the social security system; (d) a progressive tax on housing expenditures; (e) a tax on luxury cars; (f) a tax on lottery gains; (g) a tax on playing cards; (h) fees for certain administrative acts [registering of patent rights, brands, etc.]; (i) a “moderate taxation” of yields of more than 6 percent on capital, which are paid out to the stock owners of corporations with limited liability. Mises emphasized that, apart from point c, there should be no income taxes. Penalizing income kills the goose that lays the golden eggs. Moreover, all public enterprises would have to be sold or closed if their proceeds did not cover costs.

¹¹⁴ Ibid., p. 31.

¹¹⁵ Ibid., pp. 31–32.

¹¹⁶ Ibid., p. 32.

¹¹⁷ Ibid., p. 36.

¹¹⁸ Ibid., p. 37.

¹¹⁹ Ibid., p. 38.

¹²⁰ One historian of his Kammer activities pointed out:

At the university and in his books, he showed himself as an uncompromising champion of the free market. As a practitioner and Kammer politician he was rather flexible and ready for compromise if nothing essential had to be given up. But even in compromise he then remained hard and would not deviate from the course of action that had been recognized and agreed upon. (Alexander Hörtlehner, “Ludwig von Mises und die österreichische Handelskammerorganisation,” Wirtschaftspolitische Blätter 28, no. 4 [1981]: 142)

¹²¹ On August 7, 1939, Mises wrote from Aix-les-Bains to a Giovanni Demaria; Grove City Archive: Demaria file. He granted permission for an Italian translation of his Theorie des Geldes und der Umlaufsmittel, stating that he alone had all rights for translations into foreign languages. This translation probably never came into existence, but the incident showed that Italian Fascism was far more tolerant than German Nazism. Mises compared Russian freedom and Fascist freedom in Anti-Capitalistic Mentality (Princeton, N.J.: Van Nostrand, 1956), chap. 4, section 4 and chap. 5.

¹²² See Richard to Ludwig, letters dated June 13, and July 23, 1939; Grove City Archive: Richard von Mises files. They probably met on August 8.

¹²³ See the correspondence in Grove City Archive: Machlup files.

¹²⁴ Machlup's guess was that UCLA could pay at most $4,000 per annum. Mises said that his means were very limited and that his family-related expenditures were so big that he knew not how to arrange things with the prospective salary from UCLA. See Mises to Machlup, letter dated February 28, 1940; Grove City Archive: Machlup files.

¹²⁵ Machlup to Mises, letter dated February 15, 1940; Grove City Archive: Machlup files.

¹²⁶ Machlup to Mises, letter dated April 17, 1940; Grove City Archive: Machlup files.

¹²⁷ The printing of Nationalökonomie had started by January 1940. Mises half-jokingly surmised that it might be the last economics book published in the German language. See Mises to Machlup, letter dated January 30, 1940; Hoover Institution: Machlup-Mises correspondence file.

¹²⁸ Benjamin M. Anderson to Mises, letter dated March 1, 1940; Grove City Archive: Anderson file.

¹²⁹ Mises to Anderson, undated letter manuscript; Grove City Archive: Anderson file.

¹³⁰ Mises, Nation, Staat und Wirtschaft (Vienna: Manz, 1919), p. 112n.; translated by Leland B. Yeager as Nation, State, and Economy (New York: New York University Press, 1983), p. 138 note.

¹³¹ In their purely tactical use of the air force in direct confrontations with enemy troops, the Germans applied the theory of the chief engineer of the French navy, Rougeron, who at the beginning of the 1930s had synthesized the experiences of World War I. In distinct contrast, the western allies would eventually apply the theories of the Italian general Giulio Douhet, according to which the air force should bomb the cities and supply lines in the hinterland of the enemy, thus destroying his economy and the morale of the population. Douhet's theory had already been anticipated in the strategic planning offices of the British Royal Air Force, directly after its creation in the spring of 1918. The end of the war prevented the application of the plans at this point. See Giulio Douhet, Luftherrschaft (Berlin: Drei Masken Verlag, 1935); Colston Shepherd, The Airforce of Today (London & Glasgow: Blackie & Son, 1939). I am indebted to Philipp Egert for these references.

¹³² On June 3, 1940, Louis Baudin wrote to Mises that Paris was calm. “I was not surprised by our early failures. We needed to get rid of our bad leaders and to correct people's mindsets. The Popular Front has cost us dearly!”

¹³³ Mises to Royal Wilbur France, letter dated October 31, 1946; Grove City Archive: France file.

¹³⁴ Rappard to Kelsen, Mises, and Röpke, letter dated May 27, 1940; Mantoux to Rappard, letter dated May 24, 1940; Grove City Archive: Mantoux file.

¹³⁵ Surrounded by fascist regimes, Switzerland naturally adapted to the new political landscape as part of a strategy of conflict minimization. In September 1940, for example, Switzerland temporarily introduced Nazi designations for its political offices and institutions, creating “Gauleiter” and an “Arbeitsfront” organization. However, the émigrés who had stayed on in the small mountain country could never be sure they would not be surrendered to the governments they had escaped. See Hermann von Grimeisen to Mises, letter dated November 25, 1940; Grove City Archive: Grimeisen file. Röpke, too, seems to have considered emigration to the United States. See Hayek to Mises, letters dated June 1, 1940 and August 29, 1940; Grove City Archive: Hayek files.

¹³⁶ Hayek to Mises, letter dated June 1, 1940; Grove City Archive: Hayek files.

¹³⁷ A copy is in Grove City Archive: Hayek files. A month later, Professor Penrose from the University of California wrote another “official” letter of support, which was ostensibly addressed to Professor Pitman B. Potter of the Geneva Research Center, urging him to facilitate Mises's passage to the United States. The letter predicted negative consequences on American public opinion for any country that would hinder Mises's safe passage.

¹³⁸ Hayek had urged Mises to get in touch with Rougier for the French transit visa. “He has worked miracles in other cases. To avoid any loss of time I am cabling him at the same time and you may possibly hear from him.” Hayek to Mises, letter dated June 1, 1940; Grove City Archive: Hayek files.

¹³⁹ He had already written a goodbye letter to Mantoux and Rappard on June 10. See Grove City Archive: Mantoux file. He had also left a gift, possibly on this occasion, for the library: a copy of George F. Knapp, Staatliche Theorie des Geldes, 2nd ed. (Munich & Leipzig: Duncker & Humblot, 1918) with Carl Menger's annotations. See Silberner to Mises, letter dated December 11, 1940; Grove City Archive: Silberner file.

¹⁴⁰ Rappard reacted immediately and cabled on the same day to Professor Amzalak in Lisbon. See the transcript of the cable in Graduate Institute Archive.

¹⁴¹ The quote is from Mises to Rappard, letter dated July 14, 1940; Graduate Institute Archive. This letter contains Mises's report on their adventure at the French border. See also the slightly different (and probably less accurate) account in Margit von Mises, My Years With Ludwig von Mises, pp. 51–56. Official documents and correspondence relating to their escape from Europe are in Grove City Archive: files #6/10/1/2 and #6/10/1/3.

Chapter 17. A Treatise on Economics

¹ Mises to François Perroux, letter dated September 28, 1946; Grove City Archive: Perroux file.

²Human Action: A Treatise on Economics (New Haven, Conn.: Yale University Press, 1949; Scholar's edition [Auburn, Ala.: Ludwig von Mises Institute, 1998]), and Nationalökonomie (Geneva: Editions Union, 1940) are virtually identical in general architecture. There are a few substantive differences between the two books, but these differences pale in comparison to the differences that separate both of them from all similar works. In the present chapter, we will therefore quote Human Action wherever possible. In Human Action, Mises placed a greater emphasis on refuting positivism, whereas in Nationalökonomie he had refuted in particular Spann and Marx. Moreover, in Human Action he added a chapter on general probability theory, and he expanded the “conclusion” of Nationalökonomie into a comprehensive seventh part of Human Action that dealt with the social and cultural significance of praxeology. He had planned an American edition early on and had anticipated modifications of his text to accommodate the particular background of his American readers. See Mises to Machlup, letters dated December 18, 1938, June 15, 1939, and January 30, 1940; Hoover Institution: Machlup-Mises correspondence file.

³ Mises to Ernest Anthony, letter dated June 19, 1953; Grove City Archive: Anthony file.

⁴ Mises to Ballvé, letter dated May 13, 1957; Grove City Archive: Ballvé files.

⁵ This emphasis demonstrates in turn the crucial importance of Grundprobleme for the development of Nationalökonomie.

⁶ A fine point to notice: the treatment of epistemology came after the definition of action, because science and epistemology are themselves instances of action. Another fine point: In Human Action, Mises adopts the pragmatist definition of truth (“that which works in practice”) and maintains this definition throughout all later writings.

⁷ Carl Menger, Grundsätze der Volkswirtschaftslehre (Vienna: Braumüller, 1871), p. vii.

⁸ Mises, Nationalökonomie, chap. 5, sect. I.

⁹ In Socialism: An Economic and Sociological Analysis (Indianapolis: Liberty Fund, 1981), the theory was presented not in the first part, which dealt with fundamentals, but in one of the subsequent parts that dealt with particular problems of socialist orders.

¹⁰ Haberler to Davidson, letter dated January 23, 1945; Yale University Press Archive.

¹¹ Murray Rothbard later argued that as a consequence of the mere fact that people rank their choice alternatives, it follows that demand curves must slope downward to the right. See Murray N. Rothbard, Man, Economy, and State, 3rd ed. (Auburn, Ala.: Ludwig von Mises Institute, 1993), chap. 2. Mises made no such inference. He was skeptical about the use of graphical methods in exact analysis (he did accept them as pedagogical devices).

¹² Mises, Human Action, p. 270.

¹³ Ibid., p. 324.

¹⁴ Ibid., pp. 328f.

¹⁵ Mises would later discuss the irrelevance of homo oeconomicus for modern economics in Human Action, pp. 62ff. He concluded that “theorems concerning commodity prices, wage rates, and interest rates refer to all these phenomena without any regard to the motives causing people to buy or to sell or to abstain from buying or selling” (p. 64).

¹⁶ Ibid., p. 325.

¹⁷ Ibid., pp. 245ff.

¹⁸ Ibid., p. 647, for example.

¹⁹ Ibid., p.146.

²⁰ Ibid., p. 147. A few years later, Joseph Schumpeter pointed out that the social analysis of the classical economists had its roots in medieval scholasticism. Saint Thomas Aquinas and his followers had pioneered methodological individualism and utilitarian justifications of social institutions. By contrast, divine law and omnipotent government were protestant inventions. See Joseph A. Schumpeter, History of Economic Analysis (New York: Oxford University Press, 1954), part 2, chap. 2, pp. 91–93.

²¹ Ibid., p. 145.

²² Ibid., p. 145.

²³ Ibid., p. 147.

²⁴ “The market is a democracy where every penny gives a right of vote.” Frank A. Fetter, The Principles of Economics (New York: The Century Co., 1905), p. 395. A few pages later he states: “So each is measuring the services of all others, and all are valuing each. It is the democracy of valuation” (p. 410).

²⁵ Joseph A. Schumpeter, Theorie der wirtschaftlichen Entwicklung (Munich: Duncker & Humblot, 1911).

²⁶ In Human Action, he called it the “evenly rotating economy,” pp. 246–47.

²⁷ Mises to an unknown correspondent, letter dated November 24, 1930; Mises Archive 66: 14.

²⁸ He started lecturing on capital and related problems in the winter semester of 1936–1937. See Mises to Machlup, letter dated February 15, 1937; Hoover Institution: Machlup-Mises correspondence file. By then, Mises must have made his mind up about these questions.

²⁹ Menger, Grundsätze, pp. 133ff.

³⁰ Eugen von Böhm-Bawerk, Capital and Interest (South Holland, Ill.: Libertarian Press, 1959), p. 265: emphasis in the original. See also Böhm-Bawerk, Positive Theorie des Kapitals (Innsbruck, 1889), p. 327, and Böhm-Bawerk, Capital and Interest, p. 259.

³¹See Frank A. Fetter, Economic Principles, 2 vols. (New York: The Century Co., 1915); idem, Capital, Interest, and Rent, Murray N. Rothbard, ed. (Kansas City: Sheed Andrews and McMeel, 1977).

³² Böhm-Bawerk, Positive Theorie des Kapitals (Jena: Gustav Fischer, 1921), pp. 328ff.

³³ Mises, Nationalökonomie, pp. 439ff.; Human Action, pp. 485ff. Mises also criticized Böhm-Bawerk for having failed to develop a truly praxeological theory of the period of production.

³⁴ Böhm-Bawerk, Positive Theorie des Kapitals, p. 327.

³⁵ Neither did Irving Fisher and Frank Fetter think this was the case; they even argued that time preference could be negative. See Irving Fisher, The Rate of Interest (New York: Macmillan), p. 184; and Frank A. Fetter, “Interest, Theories: Old and New,” American Economic Review (1914): 238f.; idem Economic Principles, 2 vols. (New York: The Century Co., 1915), p. 237.

³⁶ Mises to Robert Fleming, letter dated May 13, 1969; Grove City Archive: “F” file.

³⁷ Mises, Nationalökonomie, pp. 443f. Here he quoted Fetter, Principles of Economics, p. 144, and Franz Cuhel, Zur Lehre von den Bedürfnissen (Innsbruck: Wagner, 1907), p. 304. For an earlier statement of this argument, see Mises, Grundprobleme (Jena: Gustav Fischer, 1933), pp. 23f.

³⁸ Mises, Nationalökonomie, p. 446; Human Action, p. 483.

³⁹ Mises, Nationalökonomie, p. 502.

⁴⁰ Ibid., pp. 502–10. Mises stresses that the boom is not a phase of “overinvestment,” but of misallocation. There is too much consumption and too much investment at the same time.

⁴¹ See in particular Fred Taylor, “The Guidance of Production in a Socialist State,” American Economic Review 19 (1929); Carl Landauer, Planwirtschaft und Verkehrswirtschaft (Leipzig: Duncker & Humblot, 1931); H.D. Dickinson, “Price Formation in a Socialist Community,” Economic Journal 43 (1933); A.P. Lerner, “Economic Theory and Socialist Economy,” Review of Economic Studies 2 (1934); Oskar Lange, “On the Economic Theory of Socialism,” Review of Economic Studies 4, no. 1 (October 1936); idem, “The Computer and the Market,” Review of Economic Studies 4, no. 1 (October 1936); idem, Price Flexibility and Employment (Bloomington, Ind.: Principia Press, 1944).

⁴² Oskar Lange in On the Economic Theory of Socialism, B.E. Lippincott, ed. (New York: McGraw-Hill, 1964), p. 57.

⁴³ See in particular the various editions of the most important Western textbook of the postwar years, Paul Samuelson's Economics (New York: McGraw-Hill, 1948). Up to the very last edition that appeared before the collapse of the Soviet empire, Samuelson stated: “The Soviet economy is proof that, contrary to what many sceptics had earlier believed, the socialist command economy can function and even thrive” (Economics, 13th ed., 1989, p. 837). A good study of this issue is in Mark Skousen, “The Perseverance of Paul Samuelson's Economics,” Journal of Economic Perspectives 11, no. 2 (Spring 1997): 137–52.

⁴⁴ In actual practice, market socialism had never played a big role in the Eastern Bloc. Some intellectuals were allowed to discuss the calculation problem and the market-socialist solution; see in particular Wlodzimierz Brus, Funktionsprobleme der sozialistischen Wirtschaft (Frankfurt a.M.: Suhrkamp, [1961] 1971). But in practice there was central planning, not any form of competitive pricing. Significantly, in the early 1960s, the Soviet professor Yevsey G. Liberman received worldwide attention with his proposals to steer production with the help of price incentives. For a concise presentation see Alec Nove, “The Liberman Proposals,” Journal of Soviet and East European Studies 47 (April 1963): 112–18. Needless to say, Liberman did not address, much less solve, the problems Mises had pointed out in 1922. Mises himself commented on this newest fad of economic planning in his “Observations on the Russian Reform Movement,” The Freeman 16, no. 5 (May 1966): 23–29.

⁴⁵ Mises, Nationalökonomie, pp. 639f.

⁴⁶ Ibid., p. 645.

⁴⁷ Mises, Erinnerungen (Stuttgart: Gustav Fischer Verlag, 1978), p. 74; Notes and Recollections (Spring Mills, Penn.: Libertarian Press, 1978), p. 112.

⁴⁸ Mises to Hans Hellwig, letter dated April 10, 1958; Grove City Archive: Hellwig file.

