Ludwig von Mises

Ludwig von Mises

Overview
Ludwig Heinrich Edler
Edler
Edler was until 1919 the lowest title of nobility in Austria-Hungary and Germany, just beneath a Ritter, but above nobles without title who used only the preposition von before their surname. It was mostly given to civil servants and military officers, as well as those upon whom the second rank of...

 von Mises
(ˈluːtvɪç fɔn ˈmiːzəs; September 29, 1881 – October 10, 1973) was an Austrian economist
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, philosopher, and classical liberal
Classical liberalism
Classical liberalism is the philosophy committed to the ideal of limited government, constitutionalism, rule of law, due process, and liberty of individuals including freedom of religion, speech, press, assembly, and free markets....

 who had a significant influence on the modern Libertarian
Libertarianism
Libertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...

 movement and the "Austrian School
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...

" of economic thought.




Ludwig von Mises was born to wealthy Jewish parents in the city of Lemberg
Lviv
Lviv is a city in western Ukraine. The city is regarded as one of the main cultural centres of today's Ukraine and historically has also been a major Polish and Jewish cultural center, as Poles and Jews were the two main ethnicities of the city until the outbreak of World War II and the following...

, in Galicia, Austria-Hungary
Austria-Hungary
Austria-Hungary , more formally known as the Kingdoms and Lands Represented in the Imperial Council and the Lands of the Holy Hungarian Crown of Saint Stephen, was a constitutional monarchic union between the crowns of the Austrian Empire and the Kingdom of Hungary in...

 (now Lviv
Lviv
Lviv is a city in western Ukraine. The city is regarded as one of the main cultural centres of today's Ukraine and historically has also been a major Polish and Jewish cultural center, as Poles and Jews were the two main ethnicities of the city until the outbreak of World War II and the following...

 in Ukraine
Ukraine
Ukraine is a country in Eastern Europe. It has an area of 603,628 km², making it the second largest contiguous country on the European continent, after Russia...

). The family of his father Arthur Edler von Mises had been elevated to the Austrian nobility in the 19th century, and was involved in building and financing railroads.
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Quotations

If one rejects laissez faire on account of man's fallibility and moral weakness, one must for the same reason also reject every kind of government action.

Planning for Freedom (collection, 1952), p. 44

The main political problem is how to prevent the police power from becoming tyrannical. This is the meaning of all the struggles for liberty.

As society is only possible if everyone, while living his own life, at the same time helps others to live; if every individual is simultaneously means and end; if each individual's well-being is simultaneously the condition necessary to the well-being of others, it is evident that the contrast between I and thou, means and end, automatically is overcome.

The philosophy called individualism is a philosophy of social cooperation and the progressive intensification of the social nexus.

The meaning of economic freedom is this: that the individual is in a position to choose the way in which he wants to integrate himself into the totality of society.

The goal of liberalism is the peaceful cooperation of all men. It aims at peace among nations too. When there is private ownership of the means of production everywhere and when laws, the tribunals and the administration treat foreigners and citizens on equal terms, it is of little importance where a country's frontiers are drawn. ... War no longer pays; there is no motive for aggression. ... All nations can coexist peacefully...

If history could teach us anything, it would be that private property is inextricably linked with civilization.

No wonder that all who have had something new to offer humanity have had nothing good to say of the state or its laws.

This, then, is freedom in the external life of man — that he is independent of the arbitrary power of his fellows.

Encyclopedia
Ludwig Heinrich Edler
Edler
Edler was until 1919 the lowest title of nobility in Austria-Hungary and Germany, just beneath a Ritter, but above nobles without title who used only the preposition von before their surname. It was mostly given to civil servants and military officers, as well as those upon whom the second rank of...

 von Mises
(ˈluːtvɪç fɔn ˈmiːzəs; September 29, 1881 – October 10, 1973) was an Austrian economist
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

, philosopher, and classical liberal
Classical liberalism
Classical liberalism is the philosophy committed to the ideal of limited government, constitutionalism, rule of law, due process, and liberty of individuals including freedom of religion, speech, press, assembly, and free markets....

 who had a significant influence on the modern Libertarian
Libertarianism
Libertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...

 movement and the "Austrian School
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...

