20. Human Action and Its Consequences

0:00Chapter 20. Human Action and its consequences. By the late 1940s, Mises was well integrated in the emerging network of American libertarians. His NYU seminar, his lectures at Montpellierin Society meetings and other conferences, and his writings had established his impact on the rising generation. And even beyond the circles of organized libertarianism, he had had gained a nationwide reputation as an economist and social analyst of the First Order, though for most academics his methods and political orientation smacked too much of times past. The publication of Human Action in September 1949 produced a quantum leap in his prominence and impact. Overnight, Mises turned into the central intellectual figure of the entire American right, an event that was paralleled during the next decade only in the case of of Atlas shrugged, the novel that catapulted Ayn Rand to even greater fame, at least among the general public. Mises now appeared to the public not merely as a scholar of the old school, but as one of the great minds of Western civilization, a creative genius

1:09who had not only mastered all aspects of his science, but had completely transformed this science to offer a new way of looking at social processes and relationships. Human Action was a success without precedent. His 1922 treatise on socialism had been a sensation too, but only because of the general recognition that theoretical socialism offered no help were the problems of post-war reconstruction. The socialist avant-garde had seized power in Germany and Austria but then had no idea what to do, and this crisis quickly turned from a theoretical one to a political one when socialist governments drastically aggravated conditions rather than improving them. Mises's comprehensive analysis in Gemeinwirtschaft delivered a breathtakingly lucid explanation of this mess. But while the book provoked outrage and fury in the socialist camp and initiated a paradigm shift in the thinking of an entire generation, it had not become the rallying banner of a movement. Its author had been a relatively junior economist and no institutions were in place to concentrate and organize the readers

2:10The book had convinced. American ground was more fertile. It had been prepared by a long tradition of individual liberty and a recent reorientation toward that tradition. There were, in effect, the makings of a movement just waiting for human action to form its intellectual nucleus. And just as important, there were institutions and individual promoters eager to accelerate it. Moreover, Mises himself was already one of the intellectual leaders of of this grassroots movement. He knew writers and journalists who would promote his book, and there were men who stood ready to sponsor his subsequent work. Supporters now came in droves, asking Mises to give lectures and seminars, wealthy businessmen sought his advice and often did what he recommended, and The Freeman, the first libertarian journal of a distinctly Misesian flavour, might never have seen the light of day without the glory that Human Action brought to its author.

3:05Mises now became the true spiritual rector at FEE, which had previously featured him as one among several consultants. To get a taste of the pre-1949 character of FEE, consider the case of Murray Rothbard, the man who had become Mises' most important disciple, had learned about FEE through a small brochure with the title Roofs or Ceilings Attacking Rent Control Laws. Leonard Reid had printed 500,000 copies. The authors of the brochure were two young Chicago economists by the names of Milton Friedman and George Stigler. This was in September 1946. Rothbard continued to read FEE publications and attended their conferences, yet in the spring of 1948 the future pillar of the Misesian renaissance had never even heard of Austrian economics. It appears that neither Lennart reads FEE, nor for that matter any of the other emerging libertarian organisations, had placed any First Reactions Neither Mises nor his friends expected the success the book would have. After his return from Mexico, Mises left for a two-week vacation in the Berkshire Mountains. The book was released to the bookshops while he was away

4:23on September 14, 1949. In his weekly Newsweek column, Henry Hazlitt announced and praised it, anticipating the role it would play in subsequent events. Human Action is, in short at once, the most uncompromising and the most rigorously reasoned statement of the case for capitalism that has yet appeared. If any single book can turn the ideological tide that has been running in recent years so heavily towards statism, Socialism and Totalitarianism, Human Action is that book. This was almost a self-fulfilling prophecy. Not three months later, by December 6th, more than 4,000 copies had been sold, and the book was in its third printing. With the reports of ever more sales, Mises's euphoria lasted for months. The only dark cloud was that Margit had been ill in November. His NYU seminar addressed fundamental problems and theorems of Economics and Their Relationship to Philosophical, Historical and Political Ideas.

5:23It started on his birthday, September 29. When Ludwig and Margit spent New Year's Day in 1950 with Haslett, Schütz and Hayek at their Manhattan apartment on West End Avenue, it was already clear that Human Action was a phenomenal success, especially for a 900-page scientific treatise. Even his ideological opponents had to admit that the 68-year-old Many other reviews followed over the course of the next several months. Most of these were insubstantial and their criticisms boiled down to copying at the book's pontifical style. In private correspondence, Oscar 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 This was certainly helpful.

6:31Mises 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. One reviewer had the audacity to complain that as a reader of the work one continually has the sense of being argued out of existence, but other reviews were receptive to its monumental contributions. Young Murray Rothbard praised Human Action as a masterpiece of original synthesis. The book contained a complete structure of economic science, which was firmly grounded in praxeology, and the General Principles of Individual Action. Similarly, Richard C. Conwell highlighted that Mises had integrated value and price theory and was therefore in a position to defend capitalism without basing his reasoning on such fictions as homo economicus. The book also found an exceptionally friendly reception in Germany, where Cologne University Professor Armin Spithaler published a long review in the Weltwirtschaftliches Archiv. In South Africa,

7:33A young professor adopted Mises' epistemological point of view without reservations in his Fall 1950 inaugural lecture at the University of Witwatersrand in Johannesburg. The man who lectured on economics as a social science, Ludwig Lachmann, was a graduate of the London School of Economics, where he had studied in the 1930s under Hayek and Robbins. Before that, he had been a student of Werner Zombats in Berlin. Lachmann was already acquainted with Mises's A-Prioristic Epistemology, which the Vienne economist had first outlined in his 1933 Grundprobleme der Nationalökonomie, Epistemological Problems of Economics, and which now for the first time hit the Anglo-Saxon intellectual scene. Lachmann must have sent Mises a copy of this lecture. A member of Mises's NYU seminar, George Koerter, arranged for Chapter 35, The Economics of War, to be reprinted by the New York-based Christian Freedom Foundation, CFF, in September in 1950 as a reaction to the Korean War, which should soon entail a new round of price controls and economic regimentation.

8:37Koerter worked at the time both for CFF and for FEE. The Foundation reprinted the chapter in its fourth nightly newspaper, Christian Economics. CFF was at the time located on 26 West 58th Street in Manhattan. Around 1957 his offices moved to 250 West 57th Street. This publication reached some 100,000 clergymen spread out over the entire country. This might have been Mises' first contact with CFF and its staff, and it became a productive and beneficial collaboration that would last a lifetime. George Koetter continued to attend Mises' NYU seminar for many years and became a personal friend of Ludwig and Margit. After Ludwig's death, he helped Margit write her autobiographical recollection, My Years with Ludwig von Mises.

9:23In the 1950s he worked in the New York area first for CFF and FEE, then as an automotive and transportation editor of Look magazine, and eventually as an economist for the US Steel Corporation. The latter position is mentioned in a March 1959 letter for Mises to Hayek. Cota 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 to Fond Friendship. Mises had another disciple and admirer on the CFF staff, Brooklyn-born Percy Laurie Graves, 1906-1984, was the American self-made man par excellence. Before he began to work at the Christian Freedom Foundation in 1950, he had been a bookkeeper, seaman, advertising manager, instructor in economics, financial editor, ghostwriter, and research assistant to the U.S. Congress, where he had collaborated in the investigation of the Pearl Harbor attack and in the drafting of the Taft-Hartley Act.

10:22Graves had left Christian economics no later than March 1959. 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. By then he had met Bettina Bean. Graves had previously been married in 1930 and had three children. Mises faithfully attended all sessions of Mises' NYU seminar and, together with his future wife, Bettina Bean, wrote minutes for each one of them. Eventually he made a career out of promoting Misesian economics in public lectures and seminars, but most importantly, the Grazes cared for their professor in the late 1960s and early 1970s, when Mises and his octogenarian spouse became frail. After Mises died in 1973, they continued to assist with Margit von Mises. When Percy died, Bettina continued to take care of her revered teacher's widow until Margit too died in 1993 at the age of 103. Bettina then became the curator of Ludwig von Mises' literary estate as she still is today.