⁴⁹ Mises, Nationalökonomie, pp. 361–65; Human Action, pp. 395–402.

⁵⁰ This was the view he championed, at least in one crucial passage, in Theory of Money and Credit (London: Jonathan Cape, 1934; Indianapolis: Liberty Fund, 1980). See our discussion in chapter 6.

⁵¹ His later theory was already present in the first edition of his Theory of Money and Credit, but it was presented side by side with other statements taking the opposite point of view. Mises developed the cash-balance approach to the demand for money starting from Menger's article “Geld,” Handwörterbuch der Staatswissenschaften, 1st to 3rd eds. (Jena: Gustav Fischer, 1891–1909), chap. 14. One possible source of Mises's second thoughts on this question was a short book that Edwin Cannan had published at the end of World War I. See Edwin Cannan, Money: Its Connexion with Rising and Falling Prices (London: King & Son, 1918). In his 1942 lectures in Mexico City, Mises stressed that the individual demand for money was in fact identical with the individual's cash holdings and referred the audience to p. 83 of Cannan's book. See the lecture notes in Grove City Archive: Mexico 1942 files.

Chapter 18. Émigré in New York

¹ Royal Wilbur France to Mises, letter dated November 7, 1946; Grove City Archive: France file.

² Calkins to Mises, letter dated August 1, 1940; Grove City Archive: Machlup files.

³ Roosevelt signed the G.I. Bill in 1944. The Bill provided funds to send returning soldiers to colleges and universities, thus keeping them off the labor market. It cost the American taxpayers some $14 billion between 1944 and 1956. See Theda Skocpol, “Delivering for Young Families: The Resonance of the GI Bill,” American Prospect 28 (September 1996), pp. 66–72. In 2003, the federal government employed more than 3,000 economists or about 15 percent of all members of the American Economic Association. Peter Klein has argued that, due to these circumstances, World War II radically changed the outlook of American economics profession, which turned statist. See Klein, “Why Academic Intellectuals Support Socialism,” unpublished manuscript, presented at the New Zealand Business Roundtable, April 2003.

⁴ Friedman restored his honor through late repentance, sighing: “Truly, the road to Leviathan is paved with good intentions.” Milton and Rose D. Friedman, Two Lucky People: Memoirs (Chicago: University of Chicago Press, 1998), p. 123.

⁵ During the 1930s, U.S. universities had absorbed many Communist and social democrat economists from Germany. For example, Emil Lederer, Adolf Loewe, and Eduard Heimann found employment at the Graduate Faculty of Political and Social Science (New School for Social Research) in New York, and Carl Landauer became a professor at Berkeley. On the New School for Social Research see Gary Mongiovi, “Emigré Economists at the New School, 1933–1945,” Harald Hagemann, ed., Zur deutschsprachigen wirtschaftswissenschaftlichen Emigration nach 1933 (Marburg: Metropolis, 1997), pp. 383–403.

⁶ “I have already passed the age limit.” Mises to Machlup, letter dated August 7, 1940; Hoover Institution: Machlup-Mises correspondence file. This alone cannot have been a decisive obstacle. Richard Schüller, some ten years older than Mises, found a position at the New School for Social Research. Margit called on Machlup for help, stating that her husband was deeply depressed. “He is able to serve and fight for an idea, but not for his personal destiny.” Margit von Mises to Machlup, letters dated August 6, 1940 and October 8, 1940; Hoover Institution: Machlup-Mises correspondence file.

⁷ Published in Trusts and Estates (January 1941), reprinted in Richard Ebeling, ed., Selected Writings of Ludwig von Mises: Political Economy of International Reform and Reconstruction (Indianapolis: Liberty Fund, 2000), vol. 3. The publishers of Trusts and Estates “distributed some 3,000 copies over and above our usual circulation to leading educators and economists, as well as institutional investors.” Luhnow to Mises, letter dated March 17, 1941; Grove City Archive: Trusts and Estates file.

⁸ The NYU address was eventually published as “My Contributions to Economic Theory,” Planning for Freedom and Sixteen Other Essays and Addresses, 4th ed. (South Holland, Ill.: Libertarian Press, [1952] 1980). The Princeton invitation came from Morgenstern. In New Orleans, Mises met Irving Fisher and his German assistant, Hans Cohrssen. See Fisher to Mises, letter dated February 3, 1941; Grove City Archive: Fisher file.

⁹ See Grove City Archive: Accountants Club of America file.

¹⁰ Seidman to Mises, letter dated February 19, 1941; Grove City Archive: Accountants Club of America file.

¹¹ Mises to Machlup, letters dated November 14, 1940 and November 27, 1940; Hoover Institution: Machlup-Mises correspondence file.

¹²New York Times Book Review (January 9, 1938). On Hazlitt see Jeffrey Tucker, “Henry Hazlitt: The People's Austrian,” Randall G. Holcombe, ed., 15 Great Austrian Economists (Auburn, Ala.: Ludwig von Mises Institute, 1999), chap. 11.

¹³ Henry Hazlitt, “An Interview with Henry Hazlitt,” Austrian Economics Newsletter (Spring 1984). See also Margit von Mises, My Years with Ludwig von Mises, 2nd enlarged ed. (Cedar Falls, Iowa: Center for Futures Education, 1984), p. 58.

¹⁴ Marianne Herzfeld, who spent the war years in London, asked Mises to extend her greetings to all her friends in New York and said, “there are, I think, about a hundred people there whom I would like to see.” Herzfeld to Mises, letter dated August 23, 1941; Grove City Archive: Herzfeld file.

¹⁵ Thieberger to Mises, letter dated October 31, 1940; Grove City Archive: Thieberger files.

¹⁶ Susi Schoelson (Chris Butler) to Mises, letter dated September 12, 1948; Grove City Archive: Butler file. Schoelson was a niece of Perels's wife, Lilli Roth. Their last sign of life was a letter Perels wrote in 1943 to his sister, Frieda Becher von Rüdendorf. Schoelson, the Perels, and Mises had often skied together in the Austrian Alps. In July 1946, Mises wrote to Otto Friedländer that the “terrible fate” of Perels had “deeply shaken” him (letter dated July 13, 1946; Grove City Archive: Friedländer file). As late as February 1944, he did not yet know of Perels's fate; see Grove City Archive: Hoover Library file.

¹⁷ Mises to Hans Cohrssen, letter dated February 12, 1946; Grove City Archive: Cohrssen file. Newspaperman Richard Charmatz met Bettelheim on the eve of his deportation. See Charmatz to Mises, letter dated February 26, 1947; Grove City Archive: Charmatz file. Charmatz survived the war in Vienna because he was married to an Aryan wife, but they lost all their material belongings.

¹⁸ Elsa Brockhausen to Mises, letter dated May 4, 1947; Grove City Archive: Brockhausen file.

¹⁹ Marianne Herzfeld to Mises, letter dated August 23, 1941; Grove City Archive: Herzfeld file. Ewald's brother Karl had made it to Washington, where he continued his career in international organizations. On Nazi crime victims among Mises's friends and acquaintances, see also Mises to Passow, letter dated January 29, 1947; Grove City Archive: Passow file.

²⁰ Mises to Potter, handwritten manuscript of a letter dated April 17 (1941); Grove City Archive: Geneva Research Center file. See also Karl Hagedorn to Margit Mises, letter dated May 2, 1947; Grove City Archive: Hagedorn file. Mises to Hayek, handwritten manuscript of a letter dated April 18 (1941); Grove City Archive: Hayek files.

²¹ For example, Henry Bund, Otto Ehrlich, Bert Hoselitz, Karl Kapp, Leon Koeppel, Rudolf Loebl, Edmund Silberner, Louise Sommer, Walter Sulzbach.

²² For example, in the cases of legal historian Hermann von Grimeisen and of Paul Mantoux and his family.

²³ Hayek to Mises, letter dated August 29, 1940; Grove City Archive: Hayek files. In the same letter, Hayek confidentially announced his plan to leave the country at some later point on a foundation grant for work in the United States. Jacob Viner was involved and had promised help. During the remainder of the war, though, Hayek stayed in London and Cambridge, and did not allow himself to be disrupted by the events of the war. At one time he lamented the risk of destruction of his books through firebombs. These risks were “not inconsiderable in an empty house with nobody on the spot to put out a firebomb—which, if one gets there promptly, is the easiest thing in the world.” Hayek to Mises, letter dated January 12, 1941; Grove City Archive: Hayek files.

²⁴ Hayek to Mises, letter dated June 1, 1940, and subsequent correspondence; Grove City Archive: Hayek files. They used this device at least until 1948, because the United Kingdom maintained a regime of foreign exchange controls even in the postwar period.

²⁵ Hayek to Mises, letter dated August 29, 1940; Grove City Archive: Hayek files. Rougier and Hula's affiliation is mentioned on an undated handwritten list of Mises's contained in Grove City Archive: Montes de Oca files.

²⁶ William J. Carson to Mises, letter dated December 24, 1940; Grove City Archive: NBER files.

²⁷ Barzun observed in those years that “professorial salaries in American universities [reached] the not very dizzy height of nine or ten thousand dollars a year” and then added the following remark: “The lower depths of the profession's earning power are painful to think of and undercut any irony; e.g. in 1940 there were 433 junior colleges, whose salary scale ranged, on average, from $1,572 to $2,130 a year; and 177 teachers' colleges, for which the figures are $2,433 and $3,600.” Jacques Barzun, Teacher in America (Indianapolis: Liberty Press, [1945] 1981). Fritz Machlup's starting salary at the University of Buffalo in 1935 had been $6,500. See Machlup to Mises, letter dated May 6, 1935; Hoover Institution: Machlup-Mises correspondence file.

²⁸ Mises to Hayek, handwritten manuscript of a letter dated April 18 [1941]; Grove City Archive: Hayek files. “M.” probably stood for Machlup and “L.” for Lieser.

²⁹ Mises to Rappard, letter in Graduate Institute Archive.

³⁰ Hayek to Mises, letter dated January 12, 1941; Grove City Archive: Hayek files. He went on:

I am trying hard to show to people how this present trend leads inevitably to economic decay and fascism and I shall follow up my pamphlet with a more popular booklet (probably in one of the sixpenny series) on which I am now working, apart from the larger book, which is slowly progressing.

Three months later, Hayek reported the publication of his first article on the influence of scientism on social thought.

³¹ Mises to Hayek, handwritten manuscript of a letter in response to Hayek's letter dated May 6, 1941; Grove City Archive: Hayek files. To Machlup he wrote: “I do not know why I am working, but I have been very productive.” Mises to Machlup, letter dated May 20, 1941; Hoover Institution: Machlup-Mises correspondence file.

³² Mises to Hayek, letter dated April 18, 1941; Grove City Archive: Geneva Research Center file.

³³ See the correspondence between Hazlitt and Mises in Grove City Archive: Hazlitt files. Apparently, this was his only editorial in 1941. In the spring of 1942, he published three further editorials, all of which dealt with the crucial logistical problems of Germany's war effort. In 1943, then, he published the last four editorials, which dealt primarily with problems of postwar reconstruction, especially monetary problems. For each of these articles he received $10. The pay slips are in Grove City Archive: NYT files.

³⁴ Otto Kallir (Nirenstein) to Mises, letter dated July 19, 1941; Grove City Archive: Austrian National Committee files.

³⁵ Ernst Hoor pointed out that, until 1945, the expatriate leadership of the social democrats avoided making any statement that could have been interpreted as a commitment to Austrian independence, or to the existence of an Austrian nation. See Hoor, Österreich 1918–1938 (Vienna: Bundesverlag für Unterricht, Wissenschaft und Kunst, 1966), p. 46.

³⁶ The new plan differed from the proposals he had made in early 1938 in that the proposed Eastern Democratic Union (EDU) was to include not only the countries in the Danube basin, but virtually all of Eastern Europe, including the territories that in 1933 formed the sovereign states of Albania, Austria, Bulgaria, Czechoslovakia, Danzig, Estonia, Greece, Hungary, Latvia, Lithuania, Poland, Rumania and Yugoslavia, as well as large parts of Prussia. The proposed new political entity would thus cover 700,000 square miles with about 120,000,000 residents using 17 different languages. See Mises, “An Eastern Democratic Union: A Proposal for the Establishment of a Durable Peace in Eastern Europe,” dated October 1941, 43 pp. A typewritten first draft of this paper is dated July 1, 1941 and contains 15 pp. Through the British Embassy in Washington, D.C., Mises sent copies of the July version to Hayek and Robbins (see Noel Hall to Mises, letter dated July 18, 1941; Grove City Archive: “H” files). In May 1941, Mises possibly gave a lecture at Yale discussing his plan for an Eastern European Union. See Irving Fisher to Mises, letter dated June 11, 1941; Grove City Archive: Fisher file.

³⁷ Mises, “Post-war Reconstruction,” dated May 28, 1941, 22 pages, quote from, p. 16. He went on:

It is the general belief today that the sovereignty of the small nation has proved its impracticability and that they have to disappear as independent states. This is true under present conditions... even the United States must be reckoned among these “small” nations... I believe that the only thing which the Western democracies can do is to form a Union for... defense.... I do not see any other reasonable solution for the postwar problem than a closer political and military union between the menaced democracies. (pp. 17f.)

The great weakness of his own plan was that it, too, was mute on the question of the “peace ideology” that could provide for the political and economic integration of Eastern Europe. Some ten years later Mises implicitly confessed this in private correspondence with Salvador de Madariaga (see Grove City Archive: Madariaga file).

³⁸ Mises to Velasco, letter dated December 16, 1958; Grove City Archive: Velasco files.

³⁹ This letter is mentioned in Montes de Oca to Mises, letter dated August 29, 1941; Grove City Archive: Mexico 1942 files. The content of the course, lecture, and seminars is mentioned in Mario de la Cueva to Mises, letter dated October 10, 1941; Grove City Archive: Mexico 1942 files.

⁴⁰ On the first weekend, he briefly returned to New York City. On July 21 and 23 he lectured at NYU's School of Commerce on the “Economics of Government Regulation of Business.” See correspondence in Grove City Archive: Dorau file.

⁴¹ “Many hundred cars pass our place every day, as all people are eager to glance 5 minutes at the peak, to take a snapshot and to rush away” (Mises to Hayek, handwritten manuscript of a letter of August 14, 1941; Grove City Archive: Hayek files).

⁴² Mises to Anne Robbins, undated letter (probably January 1943); Grove City Archive: Robbins files.

⁴³ Mises also felt greatly relieved by the Russian entry into the war against Germany. Margit von Mises to Machlup, letter dated September 3, 1941; Hoover Institution: Machlup-Mises correspondence file.

⁴⁴ Mises to Machlup, letter dated September 19, 1941; Hoover Institution: Machlup-Mises correspondence file.

⁴⁵ Mises to Hayek, handwritten manuscript of a letter in response to Hayek's letter of October 24, 1941; Grove City Archive: Hayek files.

⁴⁶ Mises to Otto Loverude, handwritten manuscript of a letter dated March 7, 1942; Grove City Archive: Churches files.

⁴⁷ See Mises, “The Dictatorship Complex,” Omnipotent Government (New Haven, Conn.: Yale University Press, 1944), chap. 11, sect. 2. In his monetary thought he had overcome this error, most notably in the context of his eventual rejection of the gold exchange standard.

⁴⁸ Coudenhove-Kalergi to Mises, letter dated November 20, 1941; Grove City Archive: Austrian National Committee files.

⁴⁹ Austrian Action to Mises, letter dated February 4, 1942; Grove City Archive: Austrian National Committee files.

⁵⁰ Rott and Schuschnigg to Mises, telegram dated February 10, 1942; Grove City Archive: Austrian National Committee files. In 1941–1942, Schuschnigg was the driving force behind attempts to bring a group of mostly Jewish refugees from Austria, who had been stranded in Lisbon, to the United States; see Grove City Archive: Schuschnigg file. Mises was in touch with Schuschnigg throughout the war. See the 1944–1945 correspondence with Pitman Potter in Grove City Archive: Potter file. Potter had moved to Oberlin College in Ohio and edited the American Journal of International Law.

⁵¹ Hula to Mises, letter dated February 20, 1942; Grove City Archive: Austrian National Committee files.

⁵² The course at the School of Economics paid US$800, and for the lectures at the law school he received US$50. See Montes de Oca to Mises, letter dated October 4, 1941; Grove City Archive: Mexico 1942 files. The same files contain his very detailed lecture notes—at that point, he probably did not yet feel quite comfortable speaking in English—which allow for a detailed reconstruction of the matters he dealt with.