" of economic thought.

Biography




Early life


Ludwig von Mises was born to wealthy Jewish parents in the city of Lemberg
Lviv
Lviv is a city in western Ukraine. The city is regarded as one of the main cultural centres of today's Ukraine and historically has also been a major Polish and Jewish cultural center, as Poles and Jews were the two main ethnicities of the city until the outbreak of World War II and the following...

, in Galicia, Austria-Hungary
Austria-Hungary
Austria-Hungary , more formally known as the Kingdoms and Lands Represented in the Imperial Council and the Lands of the Holy Hungarian Crown of Saint Stephen, was a constitutional monarchic union between the crowns of the Austrian Empire and the Kingdom of Hungary in...

 (now Lviv
Lviv
Lviv is a city in western Ukraine. The city is regarded as one of the main cultural centres of today's Ukraine and historically has also been a major Polish and Jewish cultural center, as Poles and Jews were the two main ethnicities of the city until the outbreak of World War II and the following...

 in Ukraine
Ukraine
Ukraine is a country in Eastern Europe. It has an area of 603,628 km², making it the second largest contiguous country on the European continent, after Russia...

). The family of his father Arthur Edler von Mises had been elevated to the Austrian nobility in the 19th century, and was involved in building and financing railroads. Ludwig's mother, Adele (née Landau), was a niece of Dr. Joachim Landau, a Liberal Party deputy to the Austrian Parliament. Arthur was stationed there as a construction engineer with Czernowitz railway company. At the age of twelve Ludwig spoke fluent Yiddish, German, Polish, and French, read Latin, and could understand Ukrainian. Mises was the older brother of the famous applied
Applied physics
Applied physics is a general term for physics which is intended for a particular technological or practical use.It is usually considered as a bridge or a connection between "pure" physics and engineering....

 physicist
Physicist
A physicist is a scientist who studies or practices physics. Physicists study a wide range of physical phenomena in many branches of physics spanning all length scales: from sub-atomic particles of which all ordinary matter is made to the behavior of the material Universe as a whole...

 Richard von Mises, a member of the Vienna Circle
Vienna Circle
The Vienna Circle was an association of philosophers gathered around the University of Vienna in 1922, chaired by Moritz Schlick, also known as the Ernst Mach Society in honour of Ernst Mach...

. Another brother, Karl von Mises, died as a child from scarlet fever. When Ludwig and Richard were children, his family moved back to their ancestral home of Vienna.

In 1900, he attended the University of Vienna
University of Vienna
The University of Vienna is a public university located in Vienna, Austria. It was founded by Duke Rudolph IV in 1365 and is the oldest university in the German-speaking world...

, becoming influenced by the works of Carl Menger
Carl Menger
Carl Menger was the founder of the Austrian School of economics, famous for contributing to the development of the theory of marginal utility, which contested the cost-of-production theories of value, developed by the classical economists such as Adam Smith and David Ricardo.- Biography :Menger...

. Mises' father died in 1903, and in 1906 Mises was awarded his doctorate
Doctorate
A doctorate is an academic degree or professional degree that in most countries refers to a class of degrees which qualify the holder to teach in a specific field, A doctorate is an academic degree or professional degree that in most countries refers to a class of degrees which qualify the holder...

 from the school of law.

Professional life


In the years from 1904 to 1914, Mises attended lectures given by the prominent Austrian economist Eugen von Böhm-Bawerk
Eugen von Böhm-Bawerk
Eugen Ritter von Böhm-Bawerk was an Austrian economist who made important contributions to the development of the Austrian School of economics.-Biography:...

. There, he developed friendships not only with Menger and Böhm-Bawerk, but also prominent sociologist Max Weber
Max Weber
Karl Emil Maximilian "Max" Weber was a German sociologist and political economist who profoundly influenced social theory, social research, and the discipline of sociology itself...