11:28The president of CFF and editor of Christian Economics was Howard Kirchner, but the man behind the organisation and its journal was the wealthy Philadelphia industrialist J. K. Howard Pugh, who had inherited the Sun Oil Company from his father and was an extremely successful entrepreneur in his own right. Pugh assumed various social responsibilities besides sponsoring CFF. He was the chairman of the board of Grove City College in Western Pennsylvania and he owned the Chilton Press, which published the Pathfinder and the Farm Journal. The Pugh family had a solid track record of opposition to interventionism. It sold virtually all of its highly profitable European business when confronted with the Mises had known him at least since March 1945, when the National Association of Manufacturers sent him the manuscript of a talk in which Pugh had explained how cartels threaten economic progress. The two men had entered into direct correspondence in November 1948, when Pugh asked Mises to write a letter to the editor of the New York Times in response to what

12:29they both believed was a shameful column by a certain Edward Collins. Mises declined the Request responding that any such attempt was futile. First of all, they have the habit of editing and shortening such letters so that they lose a good deal of their persuasive power or even become completely garbled. Secondly, the editor or the columnist has the privilege of the last word. The effect on the uncritical reader is always that his paper is right. What is needed to fight such allegedly non-docmatic dogmas as those advanced by Mr. Collins and and a host of other writers, is an independent journal of opinion. 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

13:29If 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 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 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 star list who had obviously never read the book.

14:28Pugh was quick to react. In early December 1948 he met with the team running Plain Talk Magazine, Alfred Kohlberg, Isaac Don Levine and Eugene Lyons to discuss the advisability of making it into just such a journal of opinion. Pugh's idea was to provide a forum for Mises, Hazlitt and other select economists. These talks did not lead to the desired result, but two years later, one year after the publication of Human Action, Pugh stood again first in line to finance a libertarian journal of opinion, The Freeman, which for a few glorious years would spread Austrian economics among a larger public. Pugh had the habit of giving away shares of his corporation, Sun Oil, to all of his employees. Starting in 1951, he also gave such shares to Mises as Christmas gifts.

15:15He did this every year until 1968. He wrote, While you have been devoting your life to saving the world from those processes which inevitably lead to communism, the rest of us have been devoting our time to operating industry, to the exclusion of everything else, so that we have been blinded to the future, and so I hope you will accept from me, at this Christmas season, a small token of my appreciation in the form of a few shares of stock in the company to which I have devoted my life. Apparently, the two men had started socializing around October of 1949, when Pugh was a lunch guest in the Mises's apartment. Misesians Mises and his circle of friends were not the only libertarians who had not believed human action could become a bestseller. Herbert C. Conwell and the people at the Volcker Fund had sensed that the Misesian edifice was too intellectual to be digested by the general American public. What was needed was a more or boiled down version of the book which would facilitate the penetration of the message into

16:13the larger public. But who could write such a work? Conwell thought he had found the right person in Murray Rothbard, who had been in touch with FEE from at least 1946. Apparently he met Mises for the first time at a FEE lecture in the summer of 1948. This was an invitation to attend a meeting on July 8th when Ludwig by the spring of 1948, when he passed his oral exams, he had never heard of Austrian economics, except, as he later recalled, as something that had been integrated into the main body of economics by Alfred Marshall sixty years before. Rothbard had a distinct recollection of his pre-Human Action economic worldview.

17:01I had a definite instinctive feeling, or insight, or whatever, that there was something wrong with all the schools of economics. I was very unhappy with all the economic theory. I thought that the institutionalists, when the institutionalists were criticizing the orthodox, Anglo-American economics, that they were right, and when the orthodox people were criticizing the institutionalists, they were right. The criticisms were right, and I believed that the simple supply and demand stuff was correct, but I didn't really have a good theoretical base. I wasn't happy with any theories offered. And then when I read Human Action, the whole thing just slipped into place because everything made sense. Shortly before he left FEE to work for the Volcker Fund, Herbert Conwell asked Mises to keep an eye on the Columbia University graduate. He called him one of the most outstanding liberal economics students I know, and mentioned that Rothbard would be interested in attending the NYU seminar. Some weeks before the publication of Human Action then, Mises and Rothbard seemed

18:02to have discussed Rothbard's project of writing a Misesian textbook on economics, a guide for the Intelligent Layman. After Mises' approval of an outline of the proposed book, Rothbard wrote to Cornwell in November 1949, declaring that he was interested in the subject and that Mises had asked him to draft a representative chapter on money and banking on the unhampered market. During those months, Rothbard took part in Mises' NYU seminar, which dealt that winter with Marxism, and in the spring moved on to the discussion of other schools of thought. has reinforced the message Rothbard had derived from reading Human Action. From you, I've learned for the first time that economics is a coherent structure, and I'm sure that this has been impressed on the other members of the seminar as well. By early January 1951, less than 16 months after the publication of Human Action, Cornuel and Mises had received the representative chapter. Cornuel was enthusiastic about the work, and Mises also thought that Rothbard would be the right person to write a textbook

19:01on Austrian Economics after getting his PhD. He wrote to Cornwell, I think that Rothbard's chapter on money and banking is very satisfactory. It certainly proves his ability to write a textbook much better than those I have had an opportunity to see. I hope he will continue his work as soon as he will have finished his thesis. But Cornwell did not wait. He offered Rothbard financial support from the Volcker Fund so that the project could go forward. Rothbard began working for the fund on January 1st, 1952, and continued his intensive work for them for the next six years. Murray Rothbard was the first in a long line of whiz kids who found a new intellectual home in Human Action and in Mises' seminar. Over the next 15 years it happened with great regularity that highly gifted young men such as George Resch and Paul Cantor suddenly sought admission to the NYU seminar. Some of them even sought admission to Mises' residence.

19:56One day Mises was ready to go out for dinner when the doorbell rang. Two youngsters were Mises was standing at the door and offered a subscription to the Freeman magazine. Mises declined the offer, saying he was already on their mailing list. He did not know that this was his first contact with two of his most ardent followers, Ralph Reiko and George Reisman. Reiko and Reisman were both 15 years old. They had been reading the Freeman for a year or two and had also read some of Mises' books. Inspired, they had established the Cobden Club, an organization of right-wing students to fight the good fight. One day they decided to pay their hero a visit and came up with the ruse of presenting themselves as salesmen. Fortunately, they then decided to do things the proper way and paid a visit to the F.E.E. offices in Irvington, where they met with Ivan Beely, who was so impressed by their knowledge that he asked Mises whether he would be willing to receive them.

20:49Within ten days the meeting was arranged and the old man, who fortunately did not remember their faces, Mises advised the boys about the proper way to study economics and spend their time in college. That first meeting took place on February 23rd. He persuaded them that they had to invest more time learning about economics and liberty, rather than propagandizing theories that they did not really understand. As a token of his trust in their talents, he invited them to attend his NYU seminar under condition that they did not make noise. They would attend and his seminar for many years and become important advocates of Misesian economics. They both learned German on Mises' advice. Reiko translated liberalismus into English and Reisman did the same for Grundprobleme, epistemological problems on economics and the free and prosperous Commonwealth.

21:38The title of the latter book was changed in subsequent additions to liberalism, a socio-economic exposition. The Volcker Fund sponsored Reiko's translation, which he began in the summer of 1956. Speeches and Papers Encouraged by the success of Human Action, Mises turned again to fighting the prevailing ideology of interventionism. On April 18, 1950, he attended a reception of New York's University Club, held in honor of the author of Human Action, and addressed the audience in an after-dinner speech on and the economics of the middle-of-the-road policy. The talk was a huge success. Two weeks later the lecture was printed in the Financial and Commercial Chronicle, and at the end of the year, Frederic Neimeier printed one thousand copies of it as a pamphlet for his campaign to counter the growing socialism among his fellow Calvinists.

22:28Mises went on to write a series of articles on various aspects of interventionism, which he published mainly in three journals, Commercial and Financial Chronicle, Plain Talk and The Freeman. These pieces both drew on the success of Human Action and spurred further interest in the book within the grassroots libertarian movement, yet Mises certainly harboured no illusions about their short-run impact. The libertarian tradition was old in America, and it was still strong, but he was well aware that current trends were eroding it relentlessly. If interventionism continues to be the policy of the US, this country will before long go This concern was soon confirmed by the policies adopted in the wake of the Korean War. When war broke out in the fall of 1950, the US government immediately reinstituted the wartime regime of price controls and regulations. In the spring of 1950, Mises attended a conference dedicated to analyzing the impact of the current Korean War mobilization on the American economy.

23:31The conference took place on April 5-8 in White Sulphur Springs, West Virginia and was sponsored by the William Volcker Fund. He then wrote a lengthy paper for the 1951 Mont Pelerin Society meeting in Beauvillon. Its subject was the nature of entrepreneurial profit and loss, which, Mises explained, resulted exclusively from the relative quality of entrepreneurial decision-making and therefore could not possibly be abolished through legislation or any other and a form of government intervention. He also demonstrated the social utility of profit and loss. Profits direct resources into those hands that use them in the way most desired by consumers. Losses help eliminate incompetent entrepreneurs thus preventing a waste of resources. The work was ready by early June and Mises sent it to Neumeier. At the same time he must have finished at least the first draft of another important work. By June 1951 he had have written a manuscript on dialectical materialism, a later version of which was probably incorporated as a chapter in theory and history.