⁵³ Mises to Hayek, handwritten undated manuscript to a letter dated March 18, 1942; Grove City Archive: Mexico 1942 files. The date of the letter can be inferred from Hayek's response dated May 19, 1942; Grove City Archive: Hayek files.

⁵⁴ Montes de Oca to Mises, letter dated October 4, 1941; Grove City Archive: Mexico 1942 files.

⁵⁵ Mises to Montes de Oca, handwritten manuscript of a letter dated October 7, 1941; Grove City Archive: Mexico 1942 files.

⁵⁶ Montes de Oca to Mises, letter dated November 29, 1941; Grove City Archive: Mexico 1942 files.

⁵⁷ Mises to Hayek, handwritten undated manuscript to a letter dated March 18, 1942; Grove City Archive: Mexico 1942 files. The date of the letter can be inferred from Hayek's response dated May 19, 1942; Grove City Archive: Hayek files.

⁵⁸ F.A. Hayek, “Planning, Science, and Freedom,” Nature (November 15, 1941): 580.

⁵⁹ Mises to Hayek, handwritten undated manuscript to a letter dated March 18, 1942; Grove City Archive: Mexico 1942 files. “Sir William” is Lord Beveridge.

⁶⁰ Both memoranda are in Grove City Archive: Montes de Oca files. The paper was translated and published as “Ideas sobre la Política Económica de la Postguerra,” Cuadernos Americanos 4, no. 4 (July-August 1942): 87–99. The original manuscript had the title “Economic Nationalism and Peaceful Economic Cooperation,” and was published many years later in Money, Method, and the Market Process, Richard M. Ebeling, ed. (Boston: Kluwer, 1990).

⁶¹ Machlup to Mises, letter dated March 16, 1942; Grove City Archive: Machlup files.

⁶² Mises to Alexander Hirsch, undated manuscript of a letter in response to Hirsch's letter dated May 12, 1943; Grove City Archive: “H” files.

⁶³ Mises contributed several memoranda dealing with the principles of postwar reconstruction (see Habsburg file). “Entwurf von Richtlinien für den Wiederaufbau.”

⁶⁴ For years, the leaders of the legitimist movement had been the most ardent champions of Austrian nationhood. The movement had been suppressed before 1933 because Austria's neighbors and its former war enemies had threatened with diplomatic and military sanctions in case of attempted restoration. When the suppression stopped, the legitimists very quickly gained political ground. By 1938, Otto von Habsburg had been nominated honorary citizen in 1,540 out of 4,400 Austrian cities and towns. See Hoor, Österreich 1918–193, pp. 64–66.

⁶⁵ See his letter to Habsburg dated May 20, 1960; Grove City Archive: Habsburg files.

⁶⁶ See chapter “Roots.”

⁶⁷ Degenfeld to Mises, letter dated April 11, 1942; Mises to Degenfeld, letter dated April 20, 1942; the three-page questionnaire; and Mises's manuscript “Monarchismus, nicht Legitimismus;” Grove City Archive: Habsburg files.

⁶⁸ Compare the version of the Declaration dated June 20, 1942, the revisions of June 25, Degenfeld's annotations dated July 1, 1942, and the final version of July 12, 1942; Grove City Archive: Austrian National Committee files.

⁶⁹ Mises to Rudolf Berthold, letter dated December 8, 1959; Grove City Archive: Berthold file. Among the few groups who showed any interest in his analysis of the necessity for and the problems of a postwar Eastern European Union was the (socialist) Central and Eastern European Planning Board, an organization that envisaged a postwar federation among Czechoslovakia, Greece, Poland, and Yugoslavia. See Olgierd Langer to Mises, letter dated February 18, 1943; Grove City Archive: “C” file.

⁷⁰ Meanwhile, Willits was on very good personal terms with Wesley C. Mitchell. See his letter to Mitchell dated January 2, 1944; Grove City Archive: AER files.

⁷¹ Noel Sargent to Mises, letter dated February 10, 1943; Grove City Archive: NAM files.

⁷² His taxable income increased to almost $6,100 in 1943 and almost $7,100 in 1944. See tax returns in Grove City Archive: NBER files.

⁷³ Probably this is the manuscript that was published posthumously as “Monopoly Prices,” Quarterly Journal of Austrian Economics 1, no. 2 (1998).

⁷⁴ Introduction to Mises's address to the Southern California NAM Advisory Committee meeting on October 18, 1944; Grove City Archive: NAM files.

⁷⁵ Mises to Fuller, handwritten manuscript of a letter dated November 14, 1944; Grove City Archive: Fuller files. Read had invited Mises for a lecture on behalf of the Los Angeles Chamber of Commerce. He had learned about Mises's NAM-related trip to the West Coast through their mutual friend, Walter Sulzbach. See Read to Mises, letter dated August 7, 1944; Grove City Archive: Read files.

⁷⁶ Earliest extant correspondence started in June 1943, when Read asked Mises whether he would be ready to give lectures in the framework of a business education campaign. Read invited Mises for dinner to his house on October 19 or 20, 1944. See correspondence in Grove City Archive: Read files.

⁷⁷ Quoted from Mary Sennholz, Leonard E. Read: Philosopher of Freedom (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1993) p. 145.

⁷⁸ Watts was a disciple of Harvard professor Thomas N. Carver, who had lectured for Read's Western School for Commercial Organization Secretaries in the 1930s. Watts took over from Carver when Carver's honorarium became unaffordable for Read.

⁷⁹ See the 1944 correspondence in Grove City Archive: Hoiles files. Hoiles published several newspapers and had learned about Mises through Walter Sulzbach.

⁸⁰ Nymeyer to Brown, letter dated October 2, 1952; Grove City Archive: Nymeyer files. Many years later, he got another contract on the NAM staff, starting January 1954, for $6,000 per annum plus $2,400 expenses. Mises speaks about his first cooperation with NAM in a letter to Albert Hunold, dated December 27, 1947; Grove City Archive: Hunold files.

⁸¹ See their correspondence of January and February 1943; Grove City Archive: Montes de Oca files.

⁸² Mises to Montes de Oca, letter dated July 22, 1945; Grove City Archive: Montes de Oca files. It is not clear whether these were the only names he suggested, or if they were the only ones Montes de Oca mentioned in his reply. Mises had drafted a longer list of prospective staff (permanent and temporary), and also a short list of the subjects to be taught. The staff included: Machlup, Haberler, Nurkse, Sulzbach, Voegelin, Poetter, Schutz, Rougier, Kelsen, Hula, Rueff, Baudin, Hayek, Robbins, Plant, Hutt, Wiese, Einaudi, Rappard, Strigl, Heckscher, and Bourquin. The main subjects to be taught were (1) economics, (2) history and critical analysis of socio-economic doctrines in the last two hundred years, (3) constitutional history since 1776, (4) economic and social history since 1750, and (5) modern public finance. See Grove City Archive: Montes de Oca files.

⁸³ See correspondence from January 1943; Grove City Archive: Robbins files. There is no surviving correspondence between December 1935 and early January 1943; and then it was Robbins's wife Iris who wrote, thanking for a Christmas parcel with sweets (chocolate, lemon juice, and more) that the Miseses had sent. Two days later, her daughter Anne wrote too, and on January 25, Lionel himself also renewed their correspondence.

⁸⁴ Montes de Oca to Mises, letter dated January 2, 1945; Grove City Archive: Montes de Oca files.

⁸⁵ Mises to Montes de Oca, letter dated July 22, 1945; Grove City Archive: Montes de Oca files.

⁸⁶ Cortney to Mises, letters dated April 9, 1945 and March 7, 1955; Grove City Archive: Cortney files. Mises had met Maurois at Louis Rougier's apartment in New York City. The dinner at Maurois's apartment probably took place on May 21 or 22, 1945. See Maurois to Mises, letter dated May 13, 1945; Grove City Archive: “M” files.

⁸⁷ Mises to R.C. Hoiles, letter dated June 21, 1944; Grove City Archive: Hoiles files.

⁸⁸ Mises, “Super-National Organization Held No Way to Peace: Radical Change in Political Mentalities and Social and Economic Ideologies Viewed as Necessary in Order to Eradicate Economic Nationalism,” Letter to the Editor, The New York Times (January 3, 1943), p. E-8.

⁸⁹ George Shea to Mises, letter dated February 3, 1943; Grove City Archive: Barron's file.

⁹⁰ Mises, “Big Business and the Common Man: High Living Standards in U.S. Came from Big Mass Production Enterprise,” Barron's 24, no. 9 (February 28, 1944), p. 3.

⁹¹ Mises to Shea, letter dated January 19, 1944; Grove City Archive: Barron's file. See also Mises to Stringham, letter dated June 13, 1946; Grove City Archive: “S” files.

⁹² Mises reviewed Adolf Sturmthal's The Tragedy of European Labor, 1918–1939 (New York: Columbia University Press, 1943), The American Economic Review 33, no. 3 (September 1943): 702–05; as well as S. Leon Levy's Nassau W. Senior: The Prophet of Modern Capitalism (Boston: Bruce Humphries, 1943), The American Economic Review 34, no. 2 (June 1944): 359–61.

⁹³ Mises to Machlup, letter dated November 26, 1944; Grove City Archive: AER files. Five years later, he wrote in similar fashion to the dean of the School of Business Administration of the University of Buffalo: “Referring to your letter of May 11 I am sorry to inform you that I have no suggestions to offer for the program of the Econometric Society. Yours very truly etc.” Mises to Somers, May 17, 1949; Grove City Archive: “S” files.

⁹⁴ Mises to Köhler, letter dated November 21, 1959; Grove City Archive: Köhler files. He renounced his title of hereditary Austrian nobility, but kept the name Ludwig von Mises as a nom de plume. See his curriculum vitae dated May 13, 1958; Grove City Archive: U.S. Army War College files.

⁹⁵ Mises to Kammer, letter dated February 10, 1946; Grove City Archive: Kammer für Handel, Gewerbe und Industrie files.

⁹⁶ Gipson owned Caxton Printers Ltd. in Caldwell, Idaho. His brother was the noted American colonial historian Lawrence Henry Gipson. He made his money as a commercial printer and with an office supply company. The profits he invested in his hobby: publishing literature he personally liked, such as libertarian conservative books (for example, Albert J. Nock's Our Enemy, The State [1935], Garet Garrett's The Revolution Was [1938], and Erik von Kuehnelt-Leddihn's Liberty or Equality [1952]). Mises first met him in January 1947. Gipson spontaneously offered help for those Mises thought deserved support in the hard postwar years. Mises named three Austrians (Brockhausen, Charmatz, and Friedrich Köhler, his long-time attorney in Vienna), and three Germans (Passow, Eugen Fink, a professor of philosophy in Freiburg and former assistant to Edmund Husserl, and Karl Hagedorn, an attorney in Hamburg and friend of Margit's family). The next year, Gipson repeated his offer (and did so once more in the spring of 1953). Mises then brought Gipson in touch with Erik von Kuehnelt-Leddihn, who became another author of Caxton Printers. In a letter dated October 25, 1952, he enthusiastically endorsed Kuehnelt-Leddihn's Liberty or Equality, as well as three of Garrett's books (Grove City Archive: Gipson files).

⁹⁷ Mises to Hans Cohrssen, letter dated February 12, 1946; Grove City Archive: Cohrssen file. Mises here asks Cohrssen to transmit a food parcel to Helene Bettelheim-Gabillon.

⁹⁸ Elsa Brockhausen to Mises, letter dated May 4, 1947; Grove City Archive: Brockhausen file.

⁹⁹ Charmatz to Mises, letters dated February 26, 1947 and May 4, 1947; Grove City Archive: Charmatz file.

¹⁰⁰ Ich sehne mich nicht danach, dem Pöbel zu begegnen, der bei dem Niedermetzeln ausgezeichneter Männer Beifall geklatscht hat.” See Carl Brockhausen to Mises, letter dated July 22, 1947; Grove City Archive: Brockhausen file. Brockhausen brought this issue up in later letters too, asking Mises where he had received his information. In a letter dated July 4, 1949, Brockhausen, more than ninety years old, said he was about to look into the accounts of Nazi war crimes.

¹⁰¹ In early March 1940, Mises had declared his readiness to contribute to the reconstruction of “our devastated [verwüstetes] Austria.” See Mises to Plöchl, letter dated April 2, 1940; Grove City College Archive: Plöchl file. Clearly the early use of such vocabulary made it difficult to keep pace with the subsequent devastations.

Chapter 19. Birth of a Movement

¹ Mises to Johannes Bahner, letter dated June 12, 1947; Grove City Archive: “B” file. Johannes Bahner was the owner and CEO of the Elbeo textile corporation.

² Mises to Reinhard Kamitz, letter dated October 18, 1946; Grove City Archive: Kamitz file. Kamitz eventually became Minister of Finance and then president of the Österreichischen Nationalbank. Mises respected him very much and paid him the following tribute about his time as a Minister of Finance: “under the most adverse circumstances you have proved yourself to be a worthy successor to the two Pleners and to Böhm-Bawerk.” Mises to Kamitz, letter dated November 14, 1961; Grove City Archive: Kamitz file.

³ Mises to Hans Ilau, letter dated May 17, 1947; Grove City Archive: NAM files.

⁴ Robert M. Crunden, The Mind and Art of Albert Jay Nock (Chicago: Henry Regnery, 1964), p. 179.

⁵ Julian Joseph DelGaudio, Refugee Economist in America: Ludwig von Mises and American Social and Economic Thought, 1940–1986 (Ann Arbor, Mich.: University Microfilms International, 1988).

⁶ E.M. Biggers to Congressman H.P. Fullmer, letter dated June 5, 1943; Grove City Archive: “B” files.

⁷ George H. Nash, The Conservative Intellectual Movement in America Since 1945 (New York: Basic Books, 1976), pp. 6f.

⁸ F.A. Hayek, The Road to Serfdom (Chicago: University of Chicago Press, 1944), pp. 17, 36.

⁹ Frank Chodorov, “What This Country Needs Is Guts,” analysis 2 (February 1946): 3.

¹⁰ Mises's speech was first published as “Planning for Freedom,” together with a speech by Rufus S. Tucker, delivered before the same audience, in a 24-page pamphlet: Economic Planning (New York: Dynamic America, 1945), pp. 3–12. Later the essay was reprinted in Mises's book Planning for Freedom (South Holland, Ill.: Libertarian Press, 1952). In correspondence with A. Dauphin Meunier, a professor in Paris, Mises mentioned that he disliked the title and subtitles of the printed version of his talk. The French translation was published in 1947 in the Revue de l'Économie Contemporaine under the title “L'interventionnisme et le salaire.” See Grove City Archive: Dauphin Meunier file. In a letter to Selma Fuller, Mises praises the virtues of Road to Serfdom, but concedes the appropriateness of Fuller's critical stance on the book.

The positive program developed by Hayek matters little when compared with these virtues of his book. However, it is a very comforting fact that your friends were shrewd enough to see the contradictions in this program. (Mises to Fuller, handwritten manuscript of a letter dated November 14, 1944; Grove City Archive: Fuller files)

¹¹ Mises to Montes de Oca, handwritten manuscript of a letter dated April 3, 1945; Grove City Archive: Montes de Oca files.

¹² Read in an interview with George H. Nash, quoted in Nash, The Conservative Intellectual Movement in America, pp. 22f.

¹³ F.A. Hayek, “The Intellectuals and Socialism,” University of Chicago Law Review 16 (1949): 417–33, reprinted in Bruce Caldwell, ed., The Collected Works of F.A. Hayek, vol. 10: Socialism and War: Essays, Documents, Reviews (Chicago: University of Chicago Press, 1997), p. 222.

¹⁴ Allman to Mises, letter dated May 10, 1945; Mises to Allman, letter dated May 18, 1945; Grove City Archive: “A” files.

¹⁵ Mises to Machlup, letter dated December 15, 1946; Grove City Archive: Machlup files.

¹⁶ Herbert von Beckerath, Goetz Briefs, Gottfried von Haberler, Georg Halm, and Joseph Schumpeter had obtained positions at Harvard; Machlup was at the new (Rockefeller-funded) University of Buffalo, and Morgenstern at Princeton. Apparently they were all unwilling or unable to get Mises into their departments.

