Formative Years

0:00Okay, welcome everybody to the Mises Institute. I'm Dr. Mark Thornton. I'm a senior fellow here at the Mises Institute, and on behalf of Lew Rockwell and the entire staff and faculty of the Institute, I'd like to welcome you here today for a seminar, and I'd like to, of course, welcome all of our viewers who are watching us on Mises.org. Our seminar this week is the life and times and work of Ludwig von Mises. The seminar this week is sponsored by George and Joelle Eddy. And of course, we want to thank them for helping to sponsor this important conference. All of our sessions here this week are going to begin at 10 a.m. in the morning and 2 p.m. in the afternoon central time, of course, Monday through Friday.

0:47Our speaker is Guido Holzman this week. Dr. Holtzman is a professor of economics at the University of Angers in France. Guido is the author of many books, many articles that appear in journals and of course on Mises.org. Dr. Holtzman is a senior fellow with the Ludwig von Mises Institute. He was a senior fellow in residence here at the Institute for several years while working on the forthcoming intellectual biography of Ludwig von Mises The Last Night of Liberalism. And we're particularly happy and thrilled to have him here today to talk about the life and times and work of Ludwig von Mises. His forthcoming intellectual biography of Mises we're particularly excited about because it explores the early years of Ludwig von Mises, the time before he came to the United States, at the time when all of his great works were written, all of his formative years when he was putting his intellectual landscape together and it's the time when we really don't know that much about von Mises.

2:03So with no further ado, help me please welcome Ido Holzman. Thank you very much Mark, thank you very much Lou, thank you very much George and Joel, Eddie who cannot be with us today. I hope that maybe they might be watching now. I'm so glad that you're supporting my work and that you're supporting the seminar. And I hope to meet you very soon again at another occasion. We have a seminar of ten lectures this week and it follows roughly the outline of the book. In the Mises biography there are chapters intertwined, chapters dealing with Mises' ideas, the ideas of his colleagues and friends who were important for him, intertwined with accounts of his life, and the times in which he wrote, political events, personal happenings and so on.

3:05And the idea is, of course, as in any biography, to explain why he did certain things as a reaction against what was happening in the larger context in which he inserted himself. And as Mark said, well, about 60% of the book or 70% of the book deals with Mises before he came to the United States, that is Mises up until 1940 approximately. And I did this not only because it is most interesting certainly for American readers and also for European readers because there is no full biography of Ludwig von Mises in print so far, But also because, well, it corresponds to life achievement.

3:52Mostly people are not very productive anymore once they are older than 70 years. I mean, there are exceptions, of course. There's George Crispin, who is here among us, and there is Bert Blumert. There's Immanuel Kant, who started becoming really productive only at the age of 56 when he had his awakening and the awakening from the dogmatic slumber, as you call it, and then he churned out one volume after the other in a space of 16 or 18 years. It was not the case with Mises. Mises was also very productive later in his life, so he published five or six books after he came to, well, actually eight books after he came to the United States. But still the bulk of his achievements dated from an earlier period and so it was only natural that this came to be expressed also in the biography.

4:46The biography is, and I regret in a way to say this, it is a very large book. There's more than a thousand pages. For those of you who do not like to read, you've done very well to come to the seminar. or maybe to watch now, because well, you get to know a lot of this stuff already, well, much of this stuff by just following the lectures, but I mean there are many other reasons of course to buy this, the biography, even if you do not like reading, maybe your friends who like to read, Your parents might like reading, I mean they might have this old-fashioned attitude, or because it's very thick, I mean there are various other uses, right? You have a bulky door, you put this there, you have a restless night, you put it under your pillow. There are good reasons to buy this book and it has a wonderful cover, namely this, this one here, The Lifetimes and Work of Ludwig

5:48from Mises. Actually, the title will be Mises, The Last Night of Liberalism. Some people will have a concern about the title. It might be too much backward looking and to some extent I share this concern. I represent Mises as the last night of liberalism. Isn't this something that pertains exclusively to the past? And doesn't Mises represent ideas that are important for our times and hopefully even more important for the future? Yes, in a way. But Mises marks a tide of times, he was the last in a great line of classical liberals and he inspired works that went in many ways beyond his own achievements, most notably in the case of Murray Rothbard and of people associated today with the Mises Institute about whom we will talk at the end of the week.

6:44So, Mises as a person is a historical juncture. He's the last in a great line, but he's also an opening to the future. In this respect, certainly the title is justified. So what we'll do this morning is just to cover the first four chapters. The first four chapters are rather bulky and will not be able to cover all the ground but I'll give a brief overview of Mises roots, his family, upbringing, the role of the family in their country in a particular region of Austria-Hungary which is named Galicia, the family business and the family life were alive once they moved to Vienna, where Mises would then spend most of his life.

7:37And then we'll talk about his upbringing further in Vienna, his school years, Vienna in general, what were the social and economic, the political problems that moved people in those days and that formed the background of his later achievements. And we'll eventually talk hopefully about his university years. Mises was born in a country that no longer exists today, which is called Austria-Hungary. This is a map of Austria-Hungary. Unfortunately, I didn't bring a map of Europe, which would have allowed you to further locate it.

8:29So you see this is Switzerland here, and this here is Italy. And part of Italy, namely these parts here, belonged to Austria-Hungary until the late 1850s. There were other parts of Europe that also belonged to Austria-Hungary before the time of the map. The map dates from about the turn of the century, about 1900. So it was not always the case that all national territories were contiguous. Sometimes there were islands within other countries and so on. For example, one important territory that for a time belonged to Austria-Hungary was Belgium, or what is today Belgium, as well as this area which is in southwest Germany.

9:17This here, the Schwarzwald, the Black Forest area, so all of this belonged to Austria-Hungary, and actually one of the most famous areas, namely the one around Salzburg, Salzburg is here, came and we always, well, when we say Salzburg we think of Mozart, right, the famous composer, and you think, well, that's as Austrian as it gets, but actually the Salzburg area came to Austria much later than these other territories, right, so the Italian dominions have been part of Austria-Hungary longer than Salzburg. Okay, so we have this landmass here and it is a quite substantial landmass actually. It was the second largest political entity in Europe, second only to Russia.