24:32His Calvinist friend immediately recognized its suitability for widespread dissemination. Even before the Montpilarin Society meeting began, Neymeyer had agreed to publish the paper and set out to print 5,000 copies, of which the Volcker Fund immediately ordered 1,500 copies. In his renewed effort to combat interventionism, Mises began by writing on such topics as middle He believed that it was important to target domestic interventionism. To one correspondent in Sweden who sought to launch a campaign for free trade, Mises explained why this campaign could only be based on a preceding campaign focused on domestic policies. One could take into consideration the abolishment of protectionism in the time of Cobden and and Chevalier as freedom of commerce existed within each state or it was at least on its way to it being established. Things are very different in the age of interventionism. Each country has a system of varying privileges for individual interest groups, pressure groups.

25:34None of these measures would work if foreign countries were to freely supply the domestic market of this country. Keeping away foreign competition is for this reason an indispensable complement to domestic economic policy. US representatives occasionally indulge in talk of Free Trade, this is pure illusion, American agricultural policies, parity prices, subsidies, limitation of crop services, destruction of supplies, potatoes, among other things, would collapse overnight if foreign imports were freely allowed into the country. Can you imagine a present-day England or present-day France with a regime of free trade? The more a country proceeds to a comprehensive control of all business activities, the more it must close lose itself to foreign countries. The battle for free trade must therefore first attack domestic protectionist measures. Similarly, he wrote a few years later to Auger, 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

26:43and the jurisdiction of the various national governments. Of course, this does not mean that he would now downplay the importance of free trade. He discussed it in his lectures and occasionally also in correspondence. A master of concision, Mises sometimes addressed the point better in correspondence than in his books. For example, in response to the perennial question of whether free trade would cost American jobs, he replied, Wages are cheaper in almost all foreign countries than they are in this country, but total costs of production are for most commodities, practically for all manufactured goods, lower in this country than they are abroad. What counts in competing on the market is not the height of one item of the total bill of costs, but total costs of production. There are of course some minor and less important branches of manufacturing which under free trade would lose a part of their customers to foreign competition, The Freeman The success of Human Action prompted the creation of another important libertarian institution.

28:05Mises had long been arguing the need for a free market journal of opinion. Now organisers, journalists and especially financial backers rallied to establish such a journal. Its explicit purpose would be to promote the ideas Mises stood for. The Austrian economist became the intellectual standard bearer of the Freeman, which reinforced the infant network of Mises' NYU Seminar, FEE and the Mont Pelerin Society. Despite its eventual departure from its founding auspices, the Freeman would play a significant role in the revival of American libertarianism under new Austrian auspices. Two historians have aptly summarized this role. It is difficult to convey a sense of the crucial role of the Freeman at the height of its prestige. Between 1950 and 1954, the American left in these years had many well-known and reputable journals The American right had almost none. By the end of 1955, when new owners changed the nature of the magazine, a self-conscious and relatively coherent movement had evolved. If creeping conservatism was the grand trend of the 1950s, then the Freeman had been its professional

29:16and articulate journal of opinion. The Freeman began as a successor to the journal Plain Talk, which for some time had been in financial trouble and could only survive on subsidies from New York Businessman Alfred Kohlberg. Initial financing of The Freeman came through the fundraising efforts of Jasper Crane, which had resulted in a substantial donation from Herbert Hoover and sizable loans from Howard G. Pugh and Crane himself. In a note dated October 3, 1952, John Chamberlain called Hoover the principal founder of The Freeman. Later, Leo Wallman successfully set up an advertisement programme, which was then The explicit motivation of Pugh and Crane was to provide a forum for the author of Human Action and like-minded intellectuals, but to ensure editorial independence, all initial funds came in the form of donations and loans, rather than by stock. Shortly after the establishment of the Freeman, Frederic Neimeier had written to business friends that Dr. von Mises has been a prime mover on the programme to put out a truly liberal, meaning by that, laissez-faire

30:20Capitalism, 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. Crane was at that time a director of DuPont and member of its executive committee. Leadership of the Freeman was in the hands of its three editors, Henry Hazlitt, John Chamberlain and Suzanne Lafollette. Chamberlain became the president and Hazlitt the vice president of the journal. They published The Freeman as a fourth nightly review, with Mises on an eleven-man board of directors. The first issue appeared on October 2nd, 1950. The Freeman had two predecessors by the same name. The first Freeman was published for a couple of years in the 1920s. The editor was Alfred J. Nark. In the 1930s, then a former assistant to Nark, Suzanne Lafollette, published a successor for about fourteen months. Lafollette also joined the editorial team of Chamberlain's and Hazlitt's Freeman in 1950.

31:15Many observers greeted the new publication as the necessary exception in a media landscape dominated by the left. Raymond Moley explained to his readers in Newsweek, It is difficult to realize how firmly entrenched in this country are the forces which would pervert the free institutions of this country into the reality of a socialist state. The drift toward more state power, particularly federal power, began many years ago under such names as progressivism or liberalism. This movement, as organized politics, ultimately captured the Democratic Party under FDR. It pervades most of the economic and political thinking in our colleges and universities. It has seized ascendancy in our literary criticism and book reviewing. And finally, through the political arms of the CIO and AFL, it has measurably brought together into a hardcore the immense financial and voting strength of the unions. No little credit for this is due to two journals of opinion, The Nation and New Republic. These journals, once the voice of minority protest, have become the gospel of what has almost become an established order of thinking. A whole generation of teachers

32:21and other leaders of thought have, to a measurable degree, taken their political bearings from these journals. The freeman's great role is that of a protest against the new orthodoxy which holds that all good comes from the state. This new protest has the virtue, however, of Conformity to the Oldest and Best Traditions of American Freedom, Traditions that if neglected too long will wither and die. The journal had an excellent start. Subscriptions increased from 5,203 in the first issue to 12,200 in May 1951. By March 1952 Time and Newsweek reported that the new kid on the block distributed close to 20,000 copies. At the end of March 1952 Alfred Kohlberg dropped out as treasurer and returned to his important business. In came Alex Hillman, publisher of Pageant and People Today and other magazines.

33:14This was the first great blossoming of Austro-libertarianism in America. Mises now felt that things had substantially improved and he wrote in correspondence that the case for liberty had made great progress since the dark days of 1945. 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. The Freeman not only provided Mises with a forum for his ideas, but also with an organisational basis through which he could reach out directly to students. At the initiative of Henry Hazlitt, the Freeman sponsored a two-week Mises seminar in the afternoons of June 25th through July 6th, 1951 in the alumni room of the NYU Faculty Club on Washington Square. Mises was not in New York during the first three weeks of June and left New York City again on July 10th, probably for the Montpelerin Society meeting in Beauvalon. In the first week, Mises dealt with fundamental problems of economic analysis and in the second turned to monetary economics. Young Leland Yeager, at the time

34:19a graduate student in monetary economics, was one of the 39 participants. The second The following week would leave a lasting impression on him. He wrote, Reading your books is very instructive, but seeing and hearing you in person is a genuine inspiration. You revealed yourself not only as a great economist, but as a great humanitarian too. The interventionists who cite you as an example of a die-hard reactionary are only showing their own complete ignorance. What a pity that the world has so few intellectually courageous men like you. Bettina Bean took lecture notes of this seminar. In the 1980s, Jaeger 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. Jaeger was one of the few student participants. Most members of the seminar were teachers, journalists, businessmen and professors.

35:10The two weeks were a great success and led to a second Mises seminar in June and July 1952 in San Francisco's public library before an audience of 46 participants. 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. Again, the first week was dedicated to fundamentals. Mises here delivered his analysis of dialectical materialism, which a few years later appeared as a chapter of his book Theory and History. In the second week he dealt with capital theory, saving, investment, and the accumulation of capital, the demand for capital, and the economic Forming a Political Significance of Foreign Investment Again, this seminar was very successful, but it did not go to his head. When invited to appear on television in California, he declined, saying, My foreign accent prevents me from appearing on television or radio. These media of communication intensify the shortcomings of the speaker's pronunciation.