¹⁷ Nash, The Conservative Intellectual Movement in America, pp. 13, 351, n. 47. Nash mentions that Hazlitt and Read were among those involved. Nash also mentions (ibid., p. 20) that Hayek's position at the University of Chicago was similarly subsidized out of private funds. It is not clear who, apart from Fertig, contributed to paying Mises's salary. It is however most likely that a major part of the money came from the Volker Fund. Other potential donors were among the men who would later back The Freeman, in particular Alfred Kohlberg (importer), Jasper Crane, Howard Pew (Sun Oil), Herbert Hoover (former U.S. president), W. Prentis (Armstrong Cork), W.F. Peter (Chicago, Rock Island, and Pacific Railroad). See Charles H. Hamilton, “The Freeman: The Early Years,” R. Lora and W.H. Longton, eds., The Conservative Press in Twentieth-Century America (London: Greenwood, 1999).

¹⁸ Mises to Machlup, letter dated December 26, 1944; Hoover Institution: Machlup-Mises correspondence file.

¹⁹ When he was looking for a job right after his arrival in the United States, Machlup had brought him in touch with New York University's department of economics. In November 1940, the department head (Spahr) invited Mises to give a talk on his contributions to economic theory. Spahr was slow (or unwilling) to follow up with a job offer and Mises then accepted the position at NBER.

²⁰ Yoneo Azuma to Mises, letter dated July 13, 1948; Grove City Archive: Azuma file. Azuma was a student of Mitsutaro Araki, to whom Mises had already in 1925 granted permission to translate and publish Theory of Money and Credit. Araki never completed the translation, but his student finished it in the early years of the war. When he wrote to Mises in 1948, the manuscript of the translation had survived the war years in a vault of the publisher. Azuma also kept Mises informed about intellectual developments in Japanese economics.

²¹ Machlup reported a few years later from a meeting with Japanese colleagues in Tokyo: “there was a discussion of whether certain parts of your Theory of Money were already in the first edition or only added in the second edition. There were several present who were able to discuss this question. See Machlup to Mises, letter dated March 28, 1955; Hoover Institution: Machlup-Mises correspondence file.

²² Jujiro Iwai to Nymeyer, letter dated January 23, 1952; Grove City Archive: Nymeyer files.

²³ Mary Sennholz, Leonard E. Read: Philosopher of Freedom (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1993), p. 69.

²⁴ Mises continued to be invited to other NICB conferences. For example, on May 16, 1946, he discussed the subject of postwar interest rates with Woodlief Thomas (a Federal Reserve economist), Friedrich Lutz, and Paul Samuelson. And on January 22, 1948, he took part in a symposium that dealt with the question: “Should we return to a gold standard?” Here he met Philip Cortney; among the other contributors were Albert Hahn and Michael Heilperin. See Grove City Archive: NICB files. He was probably also instrumental in providing his friend Walter Sulzbach with a job at NICB in 1946 or 1947; see Grove City Archive: Sulzbach file.

²⁵ The number of 30,000 was attained by early 1949. See Read's memorandum dated March 23, 1949; Grove City Archive: FEE files.

²⁶ He was “paid a uniform amount at regular intervals” and therefore became, for technical reasons (tax laws), an employee of FEE in October 1946. See Curtiss to Mises, letter dated October 8, 1946; Grove City Archive: FEE files.

²⁷ See Nash, The Conservative Intellectual Movement in America, p. 24.

²⁸ Frank Knight, Freedom and Reform (New York: Harper, 1947); Henry C. Simons, Economic Policy for a Free Society (Chicago: University of Chicago Press, 1948).

²⁹ Nymeyer to Mises, letter dated May 20, 1946; Grove City Archive: Nymeyer files.

³⁰ Nymeyer to Mises, letter dated June 12, 1947; Grove City Archive: Nymeyer files.

³¹ Nymeyer to Mortimer Adler, letter dated February 14, 1948; Grove City Archive: Nymeyer files.

³² Mises to P.C. Armstrong, letter dated January 16, 1950; Grove City Archive: Armstrong file.

³³ Nymeyer to Mises, letter dated October 12, 1948; Grove City Archive: Nymeyer files.

³⁴ Nymeyer to Mises, letter dated January 25, 1949; Grove City Archive: Nymeyer files.

³⁵ Mises to Nymeyer, handwritten manuscript of a letter in response to Nymeyer's letter dated April 26, 1949; Grove City Archive: Nymeyer files.

³⁶ Mises to Nymeyer, letter dated May 17, 1952; Grove City Archive: Nymeyer files.

³⁷ Nymeyer to Hayek and others, correspondence of spring and summer 1952; Grove City Archive: Nymeyer files.

³⁸ Nash, The Conservative Intellectual Movement in America, p. 10.

³⁹ Henry C. Simons, Annals of the American Academy of Political and Social Science 236 (November 1944): 192.

⁴⁰ Hoiles to Mises, letter dated September 7, 1949; Grove City College Archive: Hoiles file.

⁴¹ Mises to M.H. Johnson, letter dated October 25, 1956; Grove City Archive: “J” files.

⁴² See the memorandum dated January 13, 1947 in Grove City Archive: FEE files.

⁴³ Lane to Mises, letter dated July 5, 1947; Grove City Archive: Lane files.

⁴⁴ According to Lane, Mises had fallen prey to the confusion of egalitarianism. She quotes Mises: “It is obvious that every constitutional system can be made to work satisfactorily when the rulers are equal to their task.” Thereupon she comments: “Stuff and nonsense!... The basic fallacy [of Germany] was in the lack of a rational political thought, and this book admirably displays that lack.” Rose Wilder Lane in Economic Council Review of Books 2, no. 10 (November 1945), p. 3.

⁴⁵ See the fall 1949 and fall 1950 correspondence in Grove City Archive: Lane files.

⁴⁶ Machlup to Mises, letter dated December 13, 1946; Grove City College Archive: Machlup files.

⁴⁷ Mises to Machlup, letter dated December 15, 1946; Grove City College Archive: Machlup files.

⁴⁸ See their correspondence of June and July 1945; Grove City Archive: Montes de Oca files.

⁴⁹ Mises to Montes de Oca, letter dated January 12, 1946; Grove City Archive: Montes de Oca files. Mises received $590 for the study. He finished the epilogue at the end of December 1945. See Mises to Schmidt, letter dated December 31, 1945; Grove City Archive: Schmidt file.

⁵⁰ Mises to Karl Brandt, letter dated September 7, 1946; Grove City Archive: Brandt file.

⁵¹ Mises to Hayek, letter dated December 31, 1946; Grove City Archive: MPS files.

⁵² Mises to Hayek, letter dated December 31, 1946; Grove City Archive: MPS files.

⁵³ Mises to Hayek, letter dated December 31, 1946; Grove City Archive: MPS files.

⁵⁴ For an overview see R.M. Hartwell, History of the Mont Pèlerin Society (Indianapolis: Liberty Fund, 1995).

⁵⁵ For example, by January 1949, Hayek had already paid several visits to Austria. See Charmatz to Mises, letter dated January 27, 1949; Grove City Archive: Charmatz file.

⁵⁶ Hayek to Mises, letter dated December 28, 1946; Grove City Archive: MPS files. Mises to Karl Brandt, letter dated September 7, 1946; Grove City Archive: Brandt file. Mises had been in touch with Hoff prior to June 28, 1946. Hoff had written a libertarian manifesto during the war. He sent the manuscript to Sweden, from where an American diplomat was supposed to send it to Alfred A. Knopf in New York. But the diplomat never did so. Hoff learned after the war that this was because the diplomat found the manuscript “undemocratic”—which probably meant that it was too critical of the fundamental dogmas of America's war ally. Hoff had also come to an independent discovery of the impossibility of economic calculation in socialism. Mises had the highest opinion of the Norwegian economist. Hoff was “one of the few contemporaries whose judgment on the problems dealt with in Human Action is of consequence.” Mises to Hoff, letter dated January 11, 1950; Grove City Archive: Hoff files.

⁵⁷ Mises to Hayek, letter dated December 31, 1946; Grove City Archive: MPS files.

⁵⁸ Mises, “Observations on Professor Hayek's Plan,” typewritten memorandum dated December 31, 1946; Grove City Archive: MPS files.

⁵⁹ Mises to Hayek, letter dated December 31, 1946; Grove City Archive: MPS files. Mises suggested that Hayek invite Montes de Oca and Velasco from Mexico, Maestri from Cuba, and Hytten from Australia.

⁶⁰ Hayek to Mises, letter dated February 3, 1947; Grove City Archive: MPS files.

⁶¹ On Luhnow, see the special collections of the Kansas City Public Library, which also contain photography.

⁶² Shortly after Volker's death, the Fund moved from Kansas City to Burlingame, California. This must have been between April 1949 and June 1951. See correspondence in Grove City Archive: Herbert Cornuelle file.

⁶³ Hazlitt to Mises, letter dated December 21, 1953; Grove City College Archive: Mont Pèlerin Society files.

⁶⁴ Liaison Officers were Richard Cornuelle and Kenneth Templeton. Herbert Cornuelle left the Fund in November 1953 for a business job in Honolulu.

⁶⁵ F.A. Hayek, “Opening Address to a Conference at Mont Pèlerin,” Studies in Philosophy, Politics, and Economics (Chicago: University of Chicago Press, 1967), p. 148. See also the very moderately worded “Statement of Aims.” A copy is in Grove City Archive: Intercollegiate Society of Individualists file (filed around 1964).

⁶⁶ Milton Friedman and Rose D. Friedman, Two Lucky People: Memoirs (Chicago: University of Chicago Press, 1998), p. 161.

⁶⁷ Wilhelm Röpke, “Homage to a Master and a Friend,” The Mont Pèlerin Quarterly (October 1961): p. 5.

⁶⁸ Possibly Allais's visit to FEE in October 1947 reinforced his concerns that the American libertarians were far too radical for his taste. The visit is mentioned in Herbert Cornuelle to Mises, letter dated October 14, 1947; Grove City College Archive: FEE files.

⁶⁹ Eventually Hunold from Zurich and Aaron Director became secretaries; Eucken, Jewkes, Knight, Rappard, and Rueff were elected vice-presidents; and Hardy became the Treasurer. Mises, Antoni, Gideonse, Iversen, Robbins, and Röpke became members of the Council. See “President's Circular No. 1,” dated November 17, 1947; Grove City Archive: MPS files. On December 10, Albert Hunold announced that Mises would soon receive a photo album with some seventy pictures of the conference as a Christmas present.

⁷⁰ In June 1945, Mises still said the book was “to be published in an American edition next year.” Handwritten manuscript of letter to Tietz; Grove City Archive: Tietz file.

⁷¹ He addressed the issue on pp. 632–33 of Human Action: A Treatise on Economics (New Haven, Conn.: Yale University Press, 1949), and in a later letter to his French friend Lhoste Lachaume. See Ballvé to Mises, letter dated March 18, 1955; Grove City Archive: Ballvé files. See also Mises to Lidia Alkalay, letter dated February 19, 1952; Grove City Archive: “A” files.

⁷² Richard von Mises, Kleines Lehrbuch des Positivismus: Einführung in die empiristische Wissenschaftsauffassung (The Hague: Van Stockum & Zoon, 1939).

⁷³ Hayek to Mises, letter dated November 15, 1948; Grove City Archive: Hayek files. Mises to François Perroux, letter dated November 13, 1948; Grove City Archive: Perroux file. Perroux had learned about the accident from Helene Berger Lieser.

⁷⁴ Crane to Mises, letter dated June 28, 1949; Grove City Archive: Crane file.

⁷⁵ Apparently he also declined an invitation to lecture at the University of Vienna in a U.S.-sponsored program in 1948. Fritz Machlup took part. See Thieberger to Mises, April 18, 1948; Grove City Archive: Thieberger files.

⁷⁶ There was no similar curiosity for Italy, where Luigi Einaudi, after leading three years the country's central bank, had just been elected Italian president.

⁷⁷ Mises to Read, letter dated December 4, 1948; Grove City Archive: FEE files.

⁷⁸ In March 1950 he said that he had been to Europe twice, but not to Austria. See Mises to Ernest Neurath, letter dated March 13, 1950, Grove City Archive: Neurath file.

⁷⁹ Miller to Mises, letter dated March 26, 1949; Grove City College Archive: MPS files. See the front-page report in Neue Zürcher Zeitung (July 25, 1949). In June 1949, Mises was in Europe. See Margit von Mises to R. Ziegler; Grove City Archive: Cluett, Peabody & Co. file.

⁸⁰ On Franz Oppenheimer's influence on his student Ludwig Erhard, see for example the interview with Erhard in Deutsche Zeitung (December 30/31, 1961), p. 20. During the Nazi era, Erhard had worked for two economic research institutes. After the war, he became the Bavarian minister of the economy and also attended the private seminar of Mises's friend, Adolf Weber, who in those days was probably the most “Austrian” professor of economics (see Der Spiegel, October 16, 1963, mentioned by Gibson to Mises, letter dated March 3, 1964; Grove City Archive: “G” file). Weber championed a theory of the market process and of consumer sovereignty that was virtually indistinguishable from Mises's views; see for example, Adolf Weber, Weltwirtschaft (Munich: Richard Pflaum Verlag, 1947), pp. 86, 102, 106, 108. It was probably under the impact of the discussions in the Weber circle that Erhard received the vision and inspiration for his reforms of June 1948.

⁸¹ In those days, Walter Eucken, one of the intellectual leaders behind the Erhard reforms, wrote to Mises about the need for further deregulation: “The German authorities, with whom I am in constant touch, try everything to this effect. But American economic policies in Germany are still essentially based on central planning.” Eucken to Mises, letter dated June 25, 1948; Grove City Archive: Read files.

⁸² A few years later, the banking theorist Heinrich von Rittershausen speculated in private correspondence with Mises that Gemeinwirtschaft had laid the foundation for Erhard's success, “because all of the significant young people read it carefully during the 12 bookless years.” Rittershausen to Mises, letter dated August 22, 1957; Grove City Archive: Rittershausen file. Of all postwar monetary theorists in Germany, Rittershausen was probably most sympathetic to Mises's views.

⁸³ Adolf Wittkowski, Schrifttum zum Marshallplan und zur volkswirtschaftlichen Integration Europas (Bad Godesberg: Bundesministerium für den Marshallplan, 1953).

⁸⁴ Mises to Mark Jones, letter dated March 31, 1948; Grove City Archive: Jones file.

⁸⁵ Mises, Human Action: A Treatise on Economics, 3rd ed. (Chicago: Regnery, 1966), pp. 723–24. Until the mid-1950s, Mises was apparently reluctant to even meet with Erhard. Röpke thought this was because Mises was under the influence of his closest German intellectual ally, Volkmar Muthesius, a sharp and relentless critic of Erhard's economic policies. See Muthesius to Mises, letter dated January 2, 1954; Grove City Archive: Muthesius file.

⁸⁶ Mises to Muthesius, letter dated June 1, 1955; Grove City Archive: Muthesius file.

⁸⁷ There is a summary of the programs of the first four Mont Pèlerin Society meetings in Grove City College Archive: MPS files. Folder #9. Summary of all meetings until 1970 in folder #33.

⁸⁸ Mises to Montes de Oca, letter dated February 26, 1949; Grove City Archive: Montes de Oca files. A handwritten note with keywords for a (later) talk on Keynes is in Grove City Archive: May file.

⁸⁹ Mises to Montes de Oca, letter dated July 22, 1949; Grove City Archive: Montes de Oca files. They stayed at the Ritz, and he received $1,500 for the seminar (stated in earlier correspondence).

⁹⁰ Montes de Oca to Mises, letter dated February 24, 1950; Grove City Archive: Montes de Oca files.

⁹¹ Mises to Montes de Oca, letter dated March 13, 1950; Grove City Archive: Montes de Oca files.

Chapter 20. Human Action and Its Consequences

¹ Milton Friedman and George Stigler, “Roofs or Ceilings?” (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1946).

² Mises to Jitta, letter dated October 22, 1949; Grove City Archive: Jitta file.

³ Henry Hazlitt, “The Case for Capitalism,” Newsweek 34 (September 19, 1949), p. 70.

⁴ Mises to Armin Spitaler, letter dated December 6, 1949; Grove City College Archive: Spitaler file; Mises to Ziegler, letter dated July 16, 1949; Grove City Archive: Cluett, Peabody & Co. file.

⁵ The only dark cloud was that Margit had been ill in November.

⁶ See the flyer dated August 9, 1949 in Grove City Archive: Fertig files. The flyer mentioned that the seminar was sponsored by the Volker Fund.

⁷ Seymour E. Harris, “Capitalist Manifesto,” Saturday Review 32 (September 24, 1949): 31.