10:03So larger than Germany of course, larger than France, larger than Sweden, larger than Spain and so on. Very big thing. It doesn't necessarily mean that it was powerful. and which is a different subject about which we'll come to talk later on too. What you see on this map then also are also differently colored areas. What is here in yellow is Hungary and the dependent territories. And the other things that are shaded in orange are what we might call Austria to make things briefly, but which were called at the time those dominions and lands and kingdoms which were united, which were represented in the Reichsrat, that is in the Parliament of the non-Hungarian part of the Empire.

10:55Okay, it's a very complicated setting. It's not as straightforward as we have it today in various countries such as the United States. We have two senators and a couple of representatives per state and only 52 states and everything is clear and neat and hierarchical and here we have lots of things that are intertwined and this structure, this neat division between the Austrian part and the Hungarian part And as a result of Austria's defeat or the defeat of the ruling house of Austria-Hungary, which was the house of Habsburg, its defeat at a war that it led against its former German allies, particularly against Prussia in 1867.

11:45and the famous battle at Königgratz, and the Austrian lost, and as a consequence, they were no longer, the House of Habsburg was no longer the leading political force within the Germanys, but it also had big problems inside the country. Once you lose a war, it's very expensive, leading a war as we know in the United States is a very expensive affair, And in the best of all cases, you win very quickly and you make a lot of loot, which would allow you to pay for your former expenses, but also pay for your allies and so on, create greater loyalty and so on. and so on. Now here it was the opposite. They lost the war and they had no more money to create loyalties within the country, to rally the different people with different political orientations to the crown and as a consequence there were strong separatist movements and the crown was therefore forced to strike a deal with the most powerful, the most reluctant princes which happened to be in Hungary and so they set up a constitutional deal that was called

12:59called the Ausgleich or the compromise, compromise of 1867. According to this Ausgleich, the Reich was in fact ruled by two separate parliaments. One was the Hungarian parliament and the other one was the Austrian parliament or as I said the Reichsrat, so two different parliaments. And there was a common connection only through the ruling house. So the reason why we can paint here a common border for this whole colorful thing was that there was one common emperor, the House of Habsburg. And the Hungarians did not acknowledge, by the way, the emperor as their chief because he was the German emperor, because he coincidentally happened to be the king of Hungary.

13:55And because they had this particular interpretation of constitutional realities, they tried to get an ever better deal from him. They tried to ask him for ever more concessions in the following years which was the reason why there was a political dynamic within Austria-Hungary have finally led to the explosion of the whole entity, but I'll talk about this a little bit more later on. Now within Austria-Hungary we see here in the northeasternmost part we see a province that is called Königreich Galizien und Lodomerien, Kingdom of Galicia and Lotomeria. I won't tell you anything about the name, I'm going to read about the name, but we'll call this Galicia.

14:47That's how it was commonly referred to today. And you see here, the city of Lemberg, which was the capital city of that part of the Empire. Now, Mises was born in Lemberg, his family came from this Galicia area and so we need to talk a little bit about the particularities of this area and its relationship with the capital of the Empire which was here in Vienna, Wien. One thing that is important to know about these differences was that this huge conglomerate did not only make for a colorful map, but in fact represented very diverse parts of population.

15:47In the western part, you have typically a German population, almost exclusively German inhabitants. In this part here, Bohemia, you have Czechs and Germans, Moravia, Moravians and also a couple of Germans. Hungary, essentially Hungarians and various other minorities. In the south we had Italians, this part here was inhabited by Italians, and in this part, in Galicia, we had a mixture of Poles, Germans and Jews, essentially. These were the three major groups, sorry, and Russians. Poles, Germans, Russians and Jews, and well, again, various minorities, Italians and so on.

16:41Now, from a religious point of view too, we have lots of different groups here. We have Catholics, we have Orthodox, we have Roman Catholics, Greek Catholics, we have Jews, we have Protestants, and I hope I didn't exclude now or forget any major other groups, but these were the major groups, and they were all represented also in this area. So the population of Galicia at the turn of the century was roughly 5 million people. And to give you an order of magnitude, we're talking about here 2.2 Roman Catholics, most of which were Poles, also substantial German numbers. German numbers, and 2.2 million Greek Catholics. These were Russians, a particular breed that is almost forgotten today.

17:35They were called Ruthanians, and we have one famous writer associated with, who is often writing for lewrockwell.com, who is Joe Sobran. Some of you might know him, and Joe Sobran acknowledges the Ruthanian heritage. So it's a very strange thing. So what you need to know is, okay, it's Russian, but Russians who repented themselves to the Pope, we have a Greek cult and are Catholics. And then we have Jews, 300,000 Jews approximately, but the Jews are largely concentrated in the major cities. We have, in the city of Lemberg, we have around 60,000 inhabitants, 30,000 Roman and Greek Catholics, and 25,000 Jews.

18:29So as the Jews were within the larger empire, within the larger province, they were just a minority of whatever. 6% in the capital city of Lemberg, they represented almost 50%, probably the largest homogeneous group within the capital city. And then there were other cities that were virtually exclusively Jewish, for example Brody at the frontier here. here. You cannot read this. This is a small town here. No, it's not leasable. Okay, it's here. This is the place where it is. Brody, and I insist, because that's the place where part of the Mises family came from, in particular several and also grandmothers of Ludwig von Mises and also the family of his mother, of Adil von Mises, about whom we will talk later on too.

19:32Brody was an interesting case in that this was a free trade area between Austria-Hungary and Russia. So, very nice thing and you could make decent business at least there and so some families make good use of this. One of these families happened to be the Landau family, which was the family of Ludwig von Mises' mother. Okay, now we talked already a lot about these maps, and I'll show you just one or two more photos. This is how Lemberg looks like, there's a square in Lemberg.

20:17Well, it doesn't come out very well. One last picture from Lemberg. I mean, what is striking here for those of you who haven't yet been to this area of the world, of the World. The architecture is essentially the same and the architectural setting of the city is the same as in all other parts of Austria-Hungary. So since the probability is not very big that you might go to Lemberg, but some of you might go actually to Prague and visit the wonderful Czech capital, which is here.

21:05And if you go to Vienna which is here and other places that are further west and so on, what you'll see is essentially an architecture that is the same as the one that you see on this picture here. So it was a cultural unity despite all the diversity in religion and national affiliation and so on that came to be expressed in things like architecture. Architecture. And here then we have the birth of young Ludwig. Okay, so this must be in his Lemberg years, the formative Lemberg years, and he was born in September 29, 1881, to these parents, very stately, Arthur and Adela von Mises, so both coming from Jewish families.