36:08Mises left Manhattan for San Francisco some days after June 18. After the seminar, he He spent a vacation in California and returned to Manhattan after Labor Day. The fall term started on September 22nd. In the tradition of Plain Talk, one of the concrete goals of the Freeman was to expose Communism as a totalitarian scheme. Anti-Communism also provided a unifying theme for dealing with foreign policy and domestic policies, which could be denounced as Communist-inspired. Yet there was no fundamental agreement on the strategic role of anti-Communism. Chameleon and Lafollette saw in it the very essence of their mission. For Mises and Hazlitt, Communism was just a particularly gruesome species of the more general disease of statism, which manifested itself most notably in domestic government interventionism. Many of the Freeman articles in the decisive early years dealt with American foreign policy, especially for the role of the United States in confronting the Soviet-led East Bloc. The focus on anti-Communism in Foreign Policy, was certainly convenient in that it allowed the editors to expand their

37:14readership without offending those who were both anti-communist and pro-interventionist. Even on the issue of foreign policy, however, there was no unity in a libertarian camp. One faction advocated political isolationism combined with cultural and commercial openness to foreign countries. On the other side, there were the interventionists who championed American and Government Opposition to Communism on a Worldwide Scale. The latter tended to be less interested in combating Communism by intellectual and educational means, focusing instead on the denunciation of Communist infiltrators, the prosecution of domestic traitors and military action against Communist troops abroad. The confrontation crystallised in a semi-public correspondence between Leonard Reed and Lawrence Furtick. Reed had championed the resolute Anti-War Stands, because he recognized that war was the great mainspring of government power.

38:09Frederic commented, Your philosophy seems to trend toward non-resistance and even slightly toward anarchism. I believe that the raising of an army is a perfectly legitimate function of government. Your implication that we must wait on these shores before striking back at an aggressor makes no sense to me. Your statement that a man in the army shooting communists in Korea is just as girly as a The man blowing the head off a baby in Centreport is a statement that I reject completely. And he went on to say that the fundamental problem cannot be coercion per se, because taxes are, after all, coercively levied on the citizenry. Reid replied, Personally, I am unable to concede that there is any right that comes into being by reason of you and me acting collectively.

38:54From a moral standpoint, can the collective be right in doing what is wrong for the person? I concede that you have a moral right to protect your life and property against violence otherwise initiated. Collectively, we have the same right, but no more. This reasoning is not anarchical, nor is it pacifistic. It is nothing more than the limitation of force to what I think is its proper scope. Mises' views on the issue are revealed in a letter that he wrote some years later to Anthony Fisher, the founder of the neoliberal Institute of Economic Affairs in England. is deplored to the pro-socialist leanings of public opinion on the western side of the Iron Curtain, which paralyzes all political actions of the West and makes it possible for the Russians to do what they want in Hungary, Poland and the Near East.

39:41The average American intellectual condemns England and France as aggressors, but he does not consider as aggression what the Russians are doing in Hungary. He admits that the Russians are rather harsh in Hungary, but he excuses this harshness. It is, he thinks, rather unrealistic to apply to Eastern affairs the yardstick of Western civilization. What in America would have to be qualified as brutality is in the East merely behaving as everybody does. Otherwise Mises did not get involved in these debates. In liberalism he had argued that the Russians should be allowed to do in their own country whatever they wished, that they should be free to spread their ideology in the West, even with the help of clandestine hirelings, and that businessmen and other citizens of of the Western countries should be free to make loans to Bolsheviks in Russia and elsewhere.

40:28What he opposed was Western governments actively supporting the destructive policies of Communism, whether through premiums paid on exports to the Soviet Union or through propaganda on their behalf. He had espoused this position a quarter century earlier, and he had not retracted a single word. He was convinced that Communism first and foremost posed an intellectual challenge and had to be fought with the weapon of the mind. Mises wanted Friedman to run more articles and book reviews dealing with economic principles, but he was aware that the journal lacked the manpower to do so. The dispute over American foreign policy foreshadowed dividing lines within the American libertarian movement that have continued to the present day, but in the early 1950s it was only a sideshow in the unfolding drama that led to the early demise of The Freeman. The main factor in this drama was a disagreement between Hazlitt and Chameleon on strategic issues of editorial policy. Then, too, there was the fact that Hazlitt, who had the backing of the main sponsors, was unwilling to give up his position at Newsweek

41:31to run the Freeman full-time. Conflicts between the Hazlitt-Mises camp and the Chameleon-Lafollette camp were inevitable, given their different outlooks on what the Freeman was and should be. For Mises and Hazlitt, the essential mission of the journal was to educate the larger public, not to take part in the daily strife of political factions. As I see it, the function of the freemen is to make it possible for dissenters to challenge the ideas of the left. The issue is not so much to fight communism, as this task is to some extent accomplished by other media of communication. What matters is to expound sound economics and to expose current economic fallacies. In contrast, Tamalin favoured a more aggressive tone, both attacking and endorsing specific of Persons, Parties and Political Candidates. With an eye on Mises, Webker and other academic contributors, he later argued against sterile journalism. We believe that it was the intention of the founders that the Freeman should be a comprehensive fourth-nightly review of the contemporary scene and not merely a journal of classical economics, allowing a selected

42:36group of economists to talk to each other via their papers. In short, Chamberlain held that The magazine must have crusading zeal, wit, satire, and editorial bite. Hazlett replied, Exactly, but one man's crusading zeal is merely another man's vehemence. One man's wit and satire merely another man's trivial wisecracks. One man's editorial bite. Merely another's vituperation. After two years of experience, Hazlett found his concerns confirmed. He quoted Chicago economist Frank Knight, who had told him in correspondence that the The Freeman seems to scream in a way that may tickle the ears of those already converted or over-converted, but it would hardly convert anybody or at least nobody open to reason, and they are the only ones I'm personally interested in.

43:22This 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 Hazlitt himself was later reported to object, to putting out the kind of magazine in which McCarthy is a sacred character, and Furtick was quoted in the same source saying that the Freeman should have convinced by logic and reason with less shrillness, less direct hysteria. Hazlitt stated his opinion in October 1952, a libertarian journal of opinion is only worth Publishing, as I see it, if it can have a real effect in turning the tide of national thought in this crucial era. To have such an effect it must command the respect of the intellectuals, even, in fact, particularly of those we are trying to convert, and it cannot command this respect unless it has dignity and a note of authority. Of course

44:25the magazine must also be lively to reach as wide an audience as possible without sacrificing these qualities. Even though Haslitt was only a part-time editor, his work with the Freeman proved to be a severe drain on his energies. By May 1952 he brought a new man onto the editorial team, Forrest Davis, a former Washington editor for the Saturday Evening Post, but just a few days after his arrival it was clear that Davis was not to be Hazlitt's man. Isolated in his editorial stance, Hazlitt resigned in June, officially he took a leave of absence of four months at the request of Mises, Furtick and other friends on the board Part of directors who did not want to abandon control of the Freeman to the remaining editors. So far so good for Chamberlain, La Follette and Davis. Their major problem in the wrong run was to find funding independent of the financial fathers of the magazine, Pugh and Crane, who backed the Hazlitt line. This problem seemed to find a convenient solution in the

45:22form of a fundraising dinner at the occasion of the Freeman's second anniversary. One month before the event, however, the Hazlitt camp started torpedoing the dinner preparations. It is not entirely clear what prompted them to this action. The following scenario seems most likely. During Hazlitt's leave of absence, Howard Pugh had made it clear to both the Chamberlain camp and to the members of the board of directors that he stood ready to finance the Freeman single-handedly if it focused on the communication of broad principles of the free market philosophy rather than engaging in partisan attacks on persons and programs, that is, if it followed the Hazlitt editorial line. When Chamberlain and his associates did not yield, Mises and the others started a last desperate attempt to direct the freemen toward Hazlitt's position by scuttling the fundraiser that would have made the editors financially independent of Pugh and Crane. The struggle got uglier and more personal. Chamberlain now wrote nasty letters accusing Hazlitt of being Pugh's lap dog, and in a heated board meeting in October 1953, Mises said Chamberlain

46:27and Lafollette were second-rate journalists compared to Hazlitt. On October 31st, 1952, a vote of confidence in favour 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 Reid, Furtick, Mises and Robinsons. Hazlitt himself resigned both from the Board of Editors and as Vice President on October 8, 1952, as he had intended since May. Meanwhile, Crane and Furtick lined up a majority behind their position, and at a Board meeting on January 21, 1953, Hazlitt was elected editor-in-chief, whereupon Chamberlain, Lafollette and Davis resigned immediately. Chamberlain eventually became an editor of National Review, as well as of the Princeton panel and a regular contributor to the Wall Street Journal.