. Mises taught as a Privatdozent
Privatdozent
Privatdozent or Private lecturer is a title conferred in some European university systems, especially in German-speaking countries, for someone who pursues an academic career and holds all formal qualifications to become a tenured university professor...

at the Vienna University in the years from 1913 to 1934 while formally serving as secretary at the Vienna Chamber of Commerce from 1909 to 1934. In these roles, he became one of the closest economic advisers of Engelbert Dollfuss
Engelbert Dollfuss
Engelbert Dollfuss was an Austrian Christian Social and Patriotic Front statesman. Serving previously as Minister for Forest and Agriculture, he ascended to Federal Chancellor in 1932 in the midst of a crisis for the conservative government...

, the "austrofascist" but strongly anti-Nazi Austrian Chancellor
Chancellor of Austria
The Federal Chancellor is the head of government in Austria. Its deputy is the Vice-Chancellor. Before 1918, the equivalent office was the Minister-President of Austria. The Federal Chancellor is considered to be the most powerful political position in Austrian politics.-Appointment:The...

, and later to Otto von Habsburg
Otto von Habsburg
Otto von Habsburg , also known by his royal name as Archduke Otto of Austria, was the last Crown Prince of Austria-Hungary from 1916 until the dissolution of the empire in 1918, a realm which comprised modern-day Austria, Hungary, Bosnia and Herzegovina, Croatia, the Czech Republic, Slovakia,...

, the Christian democratic
Christian Democracy
Christian democracy is a political ideology that seeks to apply Christian principles to public policy. It emerged in nineteenth-century Europe under the influence of conservatism and Catholic social teaching...

 politician and claimant to the throne of Austria
Emperor of Austria
The Emperor of Austria was a hereditary imperial title and position proclaimed in 1804 by the Holy Roman Emperor Francis II, a member of the House of Habsburg-Lorraine, and continually held by him and his heirs until the last emperor relinquished power in 1918. The emperors retained the title of...

 (which had been legally abolished in 1918). Friends and students of Mises in Europe included Wilhelm Röpke
Wilhelm Röpke
Wilhelm Röpke was Professor of Economics, first in Jena, then in Graz, Marburg, Istanbul and finally in Geneva, and the main spiritual father of the German social market economy, theorising and collaborating to organise the post-World War II economic re-awakening of the then destroyed German...

 and Alfred Müller-Armack
Alfred Müller-Armack
Alfred Müller-Armack was a German economist and politician.He was professor of economics at University of Münster and University of Cologne. Müller-Armack coined the term "social market economy" in 1946....

 (influential advisors to German chancellor Ludwig Erhard
Ludwig Erhard
Ludwig Wilhelm Erhard was a German politician affiliated with the CDU and Chancellor of West Germany from 1963 until 1966. He is notable for his leading role in German postwar economic reform and economic recovery , particularly in his role as Minister of Economics under Chancellor Konrad Adenauer...

), Jacques Rueff
Jacques Rueff
Jacques Rueff was a French economist and adviser to the French Government.An influential French conservative and free market thinker, Rueff was born the son of a well known Parisian physician and studied economics and mathematics at the École Polytechnique...

 (monetary advisor to Charles de Gaulle
Charles de Gaulle
Charles André Joseph Marie de Gaulle was a French general and statesman who led the Free French Forces during World War II. He later founded the French Fifth Republic in 1958 and served as its first President from 1959 to 1969....

), Lord Lionel Robbins (of the London School of Economics
London School of Economics
The London School of Economics and Political Science is a public research university specialised in the social sciences located in London, United Kingdom, and a constituent college of the federal University of London...

), and President of Italy, Luigi Einaudi
Luigi Einaudi
Luigi Einaudi , Cavaliere di Gran Croce decorato di Gran Cordone OMRI was an Italian politician and economist. He served as the second President of the Italian Republic between 1948 and 1955.-Early life:...

.

Economist and political theorist F. A. Hayek first came to know Mises while working as Mises' subordinate at a government office dealing with Austria's post-World War I debt. Hayek wrote, "there I came to know him mainly as a tremendously efficient executive, the kind of man who, as was said of John Stuart Mill
John Stuart Mill
John Stuart Mill was a British philosopher, economist and civil servant. An influential contributor to social theory, political theory, and political economy, his conception of liberty justified the freedom of the individual in opposition to unlimited state control. He was a proponent of...