22:15Arthur was a railway engineer, we'll talk about this again later, and Adela didn't have a profession, so as she would say today, she was a homemaker, and she took these duties very seriously. It was, as we see from the dress and so on, was a bourgeois family, it was not extremely wealthy, but it was, well, anything between at ease and affluent. And so to give you an order of ideas, of course they would have personnel at home, they would have a cook, would have a housemaid and so on. And so really her task was to bring up the boys. And well, if we just take Ludwig von Mises as the prime example, she must have done obviously a very good job.

23:05It was not an accident because the surviving brother of Ludwig Richard was also a first class scientist, became a mathematician, engineer and so on. He was even at his lifetime was more famous than Mises and he is among mathematicians interested in the history of thought. He is still as famous today as Ludwig von Mises is among economists. So, this is not an accident, this is systematic. If you have two out of two, it's a pretty good rate, and that was her job. So they married in which year, 1880, I think I might have forgotten, 1880. Yeah, it was 1880, one year later exactly Ludwig was born.

23:55was born and they lived at the time in Lemberg which was the traditional place where his family lived. She came from this family with roots in the small town of Brody that I mentioned before at the border and her family was now already moving toward the capital city of Vienna which was not yet the case with this man And of course, one thing also deserves to be mentioned, namely that Ludwig was born a noble man. This is the family crest, which you know from the Mises Institute, so Mises Institute is putting this to good use now.

24:42And the ennoblement of the family took place in the year of Ludwig's birth. and Ludwig's Birth. Okay, so before Mises' father was just Artur Mises and his grandfather Hirscher Mises and then his grand-grandfather Meier Rachmil Mises and it was actually Meier Rachmil, a great personality about whom we'll talk in a moment, in a moment, who was honored and rewarded by the emperor for his services with the title of nobility. So in April 1881, Maya Rachmiel was awarded the title of nobility, was then Maya Rachmiel von Mises. And a couple of months later, September 1881, he obtains, in addition to this, the noble predicate, That's all they called it, a noble predicate, Edler.

25:39Therefore, Mises was born punctually after all this being done. September 29, Ludwig Heinrich Edler von Mises. And all that's left today for us is Ludwig von Mises, which is good enough, because Ludwig almost became Arabic. Now, I won't go into detail with the family crest. And finally, Chris, maybe two things that we mentioned this year is the symbol of the Greek god of Mercurius, symbol of commerce. And in the upper left corner we have the Bible, the Ten Commandments. So we have a family with roots in both religion and commerce.

26:35Now, to talk about the Mises family, to understand the significance of the family into which Mises was born, We need to underline two aspects. One, of course, is business. And about business, I'll talk a little bit later. The other one is culturalness. So we have business and religion. And we'll first talk about religion, then come to business. And religion, from a larger point of view, culture. So again, the Mises family was a Jewish family, which was a minority within the native Galicia, surrounded by a large Polish majority.

27:20Why this? Where did all these Poles come from? You can also ask, where did all the Jews come from? Well, that's another big story, but I won't talk about this in detail now. But you see here, there is no Poland here, there is a very interesting thing, here is Germany, here is Russia, here is Romania, and there is Austria-Hungary, no Poland, now we have two Poles here, at least two Poles, and in those days was black days for Poles and said Poland is not yet lost that was their main encouragement, says Poland is not yet lost and Poland indeed had disappeared and vanished from the map in a series of partitions starting in 1772. Poland had become politically weak so as we know from This wets the appetite of competing governments in those days.

28:25Well, for economic reasons, the governments did not yet conquer territories 5,000 miles away, but they occupied territories that were adjacent. And so we had very hungry governments here in Germany. We had the Prussian king, which was up here. up here, then we had the Russian Tsar and we had the Emperor down here in Austria-Hungary and they, well, they divided Poland amongst them essentially in two partitions in the 70s. And as a consequence then, so this area fell to Austria, to Austria at the time as it was called, the Habsburg Empire and it was essentially inhabited by Poles and there were Jews because many Jews again for historical reasons that I won't explain now in detail lived in Poland in those years.

29:28So we have this Polish majority and life is not always nice under a ruling class. So therefore Jews in particular, many Jews in particular, sought for emancipation, longed for emancipation. And emancipation came with the new rulers. So there was a chance now to join the camps of the winner of the war, War, the German occupants or the new German rulers and thereby to gain greater liberties at the expense of the former ruling class, namely the Polish nobility. And that's what parts of the Jews did, not all Jewish did, but parts did and we are interested in those parts because the Mises family was part of it.

30:18The Mises family was one of the major Jewish families in Galicia of those years who spearheaded the Germanization movement in Galicia for the century to come. And this lasted from the partition of Poland in the late 18th century until 1867. Okay, the famous battle of Koenigratz that I mentioned before, which propels separatist movements within Austria-Hungary, created the necessary constitutional adjustments within, in the form of the Ausgleich or the constitutional compromise, I have to appease the most powerful princes who were likely to secede, and it had a very similar impact in the case of the Galician nobility, which was Polish.

31:15So the Galician-Polish nobility obtained also a special constitutional deal in the same year, 1867, and which rolled back almost one century of efforts to Germanize the country. Okay, bring in German settlers, have German as the administrative language, language of business and so on. So all this was rolled back after 1867 and then it had virtually died out by the 1880s and 1890s. Now the Mises family spearheaded this movement and one way they did it was to bring German language and German culture to their synagogue.

32:03So they wanted to create a progressive synagogue which was not only the Mises family but one of the major families that sought to establish a progressive synagogue in Lemberg where services would be held in German. and German, which was much more open towards secular culture around the religious culture. The Mises family had roots in Poland, also political roots, roots in political culture that were important for Mises.

32:51One particularity of political culture in Poland that those of you who have read the suggested reading for the first meeting, Kühnel-Lehdeen's text on the cultural background of Ludwig von Mises, you have noticed that Kühnel-Lehdeen points out that Poland had a rather particular political constitution which made that the king was virtually powerless The powerless and all power rested with the nobility which met in a parliament called the Sejm, S-E-J-M, the Sejm, and the particularity of this parliament, a rather charming aspect from a libertarian point of view, was that you had a liberum veto, that is veto power for each single individual, that is no law could pass If there was one, even one man who was not in agreement with it, okay, so you can imagine how many laws were passed, right?