47:20But this was only a symbolic victory. More than six months of quarrel had brought the Freeman to the verge of bankruptcy, Jasper Crane desperately tried to raise new money with fundraising letters, and Frederic Neimeyer tried to acquire new advertisers but to no avail. Henry Regnery's response to Crane was symptomatic. I think this is the last cause. After a few months, Hazlitt, who still continued to write for Newsweek and to fulfil other In 1955, the magazine was taken over by the Irvington Press, a subsidiary of FEE, with Frank Chodoroff as editor. Mises contributed an article on Inequality of Wealth and Income to the first issue, May 1955. By January of the next year, the Freeman was officially the journal of FEE. Paul Poirot would be its editor for the next few decades, and it would would continue to publish the work of Mises and promote the economics of the Austrian School, but it never reached a mass audience.

48:19The Neumayr Connection Frederick Neumayr had printed 1,000 copies of The Economics of the Middle of the Road Policy, which he distributed for free among his fellow Calvinists. The campaign had a resounding echo. A few months later, the Edison Company ordered 3,100 copies, the Norfolk and Western Railway Company ordered 800 copies and other orders followed. Following instructions from Mises, Neumeyer published the piece under the title Middle of the Road Policy Leads to Socialism. Mises received a 10% royalty on the sales. The number of copies Neumeyer 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.

49:05At least one copy had found its way over the Atlantic and fell on fertile ground. The young English businessman Anthony Fisher asked that 48 copies be sent to him as a gift because of the foreign exchange controls which he duly received. 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. And Latin America, the Federation of Mexican Chambers of Commerce, planned to translate the piece, What I find revealing is the fact that such of his pamphlets as I received from you had to be published at all in a country which is supposed to be the only remaining fortress of free enterprise. If the Americans themselves are to be told about the benefits of free enterprise by Austrians of all people, it seems to me that the world's malady is pretty far gone. In the fall of 1950, spurred by the success of his campaign, Neumeier set

50:04and up the publishing company Consumers Producers Economic Service in South Holland, Illinois. This would later become the Libertarian Press, which still exists today. Throughout the 1950s, Nijmijer came to New York for two or three days at the beginning of each month and had regular dinner and lunch meetings with Mises. They never became close friends, but there were more than mere professional ties between the Jewish agnostic and the Dutch American Calvinist. Nijmijer eventually convinced himself that Mises was the greatest living champion of the Innermost Rampart of Christianity. In various letters to Howard Puneim, I have summarized many years of reflection on the significance of Mises's work for Christianity. If there is to be a re-reformation, it will have to be, in my opinion, on the basis of what the praxeological and the natural sciences have contributed to human knowledge since the days of the Reformation.

50:55In regard to questions of ethics, I have come to the conclusion that the economics of Doctor When that kind of a synthesis is made, one turns out to be an extraordinarily conservative adherent of the Christian religion, but also some of the absurdities are removed. Neimeyer's publishing venture began, as all start-ups do, small-scale with big ideas. At first he published copies of Mises' middle-of-the-road policy leads to socialism, but he already Hayek had larger-scale projects in mind. In particular, he planned an American edition of The Theory of Money and Credit, and a translation of the final edition of Boehm-Bawerk's three-volume magnum opus. Nijmeyer was also in touch with Hayek, who recommended Boehm-Bawerk's Macht oder ökonomisches Gesetz, control or economic law, for translation. Nijmeyer then made inquiries about the copyright for a 1931 translation by John Richard Metz. Mises warned him that The major problem was not to print good books, but to spread the message in a hostile environment.

51:59As conditions are today in this country, such books would be boycotted by the universities, the libraries, and the influential newspapers and periodicals. It seems to be that the main problem is to raise the money for counteracting such a boycott. Neumeyer knew Mises was right, and he knew what to do about it. Many years of networking in American industrial circles had filled his address book, and he He was astonishingly capable of bypassing the distribution channels of established publishers to reach the public directly. Mises was impressed. He started giving serious thought to Neumeier's plan to hire a qualified German-English translator for Boehm-Bawerk's work. Mises now remembered a young man from Germany who had been attending his NYU seminar for some time. He had come to the United States a year earlier as one of the first immigrants after the German quota had been opened in the summer of 1949.

52:48Mises's son, Zenholz, had already studied economics in Marburg and Cologne, and he had received a PhD in economics from the University of Cologne in the spring of 1949. In Marburg, a fellow student had advised him to read the treatise on money by that sharp Jew from Vienna, so when Zenholz decided to continue his studies, he recognized Mises's name in the faculty list of the New York University. He attended his seminar with great enthusiasm, and after In his twenty-four years at the New York University, Professor Mises sponsored only four candidates who wrote their dissertations under his tutelage, Zenholz, Spardaro, Kirzner, Reisman. When I first broached my plans to study with him and earn the degree, he bluntly rejected me.

53:35Many would like me to sponsor them, but only very few are qualified. I was stunned and Professor Mises was not about to sponsor a potential failure, in fact, the four he actually accepted may have been his full share of successful candidates. When I repeated my request six weeks later, he reacted quite differently. He readily and courteously accepted me as his candidate and even suggested a number of topics for my dissertation. He probably Mises 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.

54:21During the following years, Zenholz would not only write his doctoral dissertation but also translate Boehm-Bawerk. At Mises' suggestion, Neimeyer also hired native English speaker George D. Hunk as a co-translator. By December 1952, conflicts had arisen between the two 2 Translators. Many years later the Neumeier-Zenholz connection proved to be important in maintaining the mission of libertarian press when Zenholz took over the company. Neumeier had another publishing idea that proved to be highly successful. He had given much thought to the question of how Mises' ideas could be presented to the greater public in a more accessible form than a 900-page treatise. He found the answer when, in 1952, this libertarian press published a collection of articles that Mises had written during the previous seven years.

55:08About a year later, Neumeier had another idea, suggesting that human action be made more accessible by the creation of a glossary. Later on, Percy Graves put this idea into practice. The book was titled Planning for Freedom. This was also the title of the first essay which Mises had written in 1945 in reaction to Hayek's phrase of government planning for competition. The other chapters criticised various aspects of interventionist theory. History and Practice. They also contrasted the interventionist record for the operation of the free market. Each chapter could be read independently of the others and thus the total made for an excellent, light introduction to Misesian economics. Sales proved very satisfactory. One order came from the Soviet Union, Mises commented, I hope that the purchase of Planning for Freedom will complete the Moscow collection of my publications.

56:00A New Edition of The Theory of Money and Credit The success of Human Action paved the way for a new edition of The Theory of Money and Credit in 1953. By the late 1940s the book had been out of print for some years. Nymeyer was willing to publish a new edition, but Mises chose a more prestigious Yale University Press, which was interested in publishing more of its best-selling author. In true Christian spirit Nymeyer promoted the book through a flyer campaign. Five thousand flyers were Mises used the opportunity to add a new fourth part to the book on monetary reconstruction, which argued for reintroducing the gold standard. Here he restated ideas he had expressed in previous works, but greater intellectual majority had made the exposition simpler. He combined These older, more technical ideas were the case against the only possible alternative to the gold standard, namely inflation. Mises thought that the United States was on the verge of this steep decline of inflationism and interventionism he had seen in Europe.

57:07In only one respect did the American situation differ from Germany in 1914 and 1923, the presence of a vocal opposition against this decline. But he also added two crucial insights he had gained since the last edition of his book. The first of these insights was that there was not even an emergency case for inflation. The champions of emergency inflation agreed that there is no economic case for this policy under normal circumstances, but they argued that inflation was justified as a last resort when a national emergency such as war required the continued operation of the government and taxation and debt failed to do the job, he observes. This political argument is only Mises noticed that if a majority of citizens truly stood behind the government and its project, no inflation would be necessary. In this case, the political determination of the majority would come to be expressed in higher taxation. There was only one conceivable He had raised this point already in 1923, at the height of the German hyperinflation,

58:37but his wording then was cautious, and he did not insist on the point. In 1954 he stated unambiguously that inflation was the financial aspect of tyrannies. It is not an instrument of legitimate revenue, but an instrument of oppression. There is no need to raise the question whether the government's or the majority's opinion is right. Perhaps the government is right. However, we deal not with the substance of the conflict, but with the methods chosen by the rurus for its solution. They reject the democratic way of persuading In the majority, they aggregate to themselves the power and the moral right to circumvent the will of the people. They are eager to win its cooperation by deceiving the public about the costs involved in the measures suggested. While seemingly complying with the constitutional procedures of representative government, their conduct is in effect not that of elected office-holders, but that of guardians of the people.

59:32The elected executive no longer deems himself the people's mandatory. He turns into a furor. The second insight Mises added to the 1954 edition also represents a departure from his is thinking in 1934 and even more so from his views of 1912 when he first published the book. The insight concerns the necessity of an actual circulation of gold coins. In 1912 he almost disparaged such metalistic views, but forty years of experience had made him wiser.