⁸ John Kenneth Galbraith, “In Defense of Laissez-Faire,” New York Times Book Review (October 30, 1949), p. 45. The New Year's party is mentioned in Mises to Hayek, letter dated December 13, 1949; Grove City Archive: Hayek files.

⁹ In private correspondence, Oskar Morgenstern declared that he could not agree with Mises's statements on game theory. He did not explain why he disagreed, but said:

that the matter is far deeper and that it actually does produce results that cannot be had without it. I can see this from certain applications which are now being made in various fields, but these are all matters of difference that are, fortunately, on a level of common understanding.

This was certainly helpful. Mises must have been somewhat bemused, however, that Morgenstern did not quite remember the title of the book that he professed to have read “to a great extent.” (In his letter he thanked Mises for having sent him a copy of “Economic Action.”) See Morgenstern to Mises, letter dated January 12, 1950; Grove City Archive: Morgenstern file.

¹⁰ Alfred Sherrard, “The Free Man's Straightjacket,” New Republic 122 (January 9, 1950): 18–19.

¹¹ Murray N. Rothbard, “Review of Human Action” Faith and Freedom (September 1950): 14; idem, “Praxeology,” analysis (May 1950): 4.

¹² Richard Cornuelle, “A New Philosophy of Laissez Faire,” American Affairs (January 1950): 47–51.

¹³ Lachmann must have sent Mises a copy of this lecture. See Mises to Ballvé, letter dated December 26, 1950; Grove City Archive: Ballvé files.

¹⁴ See correspondence in Grove City Archive: Christian Freedom Foundation file. CFF was at the time located on 26 West 58th Street in Manhattan. Around 1957, its offices moved to 250 West 57th Street.

¹⁵ Margit von Mises, My Years with Ludwig von Mises (Cedar Falls, Iowa: Center for Futures Education, 1978).

¹⁶ The latter position is mentioned in a March 1959 letter from Mises to Hayek. Koether also initiated the creation in 1956 of a Mises bust by his sculptor friend, Mrs. Erickson. Thereafter his relationship with the Mises couple quickly turned into fond friendship (Grove City Archive: Koether files).

¹⁷Who's Who in America, monthly supplement of September 1952. Greaves had left Christian Economics no later than March 1959. See Greaves to Frederick Nymeyer, letter dated March 21, 1959; Grove City Archive: Greaves files. In his job search, he then presented himself as “a leading disciple of Professor Ludwig von Mises, the world famous analyst of socialist fallacies and leading exponent of the free market society.” Greaves to Edward Duning, letter dated May 26, 1959; Grove City Archive: Greaves files. By then he had met Bettina Bien (Greaves had previously been married in 1930 and had three children).

¹⁸ These lecture notes are now in the process of being edited and published as “Mises Seminar Lectures.” The first volume has just appeared. See Mises, The Free Market and Its Enemies (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 2004).

¹⁹ See the “Statement to the Directors of Freeman Magazine, Inc. by its active editors,” attachment to a letter to the Freeman's Board of Directors dated October 2, 1952, p. 4; Grove City Archive: Freeman files. The Pew family had a solid track record of opposition to interventionism. It sold virtually all of its (highly profitable) European business when confronted with the alternative of joining government-sponsored cartels. See Pew to Mises, letter dated November 5, 1954; Grove City Archive: Pew files.

²⁰ Vada Horsch to Mises, memorandum dated March 23, 1945; Grove City Archive: NAM files.

²¹ Mises to Pew, letter dated November 27, 1948; Grove City Archive: Pew files.

²² Mises later explained in private correspondence with a reader of Human Action who wondered why the libertarian message did not make it into the press:

The newspapers and magazines published in this country are either operated on a commercial basis or are newspapers and magazines of opinion.... The publishers and editors of the first group are anxious not to antagonize the feelings of the majority or a considerable part of their readers. If they cannot refuse printing an article or a letter to the editor which attacks the popular errors concerning the “Fair-Deal” and similar policies, they “edit” it. They cut down the arguments of the author in such a way that they become clumsy nonsense. The effect upon the reader is just the contrary of what the author intended. They get the impression that the market economy is advocated exclusively by bunglers and halfwits.... The second group consists almost exclusively of outright communists, half-communists and other “pink” publications.... There are a few exceptions. One is the Wall Street Journal, another one is Plain Talk. But the Wall Street Journal is solely read by bankers and businessmen, Plain Talk does not get sufficient backing and may be forced to go out of business.” (Mises to Walter Harrison, letter dated November 5, 1949; Grove City Archive: “H” files)

Mises had had personal experiences with this type of journalism. In 1944, for example, the New York Times had published a smear-job review of Omnipotent Government by a notorious Stalinist, who had obviously never read the book.

²³ Pew to Mises, letter dated December 7, 1948; Grove City Archive: Pew files.

²⁴ Pew to Mises, letter dated December 3, 1951. Apparently, the two men had started socializing around October of 1949, when Pew was a lunch guest in the Mises's apartment.

²⁵ See William M. Curtiss (Executive Secretary of FEE) to Rothbard, letter dated November 25, 1946; Rothbard Papers.

²⁶ Leonard Read to Rothbard, letter dated June 24, 1948; Rothbard Papers (also in Grove City Archive: Read files). This was an invitation to attend a meeting on July 8, when Ludwig von Mises would be speaking.

²⁷ Rothbard to William F. Campbell, letter dated April 1951; Rothbard Papers.

²⁸ Walter Block and Walter Grinder, “Rothbard Tells All: Interview with Murray Rothbard,” December 1972, p. 6, in Rothbard Papers.

²⁹ Herbert Cornuelle to Mises, letter dated June 17, 1949; Grove City Archive: FEE files.

³⁰ See Rothbard's letter to Herbert C. Cornuelle, November 28, 1949, Rothbard Papers. This sample chapter is later referred to as “the money chapter.”

³¹ Rothbard to Mises, letter dated May 18, 1950; Grove City Archive: Rothbard files.

³² Mises to Cornuelle, letter dated February 10, 1951; Rothbard Papers.

³³ Memo to Volker Fund: Progress Report, January 1 to October 1, 1952, 13 pp., Rothbard Papers.

³⁴ Raico and Reisman to Mises, letter dated February 24, 1953; Grove City Archive: Raico file. That first meeting took place on February 23. Bierly's letter of February 13 is in the same file.

³⁵Epistemological Problems of Economics, trans. George Reisman (Princeton, N.J.: Van Nostrand, 1960); The Free and Prosperous Commonwealth, trans. Ralph Raico (Princeton, N.J.: Van Nostrand, 1962). The title of the latter book was changed in subsequent editions to Liberalism: A Socio-Economic Exposition (Kansas City, Kansas: Sheed Andrews and McMeel, 1978). The Volker Fund sponsored Raico's translation, which he began in the summer of 1956.

³⁶ The talk was a huge success. See the correspondence between Mises and Shelby Cullom Davis in Grove City Archive: “D” files.

³⁷ Mises to P.C. Armstrong, letter dated March 1, 1950; Grove City Archive: Armstrong file.

³⁸ See the proceedings in Aaron Director, ed., Defense, Controls, and Inflation (Chicago: University of Chicago Press, 1952).

³⁹ At the same time he must have finished at least the first draft of another important work. By June 1951, he had written a manuscript on Dialectical Materialism, a later version of which was probably incorporated as a chapter in Theory and History (New Haven, Conn.: Yale University Press, 1957). See Cornuelle to Mises, letter dated June 6, 1951; Grove City Archive: Herbert Cornuelle file.

⁴⁰ Nymeyer to Mises, letter dated May 28, 1951; Mises to Nymeyer, letter dated June 21, 1951; Grove City Archive: Nymeyer files.

⁴¹ Mises to Friedrich Hoenig, letter dated December 6, 1951; Grove City Archive: “H” files. Similarly, he wrote a few years later to Rougier:

An interventionist government can virtually annul all the expected advantages of the disappearance of customs barriers by domestic intervention. Under the conditions of interventionism a really common market can be achieved only by a common government that has the power to delimit strictly the jurisdiction of the various national governments. (March 18, 1959; Grove City Archive: Rougier files)

⁴² Mises to Ernest Anthony, letter dated June 19, 1953; Grove City Archive: Anthony file.

⁴³ George H. Nash, The Conservative Intellectual Movement in America (New York: Basic Books, 1976), pp. 28f.

⁴⁴ Charles H. Hamilton, “The Freeman: The Early Years,” R. Lora and W.H. Longton, eds., The Conservative Press in Twentieth-Century America (London: Greenwood, 1999).

⁴⁵ See “Battle for the Freeman,” Time, January 26, 1953. In a note dated October 3, 1952, John Chamberlain called Hoover the “principal founder of the Freeman.” Later Leo Wolman successfully set up an advertisement program, which was then followed through by Kurt Lassen. See Hazlitt to Chamberlain, letter dated October 24, 1952; Grove City Archive: Freeman files.

⁴⁶ See the “Statement to the Directors of Freeman Magazine, Inc. by its active editors,” attachment to a letter to the Freeman's Board of Directors dated October 2, 1952, p. 5; Grove City Archive: Freeman files. Shortly after the establishment of The Freeman, Frederick Nymeyer had written to business friends that See also Nymeyer to Dalton, letter dated April 6, 1953; Grove City Archive: Nymeyer files. Crane was at the time a director of DuPont and member of its executive committee.

Dr. von Mises has been the prime mover on the program to put out a truly liberal (meaning by that laissez-faire capitalism) periodical to counter-influence the flood of Leftist publications. The man who finally organized the financial matters for such a publication is Mr. Jasper Crane. (Nymeyer to Choate and others, letter dated February 13, 1951)

⁴⁷The Freeman had two predecessors by the same name. The first Freeman was published for a couple of years in the 1920s; the editor was Albert Jay Nock. In the 1930s, then, a former assistant to Nock, Suzanne LaFollette, published a successor for about fourteen months. LaFollette also joined the editorial team of Chamberlain's and Hazlitt's Freeman in 1950. See Nash, The Conservative Intellectual Movement in America, p. 27; Hamilton, “The Freeman: The Early Years.”

⁴⁸ Raymond Moley's column in Newsweek (November 13, 1950).

⁴⁹ Mises to V. Casimir-Lambert, letter dated May 15, 1951; Grove City Archive: Casimir Lambert files. Casimir Lambert, who left the United States in 1946, had just returned. Mises wrote to him that meanwhile “many things have changed” for the better.

⁵⁰ Mises was not in New York during the first three weeks of June, and left New York City again on July 10 (probably for the Mont Pèlerin Society meeting in Beauvallon). See Mises to Richard von Mises, letter dated May 7, 1951; Grove City Archive: Richard von Mises files.

⁵¹ Herbert Cornuelle to Mises, letter dated October 30, 1950 and subsequent correspondence; Grove City Archive: Freeman files. Yeager to Mises, letter dated June 26, 1955; Grove City Archive: Buck Hill Falls file.

⁵² Yeager to Mises, letter dated July 7, 1951; Grove City Archive: Freeman files. Bettina Bien took lecture notes of this seminar. In the 1980s, Yeager held the Ludwig von Mises Chair in political economy at Auburn University in Alabama. He is the author of a famous textbook on international monetary relations.

⁵³ There was also another 1951 meeting in White Sulphur Springs, which Mises did not like at all because of the presence of too many statists. See Nymeyer to Brown, letter dated October 2, 1952; Grove City Archive: Nymeyer files.

⁵⁴ Mises to James Fifield, handwritten manuscript of a letter, undated response to Fifield's letter dated July 8, 1952; Grove City Archive: Churches files. Mises left Manhattan for San Francisco some days after June 18. After the seminar, he spent a vacation in California and returned to Manhattan after Labor Day. The fall term started on September 22. See Mises to Cobrin, letter dated June 18, 1952; Grove City Archive: “C” files. The vacation is mentioned in Mises to Hamilius, letter dated June 3, 1952; Grove City Archive: Hamilius files. The place (San Francisco) and length of the seminar is mentioned in Mises to Julier, letter dated September 22, 1953; Grove City Archive: “J” files.

⁵⁵ Fertig to Read, letter dated March 15, 1951; Grove City Archive: Fertig file.

⁵⁶ Read to Fertig, letter dated March 19, 1951; Grove City Archive: Fertig file.

⁵⁷ Mises, to Fisher, letter dated December 10, 1956; Grove City Archive: Fisher file.

⁵⁸ Mises, Liberalism, pp. 153f.

⁵⁹ He expressed this opinion in a letter to Louis Rougier, dated May 9, 1950; Grove City Archive: Rougier files.

⁶⁰ Mises to Jasper Crane, letter dated April 27, 1954; Grove City Archive: Crane file.

⁶¹ See the “Statement to the Directors of Freeman Magazine, Inc. by its active editors,” attachment to a letter to The Freeman's Board of Directors dated October 2, 1952, pp. 4–5; Grove City Archive: Freeman files.

⁶² Hazlitt to Chamberlain, letter dated October 24, 1952; Grove City Archive: Freeman files. This seems to have been a widely shared perception. One company executive explained why he would advertise in The Freeman in 1953, but not in 1952 (when the old editorial team was still in place):

We did consider The Freeman last year, but at that time it was too inflammatory and not objective enough. But now, since they have been reorganized, this magazine is very liberal in the conservative sense of the word. (Dalton to Nymeyer, letter dated April 8, 1953; Grove City Archive: Nymeyer files)

⁶³ Quoted from “Battle for the Freeman.”

⁶⁴ Hazlitt to Chamberlain, letter dated October 24, 1952; Grove City Archive: Freeman files.

⁶⁵ Hazlitt to Chamberlain, letter dated October 24, 1952; Grove City Archive: Freeman files.

⁶⁶ See the “Statement to the Directors of Freeman Magazine, Inc. by its active editors,” attachment to a letter to The Freeman's Board of Directors dated October 2, 1952; Grove City Archive: Freeman files.

⁶⁷ Chamberlain to Mises, letter dated October 27, 1952; Grove City Archive: Freeman files. On October 31, 1952 a vote of confidence in favor of the present editors brought to light the composition of the two factions. A “yes” vote came from the three editors themselves and from Hillman, Peters, and Kohlberg. A vote of no confidence came from Read, Fertig, Mises, and the Robinsons. See the handwritten note in Grove City Archive: Freeman files.

⁶⁸ Chamberlain eventually became an editor of National Review as well as of the Princeton Panel and a regular contributor to the Wall Street Journal.

⁶⁹ Henry Regnery's response to Crane was symptomatic: “I think this is a lost cause.” Regnery to Nymeyer, letter dated April 6, 1953; Grove City Archive: Nymeyer files.

⁷⁰ Nymeyer to Delafield, letter dated April 4, 1951; Smith to Nymeyer, letter dated June 11, 1951; Grove City Archive: Nymeyer files. Following instructions from Mises, Nymeyer published the piece under the title “Middle-of-the-Road Policy Leads to Socialism.” See Mises to Nymeyer, letter dated October 28, 1950; Grove City Archive: Nymeyer files. Mises received a 10 percent royalty on the sales. See for example Nymeyer to Mises, letter dated June 6, 1951; Grove City Archive: Nymeyer files. The total number of copies Nymeyer printed was 10,000. Shortly after the end of 1961, when a stock of 1,380 copies was left, there was a reprint, and another reprint of 30,000 (!) copies in 1965. See Nymeyer to Lipsett, letter dated October 9, 1961; Nymeyer to Mises, letter dated July 15, 1965; Grove City Archive: Nymeyer files.

⁷¹ Nymeyer wrote: “Mr. Fisher's request may be a ‘racket,’ but my assumption is that he is an advocate of free and competitive markets and that the use he makes of this pamphlet will promote a good cause.” Nymeyer to Mises, letter dated April 23, 1951; Grove City Archive: Nymeyer files. In Latin America, the Federation of the Mexican Chambers of Commerce planned to translate the piece (Mises to Nymeyer, letter dated June 21, 1951).

⁷² Jujiro Iwai to Nymeyer, letter dated January 23, 1952; Grove City Archive: Nymeyer files.

⁷³ Nymeyer to Pew, letter dated April 22, 1959; Grove City Archive: Nymeyer files. The statement that Mises is the “the greatest living champion of the innermost rampart of Christianity” is in Nymeyer to Pew, letter dated February 10, 1959; Grove City Archive: Nymeyer files. See also Nymeyer to Pew, letter dated September 17, 1956; Grove City Archive: Pew files.