33:51Now, I imagine people living or working in Washington find this rather shocking, and I guess the same thing would be people living and working in Brussels or in Berlin or Paris and so on, and so on, but for most of us other people down here in the rest of the country is a very charming aspect. It's a very efficient way to minimize laws or legislation. Another proposition has recently been made by a friend of mine. He said, well, actually it would also limit it very much if they were forced to read all laws that they vote. Just read them out in Parliament. It's technically impossible to read out, at least not with a human voice and human understanding. You'd have to go high-speed fast-forward or something, but you cannot read all the laws that they passed, impossible.

34:38So the Poles did not have this problem. It was a very decentralized, self-reliant political culture. But again, so this was just political background and so on that impregnated certainly the political culture of the Mises family, but the main orientation was to bring German culture, German secular culture in particular because German culture was not associated with a particular religion, it was in those days, we are talking about the early 19th century, it's nothing to do with the 20th century, early 19th century, German culture was conceived to be the most progressive, the most liberal culture in continental Europe.

35:26Okay, then we have business ties of the Mises family, so traditionally they are merchants, the first The first ancestor of Ludwig von Mises that I could identify is a man called Efraim Fischl von Mises who lived at the turn of the 18th and 19th century and who had export-import business trading across the border with Russia. That was his business and he was specialized in cloth in particular.

36:14He lived in Lemberg, which was a particularity because the cities, to the extent that there were not Jewish cities from the outset, usually had only a limited residence permission for Jewish citizens. In fact, the Jews were often not considered to be citizens at all. So they were usually not allowed within the big cities such as Lemberg and had residence rights only due to special permission. And the permission was granted if the individual in question was affluent, if we had the necessary education, secular institutions and so on, state administration, and thirdly, especially if the person in question did not wear traditional Jewish garb, No particular hats or trousers or whatever.

37:21So this obviously was the case of Ephraim Fischl von Mises and he gave birth to the true founder of the Mises family, the Mises dynasty, which is the aforementioned Maya Rachmiel von Mises who was born in 1801 and who died in 1891. Now we don't have any picture of Maya Rachmiel and in fact we have one portrait which is left on a coin. I hope to be able to show you the coin later on this morning. I couldn't find it but I think we have it here at the Mises Institute. I think Bettina Greaves bequeathed it to the Mises Institute so he is represented on a coin and the coin was struck on the occasion of his nobleman in 1881.

38:11in 1981. So Meyer quickly joined the family business of his father and then at the age of 30 was already a major commercial player in in Lemberg and beyond, and he was quickly also elected to the presidency of the synagogue, to what they call the cultural, the Israelian cultural community in Lemberg. So he was the president of this starting from the 1840s, and he established, so he not only made a lot of money with his business, business, but he also established schools and orphanages and so on, so it was various expenses of a caretative nature, which were also instrumental in procuring him later on the ennoblement.

39:04Maya Rachmil later on then shifted the family business into the two most dynamic industries that existed in the second half of the 19th century, namely banking and railroads. And for those of you who know their economic history, you know that this went in hand at the time. Banking was pulled by this new major industry, which was railroads, was also needed by railroads in order to finance these large scale investment projects. So the Mises family, so Meier Rachmiel himself became a banker, abandoned his or neglected his traditional merchant business, became a banker and placed his sons into banks or into railroad companies.

39:54Companies. Among his sons, we have in particular one son who was called Abraham, was the older son, and the younger son was called Hirshe, H-I-R-S-C-H-E, Hirshe Mises, and Hirshe was Ludwig von Mises' grandfather, was the younger one, and not much is known about him. He married into a banking family, that's one way to get into the banking business. Look for a, if possible, beautiful heiress, then quarter successfully. Well, it worked out in his case, so he married into the Nierenstein Bank. The name Nierenstein might be familiar to some of you, for those of you who are interested in art.

40:46This is the famous Nirenstein Gallery in New York, which was established there after World War II by one Nirenstein who came out of this family, went before a big gallery in Vienna and Paris. And he was in fact a cousin of Ludwig von Mises. So Mises' grandfather married into the Nirenstein family and then became an executive of the Nirenstein Bank in Lemberg. His sons were placed into railroad companies as engineers and among them in particular Artur von Mises, Ludwig von Mises father. So Artur was an engineer which made that so he was in the most dynamic industry of his time.

41:38certainly had a very decent salary, and well, so the essential reason why he later, why he moved with his family to Vienna at some point in the 1880s was because the railroads were nationalized, okay, something that governments like to do, if an industry works very well and there are big profits to be made, Maybe there are also social conflicts, which require the intermediation of a neutral arbiter. So government in the 1880s started taking over the railroad industry in Austria-Hungary. And as a consequence, his company was nationalized and he became a civil servant.

42:24And then an employee of the railroad ministry in Vienna. So the family moved to Vienna. okay the railroad industry had already been nationalized in the in the 1840s at that point there was not at any railroads industry in Galicia that came later and they were privatized again because the government ran out of money after it had lost the war so they were also privatized in 1850s and then re-nationalized in the 1880s oh here it is thank you very much so here we have What do we have in then? Maya Rachmiel, oh no, oh no, that's terrible, so what do we do here?

43:09Can you see this? Is there a possibility for us to modify the light like this? Ah, is this better? Okay, so what you see here, so this is a portrait of Maya Rachmiel You see, 1880 is the date when the coin was made, commemorative coin, and here we have the family crest. Unfortunately, it's not very visible. And of course, this is also the man behind these different marriages and so on, because in those days, marriage was not a pure love affair. is not today but okay we forget this until we get married so in those days well people were not allowed to forget this even before marriage so it was usually the parents who took care of them or the other grandparents and he certainly arranged various marriages within the family placed his sons and daughters for to arrange for strategic family alliances in Galicia so the The family moves to Vienna and so here we have two stations that are important.

44:35One is Ludwig's upbringing, Ludwig's education in the gymnasium at the university. So what follows, I'll talk essentially about this, and then if we have a little time, I'll talk a little bit about the main social conflicts at the time, Vienna in general. Okay, so the move to Vienna. The move to Vienna, to the capital city, was of course a big event for the family, and certainly something that they looked forward to, especially Adele, Ludwig's mother, who was concerned about the upbringing of her sons. We have three sons, Ludwig, Richard and Carl. Carl died at a very young age of scarlet fever. So we don't know anything, we don't know more about this, more than this about Carl.