1:00:21He now emphasized, gold must be in the cash holdings of everybody. Everybody must see gold coins changing hands, must be used to having gold coins in his pockets, to receiving gold coins when he cashes his paycheck and to spending gold coins when he buys in a store. 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. Of course, Mises had not become a gold bug. He had no fetish about the yellow metal or any other metal. The point was that only a commodity currency made the citizens sovereign in Monetary Matters. As long as they had real money in hand, they were truly in charge of it, and they would immediately notice any departure from sound policies. Any bank or government refusal to redeem checks would immediately be recognized as fraud. What is needed is to alarm the masses in time. The working man in cashing his paycheck should

1:01:17learn that some foul trick has been played upon him. The President, Congress and the Supreme Court have clearly proved their inability or unwillingness to protect the common man, The voter from being victimized by inflationary machinations. The function of securing a sound currency must pass into new hands, into those of the whole nation. At the end, Mises noticed that there were no arguments against the gold standard. There was only the cynical claim that reintroducing it was a utopian undertaking. He replied very much along the same lines by which he had concluded his critique of socialism. Yet, we have only the choice between two utopias, the utopia of a market economy not paralysed by government sabotage on the one hand, and the utopia of totalitarian all-round planning on the other hand. The choice of the first alternative implies the decision in favour of the gold standard. If little doubt that these warnings would go unheeded.

1:02:17Grey Eminence and Itinerant Scholar The success of human action was not the only In the instance of Mises' influence on the libertarian movement, and on the American right in general, another factor was, ironically, his relative isolation among academic economists. By the late 1940s, Mises was already the odd man out in both his methods of research and his political orientation. Then Human Action put him in the spotlight, and suddenly his authority weighed heavily in the decision-making of the few but substantial funds that had had been created to support free market scholarship. 30 years of social science research funding through the Rockefeller Foundation and others who pursued an explicit scientific orientation have left their mark on the state of economics and other disciplines. The money from Rockefeller, Ford, Carnegie and others, was channeled into the universities through the Social Science Research Council, a 1923 Rockefeller creation.

1:03:18To the exterior world, the Council represented seven major social science societies, but in fact it was a self-perpetuating body. In January 1954, Carl E. Ettinger, a private research consultant, commented on the role of the Council in a letter to Efe Hayek. Quoting extensively from R. B. Fosdick's History of the Rockefeller Foundation, he concluded, There seems to be strong evidence that the emergence of an orthodoxy of quantitative of sociology has been greatly influenced by the magnetism of money and the control of available funds by a foundation bureaucracy that knew what it wanted and favored the imitation of the methods of natural scientists by social scientists. The political explosiveness of these observations stemmed from the tax-exempt status that the big foundations enjoyed. Mises Mises had known Ettinger at least since 1946. Ettinger coordinated research on consumers' cooperatives on behalf of the Petroleum Industry Research Foundation.

1:04:21Only a small number of private individuals and institutions still supported social philosophers of the old time. Mises knew them all and Human Action had given a great boost to his authority. The Volcker Fund had been funding him since 1945. But after the publication of his treaties, the Fund began supporting lectures and extended seminars for Mises, and it even started funding his students. Thus, from 1955 to 1969, the Volcker Fund sponsored a one-year fellowship in political economy at NYU's Graduate School of Business Administration. Mises nominated the recipient. The first recipient was Hans Hans Zenholz 1955-1956 Israel Kirzner was a laureate in 1956-1957 and Toshio Maruta in 1959-1960. Upon his return to Japan, he began to spread Mises' theories and also translated the ultimate foundation of economic science and human action into Japanese. Only two students received a fellowship for three consecutive years. One of these students was Robert Guarneri, from 1963 to 1966. Guarneri had been a student of Hans Senholtz's in Grove City. He later set out for a business career. For some time, Mises also controlled

1:05:40an annual budget of $12,500 at NYU. These payments started after December 1958. And other institutions started doing the same thing. For example, the Earhart Foundation undertook travel expenditures and student scholarships, the National Association of Manufacturers organized and paid for seminars, and Howard Pugh and others subsidized the Freeman. For several years funding Mises and his projects was almost a matter of course. His judgment on persons and projects was often final. In the fall of 1958, historian of economic thought, Emil Kauder, advised Raymond de Ludwig von der Ruhr, who was looking for funding of a research project, not to write directly to the Volcker Fund, but to get first in touch with Mises or Hayek. This sudden concentration of resources on Mises reflected more than the respect owed to the man. It was also the sign of an important problem in the free market movement. By the early 1950s, substantial money was available for scholarship, but there were not many libertarian scholars of Mises's The situation was quite bleak, as Lawrence Furtick stated in a letter.

1:06:50Take the Faculty of Columbia University. Aside from Dr. George Stigler and Dr. Leo Wolman, I doubt if there is another member on the entire economics faculty who presents the free-market liberal point of view. At Yale, out of thirty members of the economics faculty, until recently just two, Professor Henry Fairchild and one other, represented the old liberal point of view. The Harvard faculty is dominated by men like Professor Seymour Harris, Alvin Hansen, Sweezy, and others like them, who range all the way from Keynesians to outright socialists. This faculty, NYU, is definitely under the major influence of Keynesians and collectivists, although there are a few eminent men, like John D. Williams and Sumner Stichter, who have not gone entirely that way.

1:07:35The same is true for smaller colleges, such as Williams, Amherst, etc. The new School for Social Research doesn't have a single libertarian on its faculty. Sarah Lawrence College probably couldn't produce a single one either. The men on Frederic's short list of libertarians were less original than Mises, less radical and less outspoken in their support of laissez-faire capitalism, the fact that it was obvious to all parties involved. Mises himself considered many of them to be moderate interventionists, and an opinion that his financial backers had learned to respect. He occasionally recommended textbooks written by these other men, for example Fairchart and Shelley's Understanding Our Free Economy and von Sickle and Rugger's Introduction to Economics, but the most he could say of these books was that the interventionism advocated within them was less radical than that promoted in all the other textbooks, which he believed were totally flawed from a theoretical point of view, Marx, Keynes, econometrics, and had a radical interventionist, if not outright socialist orientation. In short, there was

1:08:40no substitute for Ludwig von Mises, and this fact would have unfortunate consequences for American libertarianism in the following decades. New York Circles Mises' activities in New York centred on his NYU seminar. By the early to mid-1950s, Four major groups attended the NYU seminar. First, there was a group of NYU students who took the seminar for credit. The great majority of them were thoroughly uninterested in scientific questions of economic analysis, yet there were exceptions. One early student who cooperated more closely with Mises was Hugh P. King, who from 1951 to 1953 was his assistant and later became a business counselor. Then there was Morton Cobrin, who in 1952 wrote a 300-page Master's thesis that condensed some of the main ideas of human action in more accessible language. Cobrin then attended Mises' seminar on government control and the profit system.

1:09:38Cobrin had written his master's thesis under the supervision of a Dr. Dorow. But there were also more important exceptions. At least three regular NYU students would eventually become important Misesians who, each in his own way, took up where their teacher had left of Hans Zenholz, Israel Kirzner and George Reisman. Notable but less important were Louis Spadaro and Edward Foy. Hans Zenholz, who had translated Boehm-Bawerk, received his American PhD under Mises in 1954 and published his dissertation in early 1955 under the title How Can Europe Survive? With Mises' support, Zenholz had received a 3,000-ehrhardt research Grant for the academic year 1953-1954 when the fellowship program started. 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.

1:10:35In contrast to Zenholz, young Israel Kirzner had not known anything about Mises before attending his seminar. He was not even a student of economics, but an accounting major who Kirzner had to take one economics seminar to fulfil his requirements. Since he knew nothing of economics, he decided to attend the classes of the most published economics professor at NYU. Starting in September 1954, Kirzner attended Mises' seminars for many years, acting eventually as a Volcker-sponsored tutor for the younger students. He switched from accounting to economics and studied under Mises to obtain his PhD, which he received in 1957 with The Economic Point of View. Kirzner eventually became a professor of economics at NYU, a famous theoretician of entrepreneurship with numerous book publications and retired in 2002. Kirzner was a Volcker 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 Mises praised Kirzner as a young man who promises to become a highly competent teacher and author.