⁷⁴ Nymeyer was also in touch with Hayek, who recommended Böhm-Bawerk's “Macht oder ökonomisches Gesetz” [Control or Economic Law] for translation. Nymeyer then made inquiries about the copyrights for a 1931 translation by John Richard Metz. See Nymeyer to Sennholz and Huncke, letter dated June 5, 1951; Grove City Archive: Nymeyer files.

⁷⁵ Mises to Nymeyer, letter dated January 16, 1951; Grove City Archive: Nymeyer files.

⁷⁶ He went on: “He probably changed his opinion about me when he learned that I was a German doctor with a degree from Cologne University, which I had earned at the age of 27 after nearly seven years in the armed services (November 15, 1939—September 14, 1946).” Hans F. Sennholz, “Finding My Way,” a speech delivered at the Schlarbaum award ceremony (San Mateo, California, October 16, 2004). Edward Facey also received his Ph.D. under Mises.

⁷⁷ Mises's proposal is in his letter to Nymeyer dated January 27, 1951; Grove City Archive: Nymeyer files. By December 1952, conflicts had arisen between the two translators. See Nymeyer to Mises, letter dated December 11, 1952; Grove City Archive: Nymeyer files.

⁷⁸ About a year later, Nymeyer had another idea, suggesting that Human Action be made more accessible by the creation of a glossary. Nymeyer to Mises, letter dated November 25, 1953; Grove City Archive: Nymeyer files. Later on, Percy Greaves put this idea into practice.

⁷⁹ Mises to Nymeyer, letter dated March 24, 1955; Grove City Archive: Nymeyer files.

⁸⁰ Nymeyer files, around 1950.

⁸¹ He may have sent Mises's paper “About Things to Come” along with the flyer. See Nymeyer to Mises, letter dated October 22, 1953; Grove City Archive: Nymeyer files.

⁸² Mises to Hagemann, letter dated January 6, 1955; Grove City Archive: Hagemann file.

⁸³ He observes:

This political argument is only rarely resorted to in books, articles, and political speeches. It does not lend itself to such public treatment. But the underlying idea plays an important role in the thinking of statesmen and historians. (Mises, Theory of Money and Credit [Indianapolis: Liberty Fund, 1980], p. 500)

⁸⁴ Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” Schriften des Vereins für Sozialpolitik 164, no. 2 (Munich: Duncker & Humblot, 1923): 32. See also our discussion in chap. 12.

⁸⁵ Mises, Theory of Money and Credit, p. 468.

⁸⁶ Ibid., p. 493. Similarly, he wrote in private correspondence: “There is only one effective method of avoiding inflation: All government expenditure must be covered by taxes and by borrowing from the public, not by borrowing from the commercial banks.” Mises to Howard Pew, letter dated November 6, 1951; Grove City Archive: Pew files.

⁸⁷ Mises, Theory of Money and Credit, p. 494.

⁸⁸ Ibid., p. 500. He had little doubt that these warnings would go unheeded. See his letter to Rougier, dated January 3, 1952; Grove City Archive: Rougier files.

⁸⁹ Ettinger to Hayek, letter dated January 5, 1954; Grove City Archive: Ettinger file. Ettinger refers to Raymond B. Fosdick, The Story of the Rockefeller Foundation (New York: Harper, 1952). The political explosiveness of these observations stemmed from the tax-exempt status that the big foundations enjoyed. See on this Harry D. Gideonse, “Changing Issues in Academic Freedom in the United States Today,” Proceedings of the American Philosophical Society 94, no. 2 (1950); Mises's letter dated May 24, 1954; Grove City Archive: U.S. Congress files. Mises had known Ettinger at least since 1946. Ettinger coordinated research on consumers' cooperatives on behalf of the Petroleum Industry Research Foundation. See Grove City Archive: Petroleum Industry Research Foundation file.

⁹⁰ The first recipient was Hans Sennholz (1955–56). Israel Kirzner was the laureate in 1956–57 and Toshio Murata in 1959–1960 (upon his return to Japan, he began to spread Mises's theories and also translated The Ultimate Foundation of Economic Science and Human Action into Japanese). Only two students received the fellowship for three consecutive years. One of these students was Robert Guarnieri, from 1963 to 1966. See the correspondence in Grove City Archive: Guarnieri file. Guarnieri had been a student of Hans Sennholz's in Grove City. He later set out for a business career.

⁹¹ These payments started after December 1958. See Bierly to Taggart, letter dated March 17, 1960; Grove City Archive.

⁹² In the fall of 1958, historian of economic thought Emil Kauder advised Raymond de Roover, who was looking for funding of a research project, not to write directly to the Volker Fund, but to get first in touch with Mises or Hayek. See the correspondence in Grove City Archive: Roover files.

⁹³ Fertig to Paul McGhee, letter dated April 3, 1952; Grove City Archive: Fertig files.

⁹⁴ Mises to Ballvé, letters dated February 13, 1956 and May 13, 1957; Grove City Archive: Ballvé files.

⁹⁵ King to Mises, letter dated June 4, 1953; Grove City Archive: King file.

⁹⁶ Cobrin to Mises, letter dated June 10, 1952; Grove City Archive: “C” files. Cobrin had written his master's thesis under the supervision of a Dr. Dorau.

⁹⁷ Notable but less important were Louis Spadaro and Edward Foley.

⁹⁸ He was still the only student Mises had recommended until March 1955. By then Mises hoped that “also other members of my Seminar will soon comply with the requirements.” Mises to Loren B. Miller, letter dated March 21, 1955; Grove City Archive: Earhart Foundation file.

⁹⁹ Mises to Chellevold, letter dated March 1, 1956; Grove City Archive: Sennholz files.

¹⁰⁰ Kirzner was a Volker fellow in 1956–1957 and in early 1957 obtained a research grant from the Earhart Foundation. At that point, he had already defended his dissertation and was about to submit the final version. See Mises to Ware, letter dated January 28, 1957; Grove City Archive: Kirzner files. Mises praised Kirzner as “a young man who promises to become a highly competent teacher and author.” Mises to Ware, letter dated February 7, 1957; Grove City Archive: Kirzner files.

¹⁰¹ In 1954, Rothbard began to socialize with Ayn Rand's group and then backed away, having decided that she was not really a libertarian. After Atlas Shrugged came out, however, there was a temporary rapprochement and the Circle Bastiat was introduced to Rand. This eventually led to the breakup of the Circle Bastiat. See Rothbard to Mises, letter dated July 17, 1958; Grove City Archive: Rothbard files. See also Justin Raimondo, An Enemy of the State: The Life of Murray N. Rothbard (Amherst, N.Y.: Prometheus Books, 2000), p. 109ff.

¹⁰² Reisman to Ware, letter dated July 14, 1963; Grove City Archive: Reisman files. See also the preface to Reisman's Capitalism (Ottawa, Ill.: Jameson books, 1996).

¹⁰³ Frank Dierson to Mises, letter dated June 10, 1952; Grove City Archive: “D” files.

¹⁰⁴ Rothbard, Report to R. Cornuelle, July 19, 1955, 6 pp., Rothbard Papers (at least one page is missing). Rothbard had written a precursor to this paper in 1954 and submitted it (unsuccessfully) to Economica. See Rothbard to Mises, letter dated September 22, 1954; Grove City Archive: Rothbard files.

¹⁰⁵ As quoted from Ralph Raico's recollections of Rothbard in Llewellyn H. Rockwell, Jr., ed. Murray N. Rothbard: In Memoriam (Auburn, Ala.: Ludwig von Mises Institute, 1995), p. 3.

¹⁰⁶ Abrahamson to Mises, letter dated September 7, 1955; Grove City Archive: Abrahamson file. Mises replied he hoped soon to find the leisure to study it carefully.

¹⁰⁷ Hayek and Machlup had thought about undertaking a festschrift for Mises's seventieth birthday in 1951. However, none of them was willing to make the effort and thus they turned to Hazlitt “to do all the technical work connected with the editing of such a volume.” See Machlup to Hazlitt, letter dated November 28, 1950; Hoover Institution: Machlup-Mises correspondence file. Hazlitt was too busy to become a part-time assistant to Hayek and Machlup, but the decisive obstacle was financial: no publisher could be found. See Machlup to Mary Sennholz, letter dated November 1, 1954; Hoover Institution: Machlup-Mises correspondence file.

¹⁰⁸ Faustino Ballvé had received the request to make a contribution by March 1955. See Ballvé to Mises, letter dated March 18, 1955; Grove City Archive: Ballvé files. Louis Rougier withdrew his contribution because he thought it was poorly translated into English, and Alfred Müller-Armack declined, saying he had no time; see Grove City Archive: Mary Sennholz files.

¹⁰⁹ This does not mean that critical voices were banished. William Rappard contributed an important critique of Mises's theory of interventionism. Rappard here published thoughts he had long since expressed in private correspondence. See for example on the occasion of the publication of Nationalökonomie. Rappard to Mises, letter dated May 31, 1940; Grove City Archive: Rand file.

¹¹⁰ Rothbard to H. Cornuelle, letter dated March 14, 1951; Rothbard Papers. “What McCulloch did for Ricardo” refers to John Ramsay McCulloch, Principles of Political Economy (New York: Augustus M. Kelley, [1864] 1965).

¹¹¹ See Rothbard's memorandum to the Volker Fund: “Progress Report, January 1 to October 1, 1952;” Rothbard Papers.

¹¹² Rothbard to Richard Cornuelle, letter dated January 3, 1953; Rothbard Papers.

¹¹³ There were indirect contacts between Rothbard and Rand ever since November 1947. By May 7, 1953 Rothbard was asked to introduce Reisman and Raico to Ayn Rand, which suggests that at that point he was a regular member of her group.

¹¹⁴ Rothbard, Progress Report (Rothbard Papers: Memo to Volker Fund, April 1, 1953).

¹¹⁵ Rothbard to R. Cornuelle, Memo (“Textbook or Treatise?”) dated February 1954; Rothbard Papers.

¹¹⁶ Rothbard to R. Cornuelle, letter dated November 5, 1954; Rothbard Papers.

¹¹⁷ Rothbard to R. Cornuelle, Memo dated August 9, 1954; Rothbard Papers.

¹¹⁸ Rothbard to R. Cornuelle, letter dated July 19, 1955; Rothbard Papers.

¹¹⁹ For a partial list of Rothbard's main contributions to economics, see Joseph Stromberg's introduction to the fourth edition of Man, Economy, and State (Auburn, Ala.: Ludwig von Mises Institute, 2003).

¹²⁰ Rothbard to Mises, letter dated April 2, 1956; Rothbard to R. Cornuelle, letter dated May 30, 1956; Rothbard to H.W. Luhnow, letter dated July 29, 1956; all in Rothbard Papers. The Earhart Foundation grant, which Rothbard duly received, made up for the ending of the Volker Fund grant, which had supported his writing of the treatise.

¹²¹ Mises to Kennedy, letter dated April 5, 1956; Grove City Archive: Rothbard files.

¹²² Mises commented on the September 1957 version of the book at the request of FEE. See correspondence in Grove City Archive: Rothbard files.

¹²³ Rothbard to Mises, letter dated May 5, 1959; Grove City Archive: Rothbard files.

¹²⁴ Frank Meyer, Memo: On Murray Rothbard's Manuscript, late 1959 or January 1960; Rothbard Papers.

¹²⁵ Grove City Archive: American School of Economics files.

¹²⁶ Vada Horsch tried to place him at Yale. See Ryan to Mises, letter dated July 9, 1956; Grove City Archive: NAM files.

¹²⁷ He went on to urge the establishment of a new graduate school for the education of future professors, a school squarely built on the tradition of classical liberalism. See Sennholz to Mises, letter dated November 7, 1956; Grove City Archive: American School of Economics files. During the next few years, Sennholz would spend much time and energy on this project; but it did not materialize, mainly due to financial reasons. In another letter, he mentions that the plans for establishing a graduate school of economics had been longstanding with FEE. See Sennholz to Mises, letter dated January 10, 1959; Grove City Archive: American School of Economics files.

Chapter 21. The Epistemological Case for Capitalism

¹ He had said this in a July 1956 meeting with Lachmann. See Lachmann to Mises, letter dated September 17, 1956; Grove City Archive: Lachmann file.

² Mises, Human Action, 3rd ed. (Chicago: Regnery, 1966), p. 4.

³ Ibid., p. 6.

⁴ Ibid.

⁵ Mises, Theory and History: An Interpretation of Social and Economic Evolution (New Haven, Conn.: Yale University Press, 1957).

⁶ Mises, Human Action, p. 145. See also ibid., pp. 145–47.

⁷ Mises, Theory and History, pp. 73–74. He emphasizes that from the point of view of a perfect being such as God, things might look completely different. This position can best be characterized as a Leibnizian rationalism. On the importance of Leibnizian rationalism for Austrian intellectual life, see William M. Johnston, The Austrian Mind (Los Angeles: University of California Press, 1972), chap. 19. Johnston is however not convinced that the Austrian School of economics was influenced by the Leibnizian tradition. See ibid, pp. 86f.

⁸ Thirteen years before, he had written:

We may reasonably assume as hypothesis that man's mental abilities are the outcome of his bodily features. Of course, we cannot demonstrate the correctness of this hypothesis, but neither is it possible to demonstrate the correctness of the opposite view as expressed in the theological hypothesis. We are forced to recognize that we do not know how out of physiological processes thoughts result. We have some vague notions of the detrimental effects produced by traumatic or other damage inflicted on certain bodily organs; we know that such damage may restrict or completely destroy the mental abilities and functions of men. But that is all. (Omnipotent Government [Spring Mills, Penn.: Libertarian Press, 1985], p. 156)

⁹ This point also applied to F.A. Hayek's The Sensory Order (Chicago: University of Chicago Press, 1952), a book that Mises did not cite. Hayek had attempted to analyze the mechanism through which physiological impulses come to be translated into mental perception. Apparently, Mises was not convinced that Hayek delivered more than metaphysical speculation.

¹⁰ Individual value judgments and actions

are ultimately given as they cannot be traced back to something of which they would appear to be the necessary consequence. If this were not the case, it would not be permissible to call them an ultimate given. But they are not, like the ultimate given in the natural sciences, a stopping point for human reflection. They are the starting point of a specific mode of reflection, of the specific understanding of the historical sciences of human action. (Mises, Theory and History, p. 310; emphasis added)

¹¹ Mises, Theory and History, p. 183.

¹² Ibid., p. 1.

¹³ Mises, Theory and History:

Thymology has no special relation to praxeology and economics. The popular belief that modern subjective economics, the marginal utility school, is founded on or closely connected with “psychology” is mistaken.... [P]raxeology is not concerned with the events which within a man's soul or mind or brain produce a definite decision between an A and a B. It takes it for granted that the nature of the universe enjoins upon man choosing between incompatible ends. Its subject is not the content of these acts of choosing but what results from them: action. It does not care about what a man chooses but about the fact that he chooses and acts in compliance with a choice made. (p. 271; emphasis added)

The thymological analysis of man is essential in the study of history. It conveys all we can know about ultimate ends and judgments of value. But as has been pointed out above, it is of no avail for praxeology and of little use in dealing with the means applied to attain ends sought. (p. 280)

¹⁴ Ibid., p. 9.

¹⁵ Mises, The Ultimate Foundation of Economic Science (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, [1962] 2002), p. 117.

¹⁶ Mises, Theory and History, p. 9.

¹⁷ Ibid., p. 12. Notice that Mises admitted the existence of errors in regard to one's value judgments (ibid., p. 174). He also took it for granted that one could enjoy art (ibid., p. 63). The point was, again, that each individual is his own judge.

¹⁸ Ibid., p. 54.

¹⁹ Ibid., pp. 59f.

²⁰ Ibid., pp. 60–61.

²¹ Ibid., p. 61.

²² Mises, The Ultimate Foundation of Economic Science, p. 123.

²³ Ibid., p. 3.

²⁴ Mises, The Anti-Capitalistic Mentality (Princeton, N.J.: Van Nostrand, 1956), chap. 2, sect. 1.

²⁵ Mises, Theory and History, pp. 65–66.

²⁶ Mises, ibid., pp. 224–25. He continued: “The essence of civilization is ideas. If we try to distinguish different civilizations, the differentia specifica can be found only in the different meanings of the ideas that determined them” (ibid.) See also ibid., pp. 261f. and Mises, The Ultimate Foundation of Economic Science, pp. 92f.

²⁷ Mises, Theory and History, pp. 186–88.