45:24We have maybe, yeah, yeah, I can show you, I can show you family pictures with the three of them. Here we have Mother, Richard, Ludwig and Carl. So Carl must have been a boy of 6 or 7 when he died. Here we have another photo where he is a little bit younger. So, a traditional mountain garb, and it's almost sure that they took this photo while they were already in Vienna, because it's not a traditional Galician garb. You see here is the traditional Alpen garb that you have in the western part of the country.

46:15So, little one Carl must have been there about three or four years of age, Ludwig maybe seven or eight and Richard six or seven. So they moved to Vienna and lived in an apartment. It was still unusual at the time to own separate houses there, so that was the thing to do. And of course they had a big apartment, they brought their maid, they brought their cook, they had a good house, everybody was fine. And Vienna was of course what was the place to be if you wanted to get your children in education.

47:06The best schools in the country were there, not only the best schools, but lots of other things from which to derive education. You had all the cultural institutions, you had the theatres, you had the opera house, you had the concerts, you had lots of music, you had bookshops, book publishers and so on. They were there. You had a concentration of all the major administrations of the country, all the major scientific institutions of the country and of course the headquarters of all major business firms were there too. And all of this within the confines of a rather small area. So we look at this again. So here we have a map of Vienna from about 1850.

48:01What you see here was that, so this is Vienna with the architectural structure of absolutism, royal power and imperial power and so on. We have here an island of buildings surrounded by a big empty surface and then settlements around this. So here we had the administrative center of the entire empire, with the imperial family was living there, and all the ministries and so on, people working for them, and around this, you see this maybe, we have here the ramparts, you see this line with these triangle shaped things, so these are the ramparts, it was a defense wall, well, meant to protect the heart of the government in the case of invasions.

49:06And the reason why it's empty around is, well, because to better shoot the enemy, okay? Otherwise you have a guerrilla warfare, so right here when they approach you can nicely shoot them also, if insurgents shoot them better there. And when it was nobody there to invade or to insert himself, Then they used this space for military exercises and so on, like parades and so on. Now, so all this ended in the 1850s and 1860s, was the one last effort at the reinstoration of an absolutist reign in the 1850s, but this was very unsuccessful. and so the rampart was destroyed and all of this was then covered with buildings in particular with a splendid boulevard which has the shape of the former area around the rampart that is a U shape on which were located then buildings created in the image of the values of the new political elite within the country and And the political elite in those decades were the liberals, or the classical liberals, we might say, okay?

50:19And so we had then parliamentary buildings that were set up here, the upper house and the lower chamber. We had museums, still have a splendid collection today, the Museum of Natural History and Museum of Modern History in Vienna. We have the opera house, which is down here, and a concert hall, and we have various schools, one of which was the school where Mises went to, the Akademisches Gymnasium, the academic gymnasium, cannot really translate this, which is located about here, so in this area. So, this was the time when the Mises family arrived there. This area is, well, as I said, is rather small. You can walk easily through this within, let's say, 30 minutes or so, no problem.

51:13If you compare this to other major capital cities, let's say Paris or Berlin or London especially, you need much more time. It's so much bigger, it's also much older. So here you had a very small area in which everything was very strongly concentrated. So again, the major cultural, scientific, administrative, business institutions, all of this brought together and the Mises family moves right into there. and right into there they move to an apartment that is situated also in this newly built area about here, Friedrichstraße.

51:58So Ludwig goes first as a couple of mandatory elementary education and then joins a gymnasium at the age of 11. Now, a gymnasium today in Germany is about the same thing as a high school in the U.S. It's a fairly good comparison. In those days, it was completely different. So, we cannot translate simply a gymnasium by high school because it would give us a wrong association. So, first of all, one thing you need to know is that only about 5% of each age group went to such a school. 5%, which means you have a very rough selection already in economic terms, because not all families could afford to send their children there, and then also in intellectual terms, because the schools were obviously interested in attracting the brightest kids, and often intelligence education goes in hand with corresponding family background, but not always.

53:01And so for these cases and these cases also, they tried to attract such pupils, which they did. And also the subjects covered were much more advanced, especially in the later years, and the subjects that are typically dealt with in our high schools today. So, Mises had, for example, throughout the 10 or 12 years or so of his stay at the academician's gymnasium, he had 8 hours per week of Latin, every single year, 8 hours per week. And then, as from the third year, he had six hours of Greek, okay?

53:46So you imagine, well, so these were not the dumbest skills in the first place. So what their level of Latin and Greek was when they came out. So effectively, in the final exam, they had to translate from Latin and from Greek, and they even had to translate from German into Latin, okay? So it's not bad at all, on this level already. And then of course they had mathematics, they had German. In the first one or two years they had calligraphy, the art of beautiful writing. And we see this here again, we have here the signature of Ludwig von Mises, which you see on the main screen. Ludwig Mises, that is actually his handwriting.

54:34So we can still read it today. I'll later show you on copies of some of the letters I had to read. You cannot read them, which was part of the difficulty, the physical difficulty of writing this biography. But in case he had a beautiful handwriting, it was not only Mother Adela who was responsible for this, but also the school. So they systematically trained this. And then there are other subject matters like physics and natural history in particular, and history. And Mises' favorite subject matter was actually history. History in school was the only subject matter in which he excelled as compared to his classmates.

55:21He was one of the best pupils in class, but he was not the very best. He was out of a group of about 30 kids. He was number 6. Okay, so he was not the very top, but he was a good pupil and he excelled only in history, which foreshadows also his later interests. Maybe I should simply quote him something he said later on the importance of studying history. In fact, in his final exam in German at the Akademisches Gymnasium when he left school in 1900, he had to write an essay on the question with the following title, What are the moral inspirations that we derive from the study of the history of Austria?

56:10Unfortunately, the essay is not left. There is no trace of this. But many years later he made a statement that gives maybe a hint as to what he might have written in May 1900. Maybe also it's completely different, because after all, a more mature view later on. So the quote that follows now is from Theory and History, published in 1957. Speaking of the benefits of studying history, Mises wrote, I quote, It opens the mind toward an understanding of human nature and destiny. It increases wisdom. It is the very essence of that much misinterpreted concept, a liberal education. It is the foremost approach to humanism, the law of the specifically human concerns that distinguish man from other living beings.