1:11:49The third important Misesian from the ranks of Mises's regular students was George Reisman, who got a PhD under Mises in 1963 for a theoretical study of interest rates with the title The Theory of Aggregate Profit and the Average Rate of Profit. His lifelong research project was the creation of a great synthesis between classical economics, Austrian economics and Ayn Rand's objectivist social philosophy. As a result of these endeavours, he eventually published his magnum opus, Capitalism, 1996. He is now an emeritus professor at Pepperdine University in California. The second group at the seminar was composed of professionals and businessmen. This group The group included personal friends of Mises's, such as Henry Hazlitt, Lawrence Furtick and George Cota, but there were also men such as Dr. Richard Freund, a commander in the US Navy, who had come to know Mises through his publications and who seized the opportunity to attend this seminar session from the end of 1954 to the end of 1961.

1:12:49The third group came from FEE. It included foundation staff and students who had been The fourth group was a spin-off of the FEE crowd. It was composed of radical young free marketeers around Murray Rothbard, including Ralph Reiko, George Reisman, Leonard Ligio and Robert Hessen. They called themselves the Cirque de Bastia. When Rand's novel Atlas Shrugged appeared in 1957. It had a deep impact on the Cirque de Bastille and also impressed Mises and other senior members of his seminar. In 1954, Rothbard began to socialise with Ayn Rand's group and then backed away, having decided that she was not really a libertarian.

1:13:40After Atlas Shrugged came out, however, there was a temporary reprochement and the Cirque de Bastille was introduced to Rand. This eventually led to the break-up of the Cirque de Bastille. Rothbard read the novel that fall and discussed it endlessly with Reisman. They also had continuing discussions on the question of whether capital accumulation implied a declining interest rate. For Reisman, these discussions were the point of departure for a lifelong research program. By all standards, the seminar was of very high quality. In its first 10 years, it featured Mises at the peak of his teaching career. One participant, who had attended the session from from the very start in 1945, wrote a thank-you note in 1952, stating that he had been especially impressed by two facts.

1:14:27First it has attracted a serious-minded group of individuals whose varied occupational and professional interests serve to stimulate a fruitful discussion. Secondly, unlike most seminars, each succeeding year of attendance builds upon the intellectual acquisitions of the past one, without leaving any impression that the student is repeating What makes the seminar especially important for the later dissemination of Mises' ideas is that it brought together a group of excellent students for whom Human Action was the starting point for further intellectual work. No previous group of his students had had this privilege and it had a noticeable effect on their further intellectual development and on the schools they created. It is revealing to contrast the cases of Zenholz and Rothbard with the case of Fritz Machlub, who had been Mises' star student in the 1920s and early 30s. All three men were high-calibre intellectuals, but only the former two became genuine Misesians. A possible difference lay in the existence of the treatise. As he had done with his students in Vienna and Geneva,

1:15:33Mises inspired his American students to apply rigorous, deductive reasoning to the analysis of politically relevant subjects. But they did more. They followed the logic to its politically Radical Conclusions Murray Rothbard, in his youthful exuberance, once boasted that his forthcoming defence of the market economy will be far more right-wing than Mises because of its grounding in welfare economics, which theory I've basically set forth in my festrift article. Rothbard had written a precursor to this paper in 1954 and submitted it unsuccessfully to Economica. It is unthinkable that one of Mises's Vienna students would have boasted that he was more Before libertarian than his professor, the Vienna students thought Mises tended to exaggerate the case for the market economy. But Rothbard was merely an extreme case of the entire species of Misesian students in a post-human action period. Their favourite sport was to find statist arguments and premises in Mises's works. They relished in unveiling his socialism and had a good laugh when Rothbard called the old master a member of the non-communist

1:16:40and Left. This new radicalism radiated beyond Mises' NYU seminar. Inspired by human action, several authors set out to defend liberty, property and capitalism as absolute principles of social order. The best known case is Ayn Rand, who shocked the political correctness of her day for the proud assertive defence of individualism and capitalism that announced itself right in The title of her books, works such as Capitalism, The Unknown Ideal and The Virtue of Selfishness, were inspired by Human Action, an intellectual debt that she graciously acknowledged. Yet Rand's case was no exception. In September 1955, Mises received a massive manuscript with the title The Capitalist Manifesto. The author, a certain Joe Abramson, asked him for comments. Mises replied he hoped soon to find the leisure to study it carefully.

1:17:34It was the work of an enthusiastic amateur, but it showed wherever more of his readers were headed. The high point of these glorious years was the publication of a festschrift for Mises on the occasion of the 50th anniversary of the doctorate that Mises had earned at the University of Vienna in 1906. Mises received the book at a celebration on March 7, 1956, in Manhattan. Hans and Mary Zenholz organised the event. Hayek and Machloub had thought about undertaking a festrift for Mises's 70th 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. Hazlitt was too busy to become a part-time assistant to Hayek and Machloub, but the decisive obstacle was financial, no publisher could be found.

1:18:25Roughly a year before the celebration they had invited contributions from seminar members such as Hazlitt, Rothbard and Sennholz, and from various other intellectuals who had in some way been close to Mises. Fausto Balvé had received the request to make a contribution by March 1955, Louis Roger withdrew his contribution because he thought it was poorly translated into English, and Alfred Müller-Armack declined, saying he had no time. The Sennholzes took pains to avoid any closer involvement of Mises' former students and colleagues from Vienna, whose political orientation was considerably less radical than that of the NYU Seminar. Among the twenty contributors, only three, Röpke, Machlup and Hayek, had been friends with Mises in Vienna.

1:19:10The Asterfestrift became a faithful reflection of the change of Mises' intellectual environment. It was to be a celebration of the intellectual case for human liberty and the free market, and of the man who had done so much to develop this case. The title made it clear, on freedom and free enterprise. 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. A Misesian Treatise It was in these high years of the New American Misesians, the human action years, that Murray Murray Rothbard completed his textbook rendering of Austrian economics. At first, he stuck to the original project of a mere popularization of human action, trying to do for Mises what McCullough did for Ricardo. But by October 1952, he had already decided to pursue a more independent exposition of economic science. Rothbard ended up writing an entire treatise of economic science, covering in some 900 pages the theory of the market economy and

1:20:22of Government Interventionism. The work was a masterpiece and had a deep impact on subsequent generations of Misesian economists. During the winter semester of 1952, Rothbard presented several chapters of his work in Mises' seminar. It was here that he might have defended, for the first time, some of the doctrines that set him apart from Mises. The professor handled the situation in his usual manner, namely with scholastic laissez-faire. He encouraged Rothbard to follow the path he had chosen. This might have to do with the specific American flavour of the exceptions Rothbard took to Mises's approach. For example, Rothbard had come to believe that there was a science of rational ethics based on human nature and what is good for human nature. Thus he had abandoned Max Weber's position, which Mises cherished, that there can be no science of ethics but only subjective value judgements.

1:21:15Rothbard had probably come to adopt this new viewpoint under the influence of discussions with Ayn Rand's group. In the first version of his manuscript of Chapter One, where he explained the first principles of human action, Rothbard had adopted the Weberian position, which was the standard position at Columbia. Probably, therefore, Rothbard attended meetings of Rand's group during 1952 and in the course of these encounters changed his mind on the and the question of scientific ethics. There were indirect contacts between Rothbard and Rand ever since November 1947. By May 7th, 1953, Rothbard was asked to introduce Reisman and Reiko to Ayn Rand, which suggests that at that point he was a regular member of her group. Rothbard also took exception to the philosophical pessimism that seemed to form the foundation of Mises's theory of human action. Mises had asserted that man acts to to Relieve Dissatisfaction, which implied that man did not act when he was happy. Rothbard thought that such a view was contrary to the natural state of man, which is at its happiest

1:22:23precisely when it is engaged in productive activity. But Rothbard would soon disagree with Mises on a more fundamental issue. During the winter semester 1953, he was in the process of reviewing conventional price theory, which stressed Cost Curves and other remnants of classical objective price theories. His rejection of these approaches had led him to some original conclusions. Rothbard became convinced that the entire neoclassical theory of monopoly prices relied on a completely unwarranted fiction namely that it was possible to distinguish these monopoly prices from competitive prices. He believed that Mises too had fallen prey to this fiction. Mises held indeed that the Sovereignty of Consumers was impaired in the presence of monopoly prices. Rothbard disagreed.

