Second Edition of Socialism

The battles on the political front had their impact on Mises's academic pursuits, especially on his teaching. The 1931–1932 private seminar met more irregularly, or at any rate was less well planned than usual. At least some of the sessions apparently dealt with the theory of capital and the business cycle, featuring lectures by Machlup, Morgenstern, and Bloch.⁹⁵

His university seminar now focused on methodological problems of the social sciences.⁹⁶ Subjects dealt with in the winter semester were the relationship between theory and praxis, and between facts and theories; the implications of the is-ought distinction; the universal validity of economic knowledge; quantitative and qualitative knowledge; the relations between statistical, historical, and theoretical research; the meaning of verstehen; behaviorism; the mathematical method; forecasting in economics; and economics and sociology.

Mises had to begin the 1932 summer semester late because he had to attend two conferences of the International Chamber of Commerce, and also take part in a world economic conference in Berlin, which reunited politicians and experts from all over the world to discuss the implications of the present crisis for international commerce and finance.⁹⁷,⁹⁸ The seminar sessions continued the discussions of the winter semester, dealing in particular with behaviorism and its relationship with the approach of German historicism; the meaning of “meaning” in the social sciences and its connections with utilitarianism; the concept of homo oeconomicus; economics and sociology; sociology and history; and again, forecasting in economics.⁹⁹

Mises's biggest academic project in 1931–1932 was the preparation of the second edition of Socialism. Upon his return from the United States, he found on his desk a letter from Gustav Fischer, announcing that Fischer was running out of copies of Socialism and inquiring whether Mises would be interested in doing a second edition.¹⁰⁰ Of course he would. The first edition comprised 2,000 copies plus 100 complimentary and review copies, more than a thousand of which had been sold within two years of publication, to the point that in 1924 already Fischer anticipated a second edition for some time after 1925.¹⁰¹ Eventually, however, the sales did not confirm these hopes.

Mises's friend F.G. Steiner, a Paris-based banker, believed the main reason the book was not more popular was the inadequacy of its German title. The prospect of learning something about Gemeinwirtschaft—the “communal economy”—did not appeal to less-educated readers. He hoped a new edition would soon be forthcoming:

Even more so than when your book was first published, there is today a kind of defeatism spreading among members of the capitalist class. Arguments of the type so brilliantly presented in your book could provide the necessary encouragement.¹⁰²

Mises began revising the manuscript, probably in the summer of 1931. In order not to increase the length of the book, he had to cut some parts to compensate for additions.¹⁰³ Following suggestions by Robbins, for example, he added a comment on the impossibility of syndicalism, and also added a discussion of Heimann's Mehrwert und Gemeinivirtschaft (1922) as an appendix to the new edition.¹⁰⁴ The passages on Heimann stress the dynamic nature of the problem of pricing. Prices for factors of production cannot simply be imputed backwards from the prices for consumers' goods since the entrepreneur produces for future consumption, and future prices for consumers' goods cannot be directly inferred from present prices.

Mises sent the first 405 pages of the revised manuscript to Fischer at the end of October 1931. Then the process slowed due to Mises's greater involvement in the campaign against foreign-exchange controls. In order not to lose too much time, Mises had asked four friends to help him review the proof pages.¹⁰⁵ The division of labor worked well, and on February 26, 1932 Mises sent the last pages to Fischer by courier. Fischer received it the next day and immediately forwarded it to Lippert & Co. in Naumburg. A month later, Fischer held the first copies in his hands and on April 1, Mises received his complimentary copies in Vienna.¹⁰⁶,¹⁰⁷

The book was a financial success for Mises. He received a pre-paid 15 percent of the selling price, of a total volume of 1,500 copies and with royalties totaling 4,050 marks. But the most gratifying result lay in the reactions from both friends and foes who honored the new edition as “the leading anti-socialist and affirmatively liberal work within scientific economic literature.”¹⁰⁸ Critics charged that Mises had not taken account of the most recent attempts to solve the problem of socialist calculation. But they made no attempt to name or describe these alleged new solutions. Another typical criticism was to qualify Mises's ideas as “utopian.” Some critics apparently felt pity for Mises, whose radicalism had left him few allies. One such critic wrote about Mises's “tragic fate”:

[He] advocates the liberalism of the so-called “classical” economists so unshakably and bluntly that he has become an embarrassment to those who would normally agree with him. Mises disdains any concessions in matters of social policy and ideology and hence, he provides a cheap opportunity to many liberal theoreticians who are just not as courageous as he is to differentiate themselves from him in a self-serving and “compassionate” way.¹⁰⁹

Inadvertently, this critic had pointed out a great service that Mises provided for all those who were, like the critic himself, opposed to government omnipotence, but did not want to reduce the scope of the state as radically as did the Vienna economist. Mises put these half-baked liberals in a comfortable middle-of-the-road position. They could make use of his arguments without a full commitment to their practical implications. Mises made them appear less radical.

It is true that Mises's radicalism alienated some of those who might otherwise have been closer allies. But it also altered the thinking of many open-minded readers, those who were willing to weigh his arguments against their prejudices. These readers often acknowledged the pertinence of his analysis of socialism and interventionism. Mises's work made them understand that capitalism must not be confused with the observed reality of the “traditional economic order.”

One reviewer said:

Possibly the greatest merit of the work is that it shows that the present-day shortcomings of capitalism, the so-called economic system of individualism, result to a large extent from the fact that, for some time now, we have not had such a system, but ever more distort it in the interest of domestic and foreign policy.¹¹⁰

Another:

In some circles Mises is called the last consistent representative of a liberal economic order. He is certainly not the last, but after many years the first who has dared to think through all the consequences of such an order, and to erect and demonstrate a doctrine with unshakable logic.¹¹¹

The most enthusiastic responses came from younger economists, but these followers did not expect Mises's argument to convert the mainstream anytime soon. One of them, Georg Halm from the University of Würzburg, said Mises himself was too optimistic:

I could name no work that is as revolutionary within its field as your Gemeinwirtschaft. Later generations will probably recognize this much more clearly than the bulk of your contemporaries. I believe you overestimate the latter considerably in your statement that your views are rarely contested today. Isn't the discussion of your Gemeinwirtschaft in Lederer's brochure, “Planned Economy,” mind-boggling?¹¹²