57:02Personal culture is more than mere familiarity with the present state of science, technology and civil affairs. It is more than acquaintance with books and paintings and the experience of travel and visits to museums. It is the assimilation of the ideas that roused mankind from the inert routine of a merely animal existence to a life of reasoning and speculating. I read this sentence again because it's so beautiful. It's a real Mises sentence, right? It is the assimilation of ideas that roused mankind from the inert routine of a merely animal existence to a life of reasoning and speculating.

57:50It is the individual's effort to humanize himself by partaking in the tradition of all the best that earlier generations have bequeathed. And certainly, so this interest then ultimately brought him to economics, the reason why he got interested in economics was only well, because to understand history well, you need to know economics, because economics is the science of cause and effect engendered by scarcity. So in order to understand the working of society well, of past societies, of present societies, you need to know economics. So his interest in history brought him to become an economist ultimately.

58:36I again quote from Mises from an essay that he wrote in 1959 on the occasion of the publication of Eugen von Boehm-Bawerk's Capital in Interest, a major book of Mises' later teacher, Eugen von Boehm-Bawerk in 1959. In our age, the conflict between economic freedom as represented in the market economy and totalitarian government omnipotence as realized by socialism is the paramount matter. All political controversies refer to these economic problems. Only the study of economics can tell a man what all these conflicts mean.

59:21Nothing can be known about such matters as inflation, economic crisis, unemployment, unionism, protectionism, taxation, economic controls and all similar issues that does not involve and presuppose economic analysis. A man who talks about these problems without having acquainted himself with the fundamental ideas of economic theory is simply a babbler. Richard Babler, with parrot-like, repeats what he has picked up incidentally from other fellows who are not better informed than he himself. A citizen who casts his ballad without having to the best of his abilities studied as much economics as he can, fails in his civic duties.

1:00:07Okay, so that's something that he picks up at the gymnasium. So we remember these two elements, so humanistic education, very heavily concentrated on Latin and Greek and on reading the ancient authors. I have a list of those authors here. Fortunately, they are still listed in the records of the gymnasium. For every year, what kind of authors were being read in that year. So, Mises read in the original. Nepos, Militares, Themistocles, Aristides, Epaminondas, never heard that name, Pelopidas, Caesar.

1:01:01Caesar was, by the way, the only author so far that I read when I was in high school, well about 100 years later, not quite. And so it's an expression of the decline in the teaching of Latin and Greek because I have one author out of six or seven that Mises read. by Mises Red, Livy, Ovid, Sallust, Yogurta, Cicero, Virgil, Tacitus, Xenophon, Homer, Herodotus, Domestinus, Plato and Sophocles, ok, it's not a bad list, so that was his background and once he was done with this so he joined the university and according to his Propensities, well he chose the study of law, which was organized at the time Department of Government Studies, so what in German is Staatswissenschaft, the science of the state, science of government. He first had, so he joined the University in 1900 and the fall of 1900 and then spend the first two years studying essentially the history of law.

1:02:33This is how things were organized at the time. There were no undergraduate and graduate studies. It was just a separation. First we study the history of law and then in the third and fourth year of study we turn to present legislation, procedural law and so on. and related disciplines such as economics and history of course. And it was therefore that he came to economics. So in the first two years he studied the history of law and then made a break of one year for his military service. He joined the army and then rejoined the university again in 1903. The way things were set up at the time, so you had lectures on the one hand, but you also had seminars and things got really interesting only in the seminars because here the students were supposed to write the papers and the best papers would be published.

1:03:30Now, Mises was a member in particular of two seminars that are important for us. One during the first two years of study, he was a member of the Grünberg seminar, and in the years of study three and four, he was a member of the Filipovich seminar.

1:04:00So we have here Eugen von Philippowitsch and Carl Grünberg. Carl Grünberg became later on even more famous because he was the founder of the Institute for Social Research, Research, the Institut für Sozialforschung in Frankfurt. Those of you who know something about 20th century Marxism know that this was the cradle of the Frankfurt school. So, Grünberg was the man who first was a professor of economics in Vienna, then moved to establish this Marxist school in Frankfurt.

1:04:46and he gave us actually two great Austrian economists, he gave us Mises and indirectly he also gave us Hans Hoppe, because Hans Hoppe when he did his studies in the early 1970s in Frankfurt, well he also did part of this at the Institut für Sozialforschung, he was in fact a pupil of Jürgen Habermas, was the most famous present day representative of this school. and of course in both cases it was not Grünberg and Jürgen Habermas who taught Austrian economics but in both cases the turn to Austrian economics came as a reaction against the benefits of these classes. So Mises joins the Grünberg seminar and he quickly sets out to write a very long paper, A long paper, in fact a book-length manuscript with a title, well I won't give you the German title, The Development of the Relationships between Lords and Peasants in Galicia, 1772 to 1848.

1:05:55Now that's interesting because of course it's its native area, Galicia. Why does he write about this subject? Well, it was something of a fashion in those days. Carl Greenberg belonged to a school of thought that we know today as the historical school. And the most famous name that comes to mind when we say the younger historical school is Gustav Schmoller, about whom we will talk later on. One follower of Gustav Schmoller was Georg Friedrich Knapp. Knapp we also know because he is the author of the Staatliche Theorie des Geldes, the state theory of money. We saw the government or the state as the origin, as the creator of money. There can be no money without the state.

1:06:48But before publishing this book, which it did in the early 1900s, Knapp published other books on peasant liberation as we say today in the US, or we would say peasant lib. So peasant lib was the big fashionable subject among members of the historical school in the 1890s. The movement was launched by the peasant-lib study of Knapp himself, concerning the eastern provinces of Germany, of Prussia. Why this? Remember what we said about the Polish partitions? These areas of Poland came to Prussia in the late 18th century.

1:07:35Now the question was, well, what was the overall impact? Was it good or bad one century later? Knapp, so the central thesis is, well, there was really peasant lib, and German rule brought peasant lib, before we had Polish rule, and the peasants were not faring very well, they were exploited, they were slaves and so on, and liberty comes with the Germans. Sounds very weird today, in the years after Hitler, Bismarck and Hitler, so few years can turn history quite around. But in those days that was not the case, so it was Peasant Lib, and Peasant Lib comes with Germanization. Now what Grünberg did was to apply the same procedure to the study of Peasant Lib in Austria-Hungary.

