The Parallel Life

During these years, Mises's scholarly enterprises compensated for the dismal courtroom routine. The first result of his research on monetary theory and policy was a published paper on the motives underlying Austrian foreign-exchange controls. The article appeared in Böhm-Bawerk's Zeitschrift für Volkswirtschaft, Socialpolitik und Verwaltung and dealt with the ways in which interest groups promoted price and production controls.¹⁵ He followed up in 1908 with a survey of recent literature on money and banking.¹⁶

It was a welcome addition to his intellectual life when, in October 1907, he was offered a position teaching economics to the senior class of the Trade Academy for Girls. While the traditionally male Gymnasien offered a broad classical education to prepare a young elite for university studies and the assumption of high responsibilities within the civil service, girls' schools had a stronger orientation to concrete professional concerns. Only recently had girls been admitted to the Matura exams and the ensuing university studies. These exams were organized exclusively by the Gymnasien, however, so the girls prepared for them in special senior classes (Abiturientenklassen) at their own schools, and on the day of the exam went to the nearest Gymnasium to take the tests.

Mises taught economics and public finance, and Austrian government. New to teaching, he must have applied the classic pedagogy he had inherited from Menger and Böhm-Bawerk. He would begin with a brief preview of the tenets to be explained, then turn to an elaboration of his subject, and eventually conclude by repeating some of the more important tenets.¹⁷ As early as 1907, he would have taught educated young ladies under the vibrant inspiration of Böhm-Bawerk's example, whose seminar he continued to attend. Böhm-Bawerk inspired Mises throughout his life of teaching. All of Mises's students would praise him for his earnest and engaged style, for the respect he displayed toward his students, and for the unfailing encouragement he provided at the slightest signs of interest and productivity on their part. The first students to profit from these extraordinary qualities were girls from Vienna's better families, students of whose names no record has been recovered.

In 1908, Mises became a member of the Zentralstelle für Wohnungsreform (Center for Housing Reform), an association of politicians and intellectuals striving for an improvement in Vienna's housing conditions.¹⁸ He greatly enjoyed his activity within the Center where he met excellent economists such as the brothers Karl and Ewald Pribram, Emil Perels, Rudolf Maresch, Paul Schwarz, Emil von Fürth, and Robert Meyer. When Meyer became Minister of Finance, Mises was asked to write a policy paper on housing taxes, which was high on the agenda of the Austrian parliament. In his memorandum, Mises argued that the taxes levied on existing buildings were less of a problem than the heavy taxation of joint stock companies, which deterred big capital from investment in real estate. To his great satisfaction, the Center for Housing Reform fully endorsed his report.

At about the same time, Mises was involved in setting up a group for the discussion of problems of economic theory and the fundamental questions of other social sciences.¹⁹ The other leaders of this group—the brothers Karl and Ewal Pribram, Emil Perels, and Else Cronbach—were also members of Böhm-Bawerk's seminar. The weekly sessions with their great teacher were far too brief to allow thorough debate of the problems that came up, so they decided to create an additional forum. The first formal meeting took place on March 12, 1908 and from then on the group met at regular intervals and soon attracted more members. Philippovich, who headed the Center for Housing Reform, allowed the group to use the Center's beautiful premises for its meetings. After World War I, this group would become the Nationalökonomische Gesellschaft, the most important German-language forum for the discussion of economic theory. It is likely that the group was already hosting foreign scholars, such as the young Dr. William Rappard who stayed in Vienna for the 1908–1909 academic year and who some twenty-five years later would hire Mises to teach international economic relations in Geneva.²⁰

Meanwhile, Mises continued to make progress in his study of money and banking. He was working on two papers that he probably presented in Böhm-Bawerk's seminar and which he submitted to foreign journals. The first one, which was published in the British Economic Journal, gave a sympathetic presentation of the foreign exchange policy of the Austro-Hungar-ian Bank (the central bank).²¹ The other paper elaborated on the same subject, dealing more critically with legal aspects of the Bank's policy to redeem its notes in gold. Legally, Austria-Hungary was on a paper-money standard, but Mises argued that a de facto gold standard had been established through the Bank's redemption policy, which by that time it had followed for some years. He concluded that a legal obligation of the Bank to redeem its notes would not represent a new burden or danger, but would be a mere formality.²² Before he even published the paper, he received an unexpected invitation from a high-ranking officer of the central bank. Mr. Waldmayer offered material that could be useful for the study, but asked that, in exchange, Mises submit the paper to the Bank for approval before publication. Mises declined.²³ After its publication in Schmoller's Jahrbuch the paper prompted a polemical exchange between Mises and two critics: Otto Neurath, another member of Böhm-Bawerk's seminar, and Walther Federn, editor of the journal Der oesterreichische Volkswirt.²⁴

The issue was of minor importance, and Mises could not understand the heat of the debate. How could there be so much fuss about what seemed to be a clear question of fact? He learned the answer only two or three years later when Böhm-Bawerk briefed him on the background of the affair. The legal obligation to redeem its notes would have curtailed a secret fund out of which the Bank paid bribes and other illicit salaries. The beneficiaries were therefore interested in maintaining the notion that legal note redemption was inadvisable for monetary policy.

How was Mises to take this revelation? Should he unmask his opponents and uncover their corrupt scheme? After much thought, he decided to do nothing of the sort. His mission as an economist was to unmask fallacious economic arguments. If he also discussed the corruption of his opponents, the mission would lose focus. He later summarized his new personal maxim as follows:

An economist must face his opponents with the fictitious assumption that they are guided by objective considerations only. It is irrelevant whether the advocate of a fallacious opinion acts in good or bad faith; it matters only whether the stated opinion is correct or fallacious. It is the task of other people to reveal corruption and inform the public about it.²⁵