²⁸ Mises's stress on the particularities of the genius is a pervasive feature of his thought, running from Gemeinwirtschaft (Jena: Gustav Fischer, 1922) via Human Action (1949) to Theory and History (1957) and Ultimate Foundation of Economic Science (1962). It is not known where his inspiration came from, but it cannot be excluded that he took it for granted that educated people would know the theoretician who had insisted on the categorical difference between “mere” talent (be it ever so great) and true genius. Weininger wrote at the beginning of the century:

Someone may have a talent, for example, the mathematical talent, by birth and to an extraordinary degree; he will then be able to digest the most difficult chapters of this science with but small effort; but it does not follow that, for this reason, he has any genius, which is the same thing as originality, individuality, and condition of his own productivity. Conversely, there are great geniuses who have not developed any special talent to a high degree. Just think of Novalis or Jean Paul.... Talent is hereditary, it may be the common good of a family (the Bachs); genius is not transferable, it is never general, but always individual (Johann Sebastian). (Otto Weininger, Geschlecht und Charakter, 19th ed. [Vienna: Braumüller, 1920], part 2, chap. 4, p. 126)

²⁹ Mises, Theory and History, p. 270. He added:

The second shortcoming of rationalism was its neglect of the problem of erroneous thinking. Most of the rationalist philosophers failed to see that even honest men, sincerely devoted to the search for truth, could err. This prepossession prevented them from doing justice to the ideologies and the metaphysical doctrines of the past. A doctrine of which they disapproved could in their opinion have been prompted only by purposeful deceit. Many of them dismissed all religions as the product of the intentional fraud of wicked impostors.

³⁰ Schumpeter had discussed the shortcomings of the classical doctrine of democracy along very similar lines. See Joseph A. Schumpeter, Capitalism, Socialism, and Democracy (New York: Harper & Sons, 1942), chap. 21. Both Schumpeter and Mises would highlight the crucial role of leadership in the operation of the market and in politics. In distinct contrast to Schumpeter, however, Mises stressed intellectual leadership. He also insisted that leadership could be good or bad; it could promote the preservation and flourishing of society, but it could also hurt and destroy it.

³¹ Mises, Theory and History, p. 66.

³² Mises, The Ultimate Foundation of Economic Science, p. 95.

³³ Mises, Theory and History, pp. 66f.

³⁴ Mises, Anti-Capitalistic Mentality, chap. 4, sect. 2.

³⁵ Mises, The Ultimate Foundation of Economic Science, p. 113.

³⁶ Ibid., p. 114.

³⁷ Mises, Theory and History, p. 288.

³⁸ Mises to Nymeyer, letter dated June 19, 1953; Grove City Archive: Nymeyer files.

³⁹ Mises, Human Action, p. 50:

The scope of understanding is the mental grasp of phenomena which cannot be totally elucidated by logic, mathematics, praxeology, and the natural sciences to the extent that they cannot be cleared up by all these other sciences. It must never contradict the teachings of these other branches of knowledge.

⁴⁰ Ibid., pp. 57–58. In Theory and History, speaking of the same problem:

The precariousness of forecasting is mainly due to the intricacy of this... problem. It is not only a rather puzzling question in forecasting future events. It is no less puzzling in retrospect for the historian. (p. 314)

See also The Ultimate Foundation of Economic Science, pp. 67, 103.

⁴¹ Mises, Theory and History, pp. 287–88.

⁴² Ibid., p. 289.

⁴³ Ibid., p. 290.

⁴⁴ Ibid., p. 290.

⁴⁵ Ibid., pp. 264–65.

⁴⁶ Ibid., p. 266.

⁴⁷ Ibid., p. 320.

⁴⁸ Ibid., p. 311.

⁴⁹ Ibid., p. 272. On thymology being an empirical rather than an a priori discipline, see also ibid., p. 311. He later gave a more operational description of the intellectual process involved:

Out of what we know about a man's past behavior, we construct a scheme about what we call his character. We assume that this character will not change if no special reasons interfere, and, going a step farther, we even try to foretell how definite changes in conditions will affect his reactions. (Mises, The Ultimate Foundation of Economic Science, pp. 50f.)

⁵⁰ Claude Lévi-Strauss, Race et Histoire (Paris: UNESCO, 1952).

⁵¹ Mises, Theory and History, pp. 335–37. He remarked:

A prediction about the future behavior of those races which today are considered culturally backward could only be made by biological science. If biology were to discover some anatomical characteristics of the members of the non-Caucasian races which necessarily curb their mental faculties, one could venture such a prediction. But so far biology has not discovered any such characteristics.

⁵² Mises, Anti-Capitalistic Mentality, chap. 2, sect. 2. He had alluded to the fundamental role of envy in Socialism (Indianapolis: Liberty Fund, 1981, p. 384) quoting Mandeville, Hume, and Schatz. In October 1952, he had recommended Helmut Schoeck's proposed study on envy to the Volker Fund. Schoeck's application was successful, and he reported to Mises on the progress of his studies; see Grove City Archive: Schoeck file.

⁵³ Nymeyer to Johnson, letters dated October 31, 1956 and January 10, 1957; Grove City Archive: Nymeyer files.

⁵⁴ Mises to M.E. Constantacatos, letter dated May 16, 1957; Grove City Archive: Constantacatos files.

⁵⁵ Mises to Trygve Hoff, letter dated June 11, 1957; Grove City Archive: Hoff files. Mises had told Hoff that he never replied to criticism.

⁵⁶ Mises, Gemeinwirtschaft, p. 421; my translation.

⁵⁷ Mises, Human Action, p. 156.

⁵⁸ Mises, Theory and History, p. 343.

⁵⁹ Ibid., p. 45. This was probably under the impact of reading Raymond de Roover and Schumpeter, possibly also Marjorie Grice-Hutchinson, on the sixteenth- and seventeenth-century School of Salamanca.

⁶⁰ Ibid., p. 343.

⁶¹ Mises, The Ultimate Foundation of Economic Science, pp. 106f. In Theory and History, he had not yet been convinced that the antagonism between reason and faith could be overcome within Christian theology.

We may leave aside the genuine dogmas such as Creation, Incarnation, the Trinity, as they have no direct bearing on the problems of interhuman relations. But many issues remain with regard to which most, if not all, Christian churches and denominations are not prepared to yield to secular reasoning and an evaluation from the point of view of social utility. Thus the recognition of natural law on the part of Christian theology was only conditional. It referred to a definite type of natural law, not opposed to the teachings of Christ as each of these churches and denominations interpreted them. It did not acknowledge the supremacy of reason. It was incompatible with the principles of utilitarian philosophy. (Ibid., pp. 46f.)

⁶² Barth is mentioned in Anti-Capitalistic Mentality, chap. 2, sect. 2.; but not in Human Action, p. 671, n. 8.

⁶³ Karl Barth, Der Römerbrief (Munich: Kaiser, 1922).

⁶⁴ Mises, The Ultimate Foundation of Economic Science, p. 38.

⁶⁵ Mises, Theory and History, pp. 344–45.

Chapter 22. Fragmentation of the Movement

¹New York Times (June 21, 1956).

² Already in 1956–1957, he had not felt well for many months. In May, at the end of the academic year, he looked forward to spending a long vacation in Austria and Switzerland. See Mises to M.E. Constantacatos, letter dated May 16, 1957; Grove City Archive: Constantacatos files.

³ Mary Sennholz has argued that Read was underestimated as an intellectual figure. See Leonard E. Read: Philosopher of Freedom (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1993).

⁴ Ernest C. Hasselfeldt, letter to the editor, Wall Street Journal (February 24, 1955); copy in Grove City Archive: NAM files.

⁵ See Sigmund Diamond, Compromised Campus: The Collaboration of Universities with the Intelligence Community, 1945–1955 (New York: Oxford University Press, 1992).

⁶ See Buckley's mass-mailed letter, dated November 4, 1955; Grove City Archive: Buckley file. The letter contains no definition of “conservatism.”

⁷ Mises to Muthesius, letter dated October 3, 1957; Grove City Archive: Muthesius files.

⁸ Mises to John Belding Wirt, letter dated October 23, 1954; Grove City Archive: Conservatism files. See also similar statements in Mises to Richard Cornuelle, letter dated November 1, 1965; Grove City Archive: Richard Cornuelle file.

⁹ Mises, “Economic Freedom in the Present World,” Economic Freedom and Interventionism: An Anthology of Articles and Essays (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1990), chap. 47. See also Henry Hazlitt's call for a change of the too “rigid” U.S. Constitution in his long letter to the editor of the New York Times (February 8, 1942); Grove City Archive: Hazlitt files. See also Henry Hazlitt, A New Constitution Now (New York: McGraw Hill, 1942)

¹⁰ Mises to Richard Ware, letter dated October 24, 1957; Grove City Archive: Earhart Foundation files.

¹¹ Jeffrey A. Tucker, “Mises as Mentor: An Interview with George Reisman,” Austrian Economics Newsletter 21, no. 3 (Fall, 2001): 4.

¹² Mises to Hayek, letter dated February 18, 1960; Grove City Archive: Hayek files. See also F.A. Hayek, The Constitution of Liberty (Chicago: University of Chicago Press, 1960), postscript.

¹³ Mises to Rand, letter dated January 23, 1958; unknown provenance. Before he read Atlas Shrugged (New York: Random House, 1957), Mises had not counted Ayn Rand among the foremost contemporary artists and philosophers. See Mises, Anti-Capitalistic Mentality (Princeton, N.J.: Van Nostrand, 1956), chap. 4, p. 2.

¹⁴ Rothbard to Mises, letter dated July 17, 1958; Grove City Archive: Rothbard files.

¹⁵ See Murray N. Rothbard, The Sociology of the Ayn Rand Cult (Port Townsend, Wash.: Liberty Publishing, 1987).

¹⁶ On Branden and Rand see Barbara Branden, The Passion of Ayn Rand (New York: Doubleday, 1987).

¹⁷ The symposium took place in 1959 at Emory University. The Volker Fund sponsored it. Helmut Schoeck, a professor of sociology at Emory, organized the event. Schoeck also wrote the most scathing indictment of the charges made against Rothbard. About Rand and Barbara Branden he said: “They clearly suffer from a serious case of what Sorokin (Fads and Foibles) calls the discoverer's complex. They seem to think that they, the female innovators of unique ideas, were robbed by a bad male.” Schoeck's letter to unknown recipient, dated August 13, 1958; Grove City Archive: Rothbard files.

¹⁸ Nymeyer to Lipsett, letter dated October 9, 1961; Nymeyer to Mises, letter dated December 27, 1961; Grove City Archive: Nymeyer files. Another organization that was very successful in selling Mises's books was the Intercollegiate Society of Individualists.

¹⁹ Nathaniel Branden to Mises, letters dated January 16, 1961 and May 26, 1961; Grove City Archive: Branden files.

²⁰ It goes without saying that he did not avoid socializing with (honest) socialists. Cases in point were the Bauers until their fallout with Mises in 1919, as well as his critic Carl Landauer, whom he probably met in 1952 in Berkeley. See Landauer to Mises, letter dated June 16, 1952; Grove City Archive: Ernest Offen file. And he wrote letters of recommendation for interventionist professors. See for example the letter he wrote for Alexander Kokkalis, dated January 4, 1954; Grove City Archive: Kokkalis file.

²¹ Yeager to Mises, letter dated June 26, 1955; Grove City Archive: Buck Hill Falls file.

²² Nathaniel Branden to Mises, letter December 15, 1961; Grove City Archive: Branden files.

²³ It was not their first personal meeting. They also met in early July 1961 and they discussed “the problems which we both consider as vital.” Mises to Rand, letter dated July 10, 1961; Grove City Archive: Rand file. It is possible they stayed in touch in the 1960s. In June 1970, Mises promised his Mexican friend Velasco that he would talk to her about him and his work. See Mises to Velasco, letter dated June 27, 1970; Grove City Archive: Rand file.

²⁴ For example, Mises did not believe that scientific value theory could establish an objective ranking of choice alternatives. He also had recently asserted in print that the essence of art and beauty is “that which pleases.” See Mises, Theory and History: An Interpretation of Social and Economic Evolution (New Haven, Conn.: Yale University Press, 1957), p. 62. On the other hand, he certainly did agree with Rand's writings in most other respects. In correspondence with Muthesius he said that Ayn Rand was the most energetic opponent of anti-trust policy. See Mises to Muthesius, letter dated March 22, 1962; Grove City Archive: Muthesius files.

²⁵ Mises to Russell Kirk, letter dated July 5, 1962; Grove City Archive: Branden files. See also Hazlitt, to Kirk, undated letter; Grove City Archive: Hazlitt file # 9.

²⁶ Kirk to Mises, letter dated July 13, 1962; Grove City Archive: Kirk file.

²⁷ For the list of the beneficiaries of membership subscriptions, see Hazlitt to Mises, letter dated December 21, 1953; Grove City Archive: Mont Pèlerin Society files.

²⁸ Mises named among the French economists: (1) Louis Baudin, (2) Daniel Villey, (3) François Trevoux, and (4) Bertrand de Jouvenel; among the British: (1) Jewkes, (2) Plant, and (3) Dennison; as well as the Irishman Duncan. See Mises to Richard Cornuelle, letter dated June 4, 1954; Grove City College Archive: Mont Pèlerin Society files. Mises did not attend the Venice meeting because he had to undergo gallbladder surgery. Two years later, he approved the funding of Coase, Nutter, Alchian, Philbrook, and Yeager. See Mises to Luhnow, letter dated December 7, 1956; Grove City College Archive: Mont Pèlerin Society files.

²⁹ “There are within the Mont Pèlerin Society, on the whole, two antagonistic camps: the laissez-faire liberals... and the neoliberals.... Everybody knows that.” Albert Hunold, “How Mises Changed My Mind,” The Mont Pèlerin Quarterly III, no. 3 (October 1961): 17.

³⁰ Hamilius to Mises, letter dated February 26, 1952; Grove City Archive: Hamilius files. At that point Hamilius was 29 years old.

³¹ He also suggested invitations for Fertig, Cortney, and Nymeyer. These three men were admitted as new members in a Council meeting of Hayek, Rappard, Jitta, Mises, and Hunold. See Mises to Hunold, letter dated June 26, 1953, and the protocol of the Council meeting of September 9, 1953; Grove City Archive: Mont Pèlerin Society files.

³² Hamilius to Mises, letter dated October 11, 1953; Grove City Archive: Hamilius files.

³³ His contribution was eventually published under the title “market.” See Mises, “Markt,” Handwörterbuch der Sozialwissenschaften (Stuttgart: Gustav Fischer, 1959), part 27, pp. 131–36. He delivered the work before the end of March 1955. The publishers “improved” his article after having received the proof pages from him. See Mises to Hermann Bente, letter dated January 15, 1960; Grove City Archive: “B” file. A translation of this piece by Edmund A. Gibson is in Grove City Archive: “G” file. See also Haberler's letter dated May 19, 1953 in Grove City Archive: Haberler file.

³⁴ Mises to Muthesius, letter dated June 1, 1955; Grove City Archive: Muthesius files. It must be said, however, that he supported them whenever common ground could be found. Thus in June 1950, he recommended the translation of Röpke's textbook Die Lehre von der Wirtschaft to the University of Chicago Press. See correspondence in Grove City Archive: Röpke files.

³⁵ Muthesius, who was based in Frankfurt am Main, ran two successful journals: Zeitschrift für das gesamte Kreditwesen and Monatsblätter für freiheitliche Wirtschaftspolitik.

³⁶ Hellwig to Mises, letter dated January 12, 1962; Grove City Archive: Hellwig file. Hellwig had expressed such views in published writings from 1955 onwards. In a piece for Muthesius's journal, he had argued that antitrust policies were counterproductive and that the champions of such policies—most notably Eucken, Miksch, and Böhm—could therefore not properly be called classical liberals. Moreover, he had the indelicacy to point out that Böhm's and Miksch's monographs had been published in the Nazi era, and could only have been published at the time because the Nazis did not perceive neo-liberalism as a fundamental threat. On the contrary, quite a few of them took a liking to the idea of government imprinting its “order” on competition. Hellwig knew what he was talking about: he had been a Berlinbased journalist during those very years. But Walter Eucken's widow, Edith, and Wilhelm Röpke protested with great vehemence and recrimination to Muthesius for publishing such politically incorrect views. Mises sided with Muthesius. See the May 1955 correspondence in Grove City Archive: Muthesius file.