1:08:27And he covered these areas, he covered Bohemia, Moravia, there was one third one that I don't remember, but it was the third one. But in any case he did not cover Galicia, comes in Mises, a native of Galicia, reads Polish, not only Latin and Greek, He is written in Greek, but also Polish. He reads Polish very well. I don't think that he talked Polish, at least not in later years, but he read Polish. So Mises is the ideal man to set out on a study of the sword, and he does this for Galicia, and he shows that peasant lib was great under the Germans.

1:09:15There was peasant lib under the Germans, and actually it was certainly also oral history because his father, his grandfather, had been part of this movement. So that's very intriguing and interesting for us, from the point of view of Mises' biography, because clearly, well, what we see here, Mises starts off, he starts off his academic career as a pupil, as a star pupil, we might say, of the historical school. It's very interesting in several respects. First of all, because it shows that Mises was not dogmatic. After all, he changed his mind, obviously. He starts off there and becomes an Austro-libertarian later. It's quite a way. away. Okay, so it's not dogmatic. And he, it's also interesting because it shows, well, so how does he proceed these things? It's not something that he comes like Athena from the bro of Zeus, right, fully-fledged and he's a libertarian and down with government and so on.

1:10:24That's not his point of departure. That's the point where he will finally arrive. He starts off on a completely different level. He starts off with a goodwill effort in applying the methods of the historical school and then finally works his way away from this. Now this study was published in 1902 in a prestigious outlet, corresponds today maybe to a Harvard series in government studies, I don't know whether such a series exists, the corresponding thing in Austria-Hungary at the time, and so brought Mises into the limelight of the profession as a coming young star of the historical school.

1:11:14Okay, then comes the military service and things get better after this. I don't say it gets better with the military service but in any case after the military service it gets much better. So here we have Mises as a young soldier, he is very happy, probably he is on his way away from the army, or probably he is just strolling around on a Sunday afternoon in one of the central parks in Vienna and so on, he is taken here. For what happens then, Mises' father dies in 1903 and he has a gallbladder problem that has plagued him for years and then he didn't survive an operation in the fall of this year.

1:12:16So Mises returns and he joins the seminar of Filipovic, who has disappeared, but you saw him before. And Filipovic contributes several papers on the history of Austrian factory legislation and other things, also still from the point of view of the historical school, essentially based on archival studies of administrative records. of Records, that was the source material that he used and based on this material then he recounted the train of events, how things happened.

1:13:11He was very dissatisfied with this later on. So this is how it goes on, the Filipovitch seminar. And Filipovic, those years are interesting, important from two points of view, well, on the one hand, then Mises gets here in touch with Filipovic, with various other students, that would become important for him later in life. For example, Emil Lederer was a famous socialist intellectual later on, was a minister in the 1910s and 1920s and in the 1930s moved on to the new school of social research in New York, was a big time left wing intellectual in those years.

1:14:05So, Mises met people of his sort in the Filippovich seminar, which was in a way the rallying ground of young intellectuals interested in social policy, which in those years meant finding those areas where the government should intervene to protect the working classes. That was what social policy meant, sometimes also called the social question. But the Filipovich seminar was also important from another point of view because it brought Mises in touch with the Austrian School. Filipovich himself was a pupil of Carl Menger, who you know of course, about whom we'll talk this afternoon. and so he probably also encouraged Mises to read Carl Menger's principles that have been published in 1871 but which apparently had been falling out of use at the beginning of the of the 20th century. The most important author of theoretical economics in those years was nobody else but Filippowicz himself.

1:15:12Filippowitsch had the equivalent of Paul Samuelson's economics textbook at the time, and so his textbook says, was Grundris der politischen Ökonomie, outline of political economy, and here you had so the main textbook that would lay out the signs, not from the point of view of the historical school, but very well from a theoretical point of view, but still explaining the necessity of government interventionism. So, Filippovich probably encouraged Mises to read Menger. Maybe Mises picked up a volume of Menger on his own, because in the fall of this year, another Menger pupil joined the Department of Economics at the University of Vienna, namely, Friedrich von Wieser, about whom we will talk later on too.

1:16:02Now, when I say Department of Economics, we've got to be careful. This meant, in fact, two professors. The Department of Economics consisted of two chairs, and there were maybe three or four adjunct professors that also taught classes. So this was the biggest, the most prestigious economics department in the country in those years was just two main professors, two full professors. Anyway, so Mises picked up Menger's volume and he later said that this turned him into an economist. So this was the great revelation for him. He became an economist reading Menger. Why was this?

1:16:49Well, because in Menger, he saw that economic theory could be realistic, and so he had the best of both worlds. He had theory on the one hand, and yet this descriptive character that he only knew from the study of history, always clinging very closely to empirical evidence. For him, as someone who came from the side of the historical school, that was of course a major criterion. If someone just proposed vacuous abstractions hanging in the air and so on, he would not have been very impressed. But what Menger did was painstakingly analyze phenomena that were accessible to everybody. Everybody could verify for himself.

1:17:37So Menger turned him into an economist, or we would have to say more precisely, Menger completely remodeled, changed Mises' orientation, because it was not, well, after the last page of the Principles of Economics by Menger, he turns the last page and he's an Austro-libertarian. was not this thing, but we've got to put ourselves into the position of this young man who comes from a completely different side, who is himself emotionally an interventionist, he wants the government to intervene, he wants to use science to improve society, but he's not very happy with the historical school, and then he reads Menger, he says, He says, oh wow, he talks about things that are obviously important to understand causal relationships in the social realm, but they cannot be seized by any other discipline.

1:18:36Obviously you need some discipline of this sort, whether you call it economics or whatever else, to talk about this layer of reality. So he starts thinking. He starts reorienting himself. Of course, it's not quite as slow as it comes out now, but he's a fast man and so on. But it takes him a couple of times, and when he publishes his first major Austrian book in 1912, The Theory of Money and Credit, about which we'll talk later on, He is still not the Mises of human action. He still has ample room for various government interventions. He ridicules almost those who want to use silver and gold coins and so on. These are ridiculous metalers because we all know that money can be so much cheaper when we make it out of paper and these things.

1:19:26He believes that labor unions can at least in the short run improve the real wages of all employees and things like this. So he has clearly not yet penetrated, not yet rethought all aspects of what he had been taught before, but he is reoriented now. He questions all of this, one point at a time. And then finally, to allow you a few questions, he joins what for him is the crucial educational experience, namely the seminar that Eugen von Boehm-Bawerk teaches at the University of Vienna from 1905 to 1914.