1:23:14I have come to the conclusion that this theory is outright nonsense. I do not differ with Mises rashly on matters of economic theory, but in this particular case I think he has not freed himself from the shackles of the old neoclassical approach. The key question here is, how do we know what the If we go to the illustration of this approach in, for example, Federer's Economic Principles, we find the competitive price and the monopolist assessing his demand curve at this price. But in reality, we never know the competitive price. The competitive price is a result of action and not a given. Even if we can observe a man restricting his investment and production in a product and and Raising the Price. We can never know if this is a movement from competitive price to monopoly price or from sub-competitive price to competitive price. As Mises has told us again and again, a concept divorced from real action and employed as an actual reality and even an ideal is invalid. Therefore, the whole concept of competitive price versus monopoly

1:24:19price has to go by the board. On the free market, there is only the free market price, which in turn is competitive since buyers and sellers freely compete with each other. And this is true not only for the individual seller but also for a cartel, for I have come to the perhaps even more revolutionary conclusion that there is nothing in the world wrong with a cartel when it is voluntary. When many firms merge or form a cartel, what happens? In effect, the assets of many individuals are pooled and directed by them all in accordance with their proportionate ownership and their contract. And how does this process differ from the formation of an ordinary corporation when different individuals pool their capital and assets according to their voluntary contract? Not in the slightest. Another year later, at the beginning of the academic year 1954-1955, Mises concentrated in his NYU seminar on price theory and other aspects of the theory of the market economy, possibly because he sensed that Rothbard was in a decisive phase of his

1:25:20He had Rothbard deliver several presentations, in particular on Robinson's and Chamberlain's theory of monopolistic competition and on selling costs. Rothbard was better prepared than ever. He had spent the summer discussing economics for endless hours with young George Reisman. In the course of these discussions they developed an important extension of Mises's theory of economic calculation, starting from the question of how extensive the number of If firms in the economy must be in order to have calculation, they came to the conclusion that for every vertical integration within a firm, in order for the firm to allocate costs, etc., internally, there would have to be a market for that area external to the firm. Thus, the inability of a socialist government to calculate is a special case of the inability of any firm to calculate for departments internal to itself, if there is no external market to which to refer. Combined for the Mises seminar, this intensive exchange gave a decisive boost to Rothbard's writing to the point that, by July 1955, the manuscript had almost

1:26:27reached the form it would have when it was eventually published in 1962. Most important, Rothbard had by then completed the chapter explaining the conceptual framework within which he would analyse both the operation of the market economy and government intervention. In distinct contrast to all previous economists, with the notable exception of Gustave de Molinarie, the Dean of the French 19th century laissez-faire school, Rothbard did not present the modern state as an integral part of society. Rather, he distinguished between two types of production of security, coercive and free. The former was characteristic of the modern state, whereas the latter would exist only in a hypothetical free society. These statements, which Rothbard made in his July 1955 report to the Volcker Fund must have set off alarm bells with Luno and other Volcker Fund people. For the first time, Rothbard had spelled out his thoroughly anti-statist worldview and tried to prove that this view found support in the tenet of economic science. This brazen display of political anarchism was apparently too much

1:27:35even for the Volcker Fund. Rothbard was given another extension of his research grant which which he used during the academic year 1955-1956 to polish his manuscript. By July 1956 it amounted to 1,900 typed pages, and finally to finish his PhD in economics at Columbia University. But it must have been made clear to him that he could not count on Volcker Fund support in the future, at least not to the extent he had enjoyed it in the past. By April 1956 he applied for a new research grant for work on the Great Depression, this This time from the Earhart Foundation. The Earhart Foundation grant, which Rothbard duly received, made up for the ending of the Volcker Fund grant, which had supported his writing of the treatise. Mises supported him unequivocally, stating that he was fully convinced that Rothbard will one day be counted among the foremost economists. Rothbard's treatise was put on hold. He worked part-time for FEE writing a short book on money, what has government

1:28:33done to our money, and he continued to polish the manuscript of his treatise for the next few years. The directors of the Volcker Fund needed quite some time to ponder the question of what to do with this explosive material which threatened to disintegrate the nascent libertarian movement. In May 1959, Rothbard reported completion of the manuscript in a letter to Mises. He also expressed his regret that he had only rarely been attending Mises's The version of the manuscript was passed on to the Volcker Fund's Frank S. Maier, ostensibly in an effort to bring the project to completion, or the decision might have been related to already existing plans to close down the fund. Maier was no Rothbardian. He was chosen as a third party or objective opinion on the merits of the book. He delivered a report that would allow both the author of the book and his sponsor to agree on how to proceed without losing face.

1:29:27Meyer said the book was one of the two or three most important discussions of economics to be written in this century, and he lavishly praised it for its radical break with the traditional utilitarian underpinnings of economic theory, a break that opened the prospect of integrating the economic rationale against collectivism into certain strands of conservative thought. On the other hand, Meyer admonished that certain chapters were fundamentally political in their and Written from the point of view of an uncompromising anarchism. These chapters should be removed and their economic content be collected into a single chapter. And so it happened. Rothbard's treatise, with anarchism excised, was published in 1962 as Man, Economy and State.

1:30:12His discussion of a stateless market society would eventually appear eight years later in a separate book with the title Power and Market. 1. Zenholz at Grove City College While Rothbard was still busy writing and polishing the manuscript of his magnum opus, Hans Zenholz was already a quality product of Mises' NYU seminar. He had written a very thorough doctoral dissertation and published it in 1955 with Jasper Crane's Vernostrand Company. And in distinct contrast to Rothbard, who spent nights working or discussing with friends, Leapt through much of the day, missed deadline after deadline, and tended to be messy and disorderly, Zenholz featured the teutonic personal virtues of punctuality, orderliness, and reliability. By the mid-1950s he was visibly Mises's most important student. Zenholz was not only an intellectual heir to the Austrian tradition, but also had the vision, the drive, and the enthusiasm to lead the Austrian school and the burgeoning libertarian intellectual movement into the second half of the 20th century. Not only did he realise that the

1:31:23decisive battle in politics was the battle of ideas, and that for the time being this battle was mainly fought in institutions of higher learning, but he also saw quite clearly that there was no hope whatsoever in turning around mainstream academia from within. The success of the libertarian movement depended on its ability to set up parallel academic Institutions to compete with the socialist academic establishment from the outside. The tragedy for Senholtz and for the libertarian movement at large was that most of his initiatives to establish parallel libertarian institutions did not find the necessary support. For example, starting in August 1955, he tried for some years without success to establish a libertarian journal, and at the end of the 1950s he tried to establish an American School of Economics with the mission of producing future university professors equally without success. These failures might have been due to the timidity of potential donors or to Xenholz's youth and assertiveness. He was a born leader who could not suffer subservience. He needed to be his, Hans Xenholz's, own man in all of his

1:32:28endeavors. For some time he threw himself into working for FEE and took up residence in Irvington on Hudson, but the presence of another great ego then at Reeds made it impossible for Xenholz to to turn FEE into the instrument of his far-reaching plans. After completion of his Ph.D. in 1955, he began looking for a new position. It was not easy for Zenholz to find academic employment because of a triple disadvantage. He was an old-fashioned economist, a libertarian and a German. Wader Horsch tried to place him at Yale. Eventually, however, he found a position at Grove City College, a liberal arts college Research in Western Pennsylvania that had been sponsored by the Pugh family for generations. It was once again the long-standing connection between Mises and J. Howard Pugh that proved so useful. When Zenholz first saw the facilities, he could hardly believe his eyes. The chapel is fashioned after European Gothic cathedrals. Its beauty is superb. The reception room in the library would have flattered European royalty, with thick Persian rugs on the floor

1:33:33and expensive originals on the wall, the furniture French antique style, the indoor swimming pool is built according to Olympic standard, only Esther Williams is missing, the bowling alley is patterned according to Westchester club standards, the girls dormitory boasts a gold-leaf Steinway piano besides other beautiful furniture, I am beginning to understand why most professors go to Grove City and are never heard of again. On the other hand, Zenholz did not wax enthusiastic about the students, who did not nearly live up to the hopes of Pew and other sponsors, who had wanted their contributions to help educate the future champions and supporters of a free society. In spite of all the splendour offered by a few capitalists, the 1,300 students constitute the usual sample of 75% collectivists and 25% without opinion. He went on to urge the establishment of a new graduate school School for the Education of Future Professors, a school squarely built on the tradition of classical liberalism. During the next few years, Zenholz would spend much time and energy

1:34:38on this project, but it did not materialise, mainly due to financial reasons. In another letter he mentions that the plans for establishing a graduate school of economics had been long standing with FEE. Clearly there was a lot of work to do. Zenholz grabbed the bull by by the horns, and threw himself into the battle of ideas. During the next five decades he educated a new generation of Austrian school scholars, among them Walter Grindor, Jeffrey Hummel, Alejandro Chafouin, Philippe Natav and Peter Butker. He would publish hundreds of articles and dozens of books and booklets. He and Rothbard almost single-handedly created a modern Austrian-Misesian literature. Until the early 1960s they were not alone in this in this endeavor, Mises himself made a number of contributions that we will discuss in the next chapter.