³⁷ Mises to Hellwig, letter dated January 19, 1962; Grove City Archive: Hellwig file. Mises also knew well the pro-inflationist views of Erhard's undersecretary of the economy, Alfred Müller-Armack. In 1932, Müller-Armack had published a book amplifying the case for inflation presented by Joseph Schumpeter. He had argued that credit expansion had the character of a self-fulfilling anticipation of growth. See Alfred Müller-Armack's Entwicklungsgesetze des Kapitalismus (Berlin: Juncker & Dünnhaupt, 1932).

³⁸ Hayek to Mises, letter dated October 25, 1955; Grove City Archive: Hayek files.

³⁹ A few months later he wrote: “I hope that this year's Mont Pèlerin meeting will be more interesting than the Berlin meeting.” Mises to Pierre Goodrich, letter dated April 3, 1957; Grove City Archive: Goodrich files. Goodrich's company (Indiana Telephone Corporation) issued annual reports highlighting the consequences of the ongoing inflation for the American economy and for corporate accounting (the problem of “illusory profits”). Mises liked them very much and urged Goodrich to seek wider circulation of his message.

⁴⁰ See Hayek's circular letter dated November 27, 1956; Grove City Archive: Hayek files.

⁴¹ In the early 1950s, the American libertarians tried to hold a Mont Pèlerin Society meeting in the United States, but for financial reasons (the Europeans had no money) this project materialized only in 1958, when Jasper Crane managed the fundraising. The outbreak of tensions at the Princeton meeting is stated in Hunold to Röpke, letter dated April 4, 1960. About that time, Mises's student from his Geneva years, Stefan Possony, had difficulties being accepted into the society. See his inquiry in a December 1958 postcard to Mises; Grove City Archive: “P” file.

⁴² Bettina Bien Greaves, Austrian Economics: An Anthology (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1996), pp. 77–82. A digital file of the audio is available at http://www.Mises.org/Media/.

⁴³ See the correspondence in the Cortney, Fertig, Hunold, and Leoni files. Hunold presented his view on the events before the Kassel meeting in a letter to Röpke, dated April 4, 1960, a copy of which he also sent to Mises. Hayek then declared in another open letter, dated July 3, 1960, that Hunold's replacement as secretary of the Society would be the most important task of the forthcoming general meeting. After careful examination of the evidence, Röpke became more and more convinced that several of Hayek's charges against Hunold were baseless and that, on the contrary, Hayek himself had occasionally overstepped the bounds of his authority. Hunold in turn believed that Hayek had come under the bad influence of Machlup and others (Friedman?) who sought to abuse the Society for their personal purposes. After the Turin meeting, member Wolfgang Frickhöffer concurred; he had the impression that a group around Friedman had poisoned the atmosphere with intrigue and pettiness. In early January 1962, Bruno Leoni presented his negative experiences with Röpke and Hunold in an open letter to all Mont Pèlerin Society members. See Grove City Archive: MLS files. And he went into more (ugly) detail in a confidential letter to Koether, which of course reached Mises. See Leoni to Koether, letter dated October 14, 1961; Grove City Archive: Leoni file.

Chapter 23. Last Years

¹ See documents and correspondence in Grove City Archive: Karras file.

² Mises to Harry Hoiles, letter dated February 25, 1969; Grove City Archive: “H” files. At the end of July 1964 he gave a talk at the Walter Eucken Institute in Freiburg. He followed an invitation by Hayek (Eucken file). He then attended the Mont Pèlerin Society meeting in Semmering and also went to Vienna. There he visited the Institute for Business Cycle Research (now Institute for Economic Research), which recognized him as its founder (see Franz Nemschak to Mises, and Franz Nemschak to Libertarian Press, letters dated September 3, 1964; Grove City Archive: Österreichisches Institut für Wirtschaftsforschung files).

³ Mises to Swets & Zeitlinger, correspondence of October 1958; Grove City Archive: Swets & Zeitlinger file. In other correspondence Mises emphasized that he was a member of the Econometric Society only to receive its periodical. See Mises to Nymeyer, letter dated May 14, 1953; Grove City Archive: Nymeyer files.

⁴ Letter to Robinson; Grove City Archive: “R” files.

⁵ International University Booksellers to Greaves, letter dated February 1, 1969; Grove City Archive: Greaves files.

⁶ In February 1962, he had to undergo surgery (see Mises to Muthesius, letter dated February 21, 1962; Grove City Archive: Muthesius files; see also March 1962 correspondence with Magnus Gregersen; Grove City Archive: Gregersen file). In the spring of 1966, Mises must have suffered for a long time from a viral infection. See Thieberger to Mises, June 6, 1966; Grove City Archive: Thieberger file. On July 3, 1966, Ludwig and Margit had a car accident. Margit later had to undergo surgery. At the end of October, she was recovering well. See Mises to Nymeyer, letter dated October 25, 1966; Grove City Archive: Nymeyer files. In January 1968, Mises had at least one tooth pulled. See Thieberger to Margit von Mises, January 18, 1968; Grove City Archive: Thieberger file. In June 1969, he and Margit were sick most of the month. See letter to Rougier, June 23, 1969; Grove City Archive: Rougier files.

⁷ In June 1970; see Grove City Archive: Schüller file.

⁸ Fertig files, “S” files, letter from Schiff. See also American Whig-Cliosophic Society to Mises, letter dated July 25, 1971; Margit from Mises to the same society, letter dated August 1, 1971; Grove City College: “A” files.

⁹ Margit von Mises, My Years with Ludwig von Mises, 2nd enlarged ed. (Cedar Falls, Iowa: Center for Futures Education, 1984), p. 180.

¹⁰ After the end of the Mises seminar at NYU they had offered help: “We consider ourselves deeply indebted to you. If either of us can be of any assistance at any time—to you or to Margit—we hope you will feel free to call on us. We shall always be at your service.” Greaves and Bien to Mises, letter dated June 6, 1969; Grove City Archive: Greaves files.

¹¹ This work was first published in a Spanish edition in Argentina in 1962. See Mises, El Establecimiento Histórico de la Escuela Austriaca de Economía (Colección Investigaciones No. 43, La Plata: Universidad Nacional de la Plata, 1962), pp. 691–727. It was probably a outgrowth of the lecture he gave on May 2, 1962 to the NYU Faculty Club on “The Austrian School of Economics at the University of Vienna,” printed in Bettina Bien Greaves, Austrian Economics: An Anthology (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1996), pp. 77–82.

¹² This attack concerned not only the “verificationist” positivism of the Vienna Circle (Schlick, Carnap, Frank, and others), but also Karl Popper's “falsificationist” positivism. Popper's theory made ample room for the use of deduction, whereas the Vienna Circle advocated strict induction; he also claimed that only falsifiable statements can be “scientific,” while the Vienna Circle posited that all non-verifiable statements are simply nonsensical. Such differences are certainly important in many respects. However, they are irrelevant as far as Mises's critique is concerned, because it aims at the common ground of both versions of positivism. For more detail see Hans-Hermann Hoppe, Economic Science and the Austrian Method, 2nd ed. (Auburn, Ala.: Ludwig von Mises Institute, 2006); Jörg Guido Hülsmann, “Facts and Counterfactuals in Economic Law,” Journal of Libertarian Studies 17, no. 1 (2003).

¹³ Mises accepts Popper's theory in this regard: “The positivistic principle of verifiability as rectified by Popper is unassailable as an epistemological principle of the natural sciences.” Mises, Ultimate Foundation of Economic Science (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, [1962] 1996), p. 120. See also ibid., pp. 70f.

¹⁴ Mises, Ultimate Foundation of Economic Science, p. 43. The Greek phrase means “knowledge of the same through the same.” Mises stressed that the “questions whether the judgments of praxeology are to be called analytic or synthetic and whether or not its procedure is to be qualified as ‘merely’ tautological are of verbal interest only” (ibid., p. 45).

¹⁵ Ibid., p. 2.

¹⁶ Ibid., p. 45.

¹⁷ Ibid., p. 65.

¹⁸ Ibid., p. 66.

¹⁹ Bertrand Russell, Religion and Science (Oxford: Oxford University Press, [1936] 1997).

²⁰ Mises, Ultimate Foundation of Economic Science, pp. 66–67.

²¹ Quoted from Margit von Mises, My Years with Ludwig von Mises, p. 110.

²² Mises had probably first heard about Regnery through Nymeyer in 1953. See Nymeyer to Mises, letter dated April 13, 1953; Grove City Archive: Nymeyer files.

²³ For an overview of the major changes and a discussion see Jeffrey M. Herbener, Hans-Hermann Hoppe, and Joseph T. Salerno, “Introduction to the Scholar's Edition,” Mises, Human Action, Scholar's edition (Auburn, Ala.: Ludwig von Mises Institute, 1998). Mises sent exhaustive lists of the changes to Reig in Madrid, who sought to keep the Spanish translation up-to-date.

²⁴ Mises, Human Action, p. 279.

²⁵ Mises, Human Action: A Treatise on Economics, 2nd ed. (New Haven, Conn.: Yale University Press, 1963), pp. 281–82. See also Human Action, 3rd ed. (Chicago: Regnery, 1966), p. 281.

²⁶Human Action, 2nd ed., p. 280.

²⁷ A typical example from about the same period:

A shallow-minded school of social philosophers, the anarchists, chose to ignore the matter by suggesting a stateless organization of mankind. They simply passed over the fact that men are not angels. They were too dull to realize that in the short run an individual or a group of individuals can certainly further their own interests at the expense of their own and all other peoples’ long-run interests. (Ultimate Foundation of Economic Science, p. 100)

²⁸ Rothbard published Power and Market (Princeton, N.J.: D. Van Nostrand, 1970) only in 1970, but the manuscript of the book (which was originally conceived as a part of Man, Economy, and State (Princeton, N.J.: D. Van Nostrand, 1962) was certainly available for Mises in the early 1960s.

²⁹ Mises to Bruno Leoni, letter dated February 15, 1965; Grove City Archive: Mont Pèlerin Society files.

³⁰ Hoiles to Mises, letter dated May 7, 1962; Grove City Archive: Hoiles file. In a subsequent letter of May 21, Hoiles argued that the production of security in a free market would be organized by insurance companies, thereby anticipating an important argument in later analysis of this problem.

³¹ Mises to Hoiles, letter dated May 14, 1962; Grove City Archive: Hoiles file. Notice that in the 1860 election Lincoln received far less than a majority of the votes.

³² Mises to Salvador de Madariaga, letter dated September 9, 1952; Grove City Archive: Madariaga file. Mises had criticized Madariaga in Omnipotent Government (Spring Mills, Penn.: Libertarian Press, 1985). Still he had held the Spaniard in great esteem—until this correspondence led to their falling out. He said in fact in the same letter: “I think that I have never paid a higher tribute to the achievements of any living author than I did in speaking of you on page 15 of my book.”

³³See Omnipotent Government. He probably owed the idea that nations result from the “construction” of ideologies to his friend Louis Rougier, who had argued that there are no objective or scientific criteria to delimit nations from one another. The true foundation of a nation is a specific “political myth.” See Louis Rougier, Les mystiques politiques contemporaines et leurs incidences internationales (Paris: Recueil Sirey, 1935).

³⁴ Mises to Salvador de Madariaga, letter dated September 9, 1952; Grove City Archive: Madariaga file.

³⁵ Mises, Ultimate Foundation of Economic Science, p. 94.

³⁶ Mises to de Madariaga, letter dated April 1, 1953; Grove City Archive: Madariaga file.

³⁷ See de Madariaga to Mises, letter dated March 11, 1953; Mises to de Madariaga, letter dated April 1, 1953; Grove City Archive: Madariaga file.

³⁸ Two similar cases might be mentioned in which Mises did not pursue correspondence touching on the necessity of coercion: a Mr. Kuhlmann, who favored an increase in inheritance taxes in order to decrease income taxes, reminded him: “And remember you say ‘Taxes are necessary’.” (Kuhlmann to Mises, letter dated April 7, 1962; Grove City Archive: Kuhlmann file.) And a Mrs. Powell Moffit complained about his endorsement of conscription in the 2nd edition of Human Action. See Virginia Powell Moffit to Mises, letter dated February 21, 1964; Grove City Archive: “M” files.

³⁹ Grove City Archive: Freedom School files.

⁴⁰ McLeod to Mises, letter dated March 10, 1965; Grove City Archive: IHS files. Baldy Harper had founded IHS in 1963. After leaving FEE, he had for some time worked for the Volker Fund and then lectured at Wabash College.

⁴¹ See Mises's letter to Harper dated May 8, 1969; Grove City Archive: Farmand file. In another letter he wrote that he could only stay for three days because he had to return for his NYU seminar. He also mentioned that his health was not very good. Mises to Harper, letter dated June 5, 1969; Grove City Archive: IHS files.

⁴² Mises to Meehl, letter dated July 25, 1963; Grove City Archive: “M” files. He also praised the work in correspondence with one of the thinkers he most admired, the French philosopher Louis Rougier. See his letter to Rougier, dated December 6, 1962; Grove City Archive: Rougier files. The letter ends with: “But, please, first of all read the book of Rothbard. It is very interesting also from the epistemological point of view.”

⁴³ Fertig to Mises, letter dated July 12, 1968; Grove City Archive: Fertig files.

⁴⁴ Mises, typewritten manuscript, probably of February 17, 1965; Grove City Archive: Cortney files.

⁴⁵ Cortney to Mises, letter dated April 24, 1965; Grove City Archive: Cortney files.

⁴⁶ Machlup to Mises, letter dated March 22, 1965; Hoover Institution: Machlup-Mises correspondence file. Mises apparently never replied.

⁴⁷ Margit von Mises, My Years with Ludwig von Mises, p. 146.

⁴⁸ He went on: “When the session was over, I tried to talk to Professor Mises, but he abruptly turned around and marched away. The break in friendly relations lasted for several years.” Machlup, “Ludwig von Mises: The Academic Scholar Who Would Not Compromise,” Wirtschaftspolitische Blätter 28, no. 4 (1981): 13.

⁴⁹ Mises to Cortney, letter dated June 27, 1966; Grove City Archive: Cortney files.

⁵⁰ Cortney to Mises, letter dated March 26, 1968; Grove City Archive: Institut des Hautes Etudes Internationales files.

⁵¹ Wilfried Platzer to Mises, letter dated September 25, 1962; Grove City Archive: Österreichische Botschaft files.

⁵² Nymeyer to Mises, letter dated September 28, 1965; Grove City Archive: Nymeyer files.

⁵³ Grove City Archive: FEE files.

⁵⁴ Rockwell followed Roche in 1971 to Hillsdale College to run its ideological and publications programs, which included a Mises Lecture Series, the newsletter Imprimis, and Hillsdale College Press, and a few years later joined the staff of Congressman Ron Paul, a serious student of Mises, and a lifelong opponent of central banking.

⁵⁵ Karel Kouba, Plan a trh za socialismu (Prague: Economic Section of the Czechoslovak Academy of the Sciences, 1967); Oldrich Kyn, “Vyzva marxisticke ekonomicke teorii,” ekonomicka revue 7 (1967): 289ff.

⁵⁶ Machlup to Mises, letter dated April 18, 1967; Hoover Institution: Machlup-Mises correspondence file.

⁵⁷ William S. Cushman to FEE, undated letter; Grove City Archive: “C” files. Mises wrote to Cushman on May 1, 1967.

⁵⁸ Schureman to Mises, May 2, 1969; Grove City Archive: “S” files.

⁵⁹ Grove City Archive: “D” files.

⁶⁰ Quoted from Margit von Mises, My Years with Ludwig von Mises, p. 181.

⁶¹ The following obituaries were compiled by Bettina Bien Greaves and Robert W. McGee in Mises: An Annotated Bibliography (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1993) pp. 315ff.

⁶² Murray N. Rothbard, Ludwig von Mises—Scholar, Creator, Hero (Auburn, Ala.: Ludwig von Mises Institute, 1988) p. 74. The original cites Ralph Raico, “The Legacy of Ludwig von Mises,” The Libertarian Review (September 1981): 22.

Epilogue

¹ Bettina Bien Greaves and Robert W. McGee, Mises: An Annotated Bibliography (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1993), p. 317. The original cites Howard S. Katz, “Ludwig von Mises Dies at Age 92,” Rip-Off Resistance 1, no. 4 (December 1973): 3.

² This expression is taken from the title of chapter 3 in Human Action. See on this question Joseph T. Salerno, “Ludwig von Mises as a Social Rationalist,” Review of Austrian Economics 4 (1990): 26–54.

³ Mises, Human Action, Scholar's edition (Auburn, Ala.: Ludwig von Mises Institute, 1998), p. 875.

⁴ Ibid., p. 874.

⁵ Ibid., p. 881.