1:20:17Here we have Eugen in all his splendor, several four-time minister of finance in the Austrian part of the empire, not the Hungarian part, the Austrian part, because there was no common finance minister, and a professor of economics at the University of Innsbruck. Carl Menger had tried several times to bring him to the University of Vienna. Each time it was blocked and the Ministry of Education said, well look, we have already one of these weird theoreticians. We need also a representative of the historical school. and so each time Boehm-Bawerk was not hired but then after his last term as a Minister of Finance was a rather glorious term, 1900 to 1904, Boehm-Bawerk at that point was the most prestigious economist living in Austria-Hungary, known abroad, his books had been translated into major language, English, French and other and other languages. And so there was no ample other reasons to provide him with a chair, a new chair, a third chair at the University of Vienna.

1:21:35That's how the third chair came into being, before there were only two. So then we had Wieser, we had Filipovich and we had Eugen from Boehm-Bawerk teaching at the University of Vienna. of the University of Vienna from 1904 to 1914 when Boehm-Bawerk dies and he starts his graduate seminar in the summer semester of 1905 with Mises in the attendance and with the elite of young people interested in theoretical social sciences at the time. So you had Mises, you had Schumpeter, you had Lederer, so there was a group of Marxists also, like Lederer but also Bukharin, later on a famous economist in the Soviet Union and so on, Richard von Striegel later on and others.

1:22:38was an excellent group, very high level of proceedings, of discussions, and the very first semester, that summer semester of 1905, saw the confrontation between Boehm-Bawerk and a young Marxist pupil Otto Bauer, about whom we will talk later on. Otto Bauer was the rising intellectual star in the socialist camp, rising star in a school that we call today Austro-Marxism. That's Austrian economics, but there's also Austro-Marxism, a particular brand of Marxism. And so they were debating the theory of value. Bauer defending or trying to defend the labor theory of value of Karl Marx and Boehm-Bawerk arguing against. It was a rather instructive experience.

1:23:31Shortly thereafter, in February 1906, Mises received his doctoral degree. At the time he didn't have to write a thesis. There was no doctoral dissertation. was just a series of oral exams and he was examined in the history of law and Roman law and canon law and of course Austrian law. And then he started his habilitation thesis under Filipowicz. Now the habilitation is a particularity of Central Europe, you find it in the Germany, Austria, Poland, of Poland, the Czech Republic and so on. It's kind of a second PhD, because we like doing things again, really nice things, we do them again and again.

1:24:21Whereas the PhD dissertation is meant to show your aptitude to scientific research by focusing on a rather narrow question. In the habilitation you show that you master an entire field of research. So that is the idea of the habilitation. It shows that you are the peer of present professors in that field. Which also implies that you can be hired as a full professor directly after having this degree. And Menger, for example, was hired after receiving his habilitation degree. He became a full professor. Mises did not, Schumpeter for example did, Schumpeter was hired as a full professor directly after receiving this degree and it's still the case today.

1:25:11Of course it's difficult but it is possible, so that is the idea of the habilitation and this habilitation dealt with the subject matter neglected so far by the Austrian economists namely money and banking. And so that's our subject for this afternoon. I propose that I stop now. It took much longer than planned, but also I covered a lot of ground. You can ask questions now. If you have, if we don't have enough time or you have more questions after thinking about it, you can bring them up this afternoon too. The historical school includes Friedrich Liszt? No, he's not usually counted within the historical school because Liszt also makes a theoretical argument.

1:25:58He makes a theoretical argument for protectionism. So Liszt for those, as a German economist for the Liszt who publishes a system of national economy in 1840 in which he tries to refute Adam Smith. Yes, for example, there was a post-war edition of The Wealth of Nations for which he wrote the preface and he highly praised him and in fact if you read a couple of the essays that he wrote after publishing Human Action, You always stress Smithian themes, capital accumulation, so the advancement of real wages and so on only comes to capital accumulation.

1:26:48Something that he had not done in earlier works is interesting. I don't have a good explanation for this. Nothing that I found any evidence for. I could not exclude this, but I found no evidence. I suppose that Filipovic encouraged him to do these readings because Filipovic taught theoretical economics. And so he certainly encouraged his students to read the classical authors. So, he must have read at that time Smith, Ricardo, Jean-Baptiste Say. It's very clear that for his theory of money and credit, he studied Ricardo in depth.

1:27:35Of course, Ricardo is much richer when it comes to monetary economics than Smith. So, it's not surprising that he didn't quote him much. But there's no evidence that I've found. How does Mises put back on his work with the historical school? Yes, well he found that it was fruitless. There were a few things that struck him when he was still a boy. As I said, he was interested in history very early on, actually even before the gymnasium years, and read historical journals and so on. And he was struck by the bias of the German historians that he found there.

1:28:20He said, well, for me as an Austrian, it was not difficult to see this bias that many young Germans maybe did not see, because there was the conflict between Prussian-led Germany and Austria-Hungary, brought out also in the conflict in the war of 1867. So he saw this political bias that was in, but that's of course not yet a decisive consideration to reject an entire approach, but then later on he also saw the substantive limitations. I can give you a good quote in which he talks about this.

1:29:05Well, I think I don't have it under hand, I'll find it later. In essence, what he says is that the historical school got things right in one respect, namely that they understood that in order to make any decision, you had to understand the picture, the historical concrete details of the situation. So they were right about this. But then it's the question, how do you react to the given situation? You need to understand something about causes and effect. It's not enough that you just understand what the present situation is. And here then the historical school offered nothing, because according to them, to their own doctrine, which is by the way a theoretical doctrine, it's not history, you could not derive any general lessons from history.

1:30:01But then of course you have a riddle. If each situation is unique and you have to react uniquely, so what do you do? And then Gustav Schmoller said, well, we've got to change reality to make it conform to the prevailing ethical and moral ideals by legislation. He didn't care for causal laws. He didn't care for the question, is it possible by doing this, creating law A to attain our end B, for example, increasing wage rates. Mises didn't care for this, he just said we need to act according to the feelings of our age. Yeah, Mises didn't find this satisfactory, which we understand, because we stand on his shoulders.

1:30:50Any questions? Well, thank you very much. See you later.