, because he does a normal day's work in two hours, always has a clear desk and time to talk about anything. I came to know him as one of the best educated and informed men I have ever known..." According to Mises' student Murray Rothbard
Murray Rothbard
Murray Newton Rothbard was an American author and economist of the Austrian School who helped define capitalist libertarianism and popularized a form of free-market anarchism he termed "anarcho-capitalism." Rothbard wrote over twenty books and is considered a centrally important figure in the...

, Hayek's development of Mises' theoretical work on the business cycle
Business cycle
The term business cycle refers to economy-wide fluctuations in production or economic activity over several months or years...

 later earned Hayek the 1974 Nobel Memorial Prize in Economic Sciences
Nobel Memorial Prize in Economic Sciences
The Nobel Memorial Prize in Economic Sciences, commonly referred to as the Nobel Prize in Economics, but officially the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel , is an award for outstanding contributions to the field of economics, generally regarded as one of the...

 (shared with Swedish economist Gunnar Myrdal
Gunnar Myrdal
Karl Gunnar Myrdal was a Swedish Nobel Laureate economist, sociologist, and politician. In 1974, he received the Nobel Memorial Prize in Economic Sciences with Friedrich Hayek for "their pioneering work in the theory of money and economic fluctuations and for their penetrating analysis of the...

).

In 1934, Mises left Austria for Geneva, Switzerland, where he was a professor at the Graduate Institute of International Studies
Graduate Institute of International Studies
The Graduate Institute of International Studies, best known as HEI , was founded in 1927 as one of the first institutions in the world dedicated to the study of international relations...

 until 1940. Fearing the prospect of Germany taking control over Switzerland, in 1940 along with other Jewish refugees Mises left Europe and emigrated to New York City. There he became a visiting professor at New York University
New York University
New York University is a private, nonsectarian research university based in New York City. NYU's main campus is situated in the Greenwich Village section of Manhattan...

. He held this position from 1945 until his retirement in 1969, though he was not salaried by the university. Instead, businessmen such as Lawrence Fertig
Lawrence Fertig
Lawrence W. Fertig was an American advertising executive and a libertarian journalist and economic commentator.Fertig wrote columns for the New York World-Telegram and the New York Sun. Fertig also wrote the 1961 Regnery Press offering, Prosperity Through Freedom.He was the founder of Lawrence...

 funded him and his work. For part of this period, Mises worked on currency
Currency
In economics, currency refers to a generally accepted medium of exchange. These are usually the coins and banknotes of a particular government, which comprise the physical aspects of a nation's money supply...

 issues for the Pan-Europa movement
International Paneuropean Union
The International Paneuropean Union claims to be the oldest European unification movement and is also referred to as the Paneuropean Movement and the Pan-Europa Movement...

 led by a fellow NYU faculty member and Austrian exile, Richard Coudenhove-Kalergi. In 1947, Mises became one of the founding members of the Mont Pelerin Society
Mont Pelerin Society
The Mont Pelerin Society is an international organization composed of economists , philosophers, historians, intellectuals, business leaders, and others who favour classical liberalism...

. Despite fleeing Europe, Mises is credited for having a highly influential role in the economic reconstruction of Europe after World War II
World War II
World War II, or the Second World War , was a global conflict lasting from 1939 to 1945, involving most of the world's nations—including all of the great powers—eventually forming two opposing military alliances: the Allies and the Axis...

 through his professional relationships with Ludwig Erhard
Ludwig Erhard
Ludwig Wilhelm Erhard was a German politician affiliated with the CDU and Chancellor of West Germany from 1963 until 1966. He is notable for his leading role in German postwar economic reform and economic recovery , particularly in his role as Minister of Economics under Chancellor Konrad Adenauer...

, Charles de Gaulle
Charles de Gaulle
Charles André Joseph Marie de Gaulle was a French general and statesman who led the Free French Forces during World War II. He later founded the French Fifth Republic in 1958 and served as its first President from 1959 to 1969....

 and Luigi Einaudi
Luigi Einaudi
Luigi Einaudi , Cavaliere di Gran Croce decorato di Gran Cordone OMRI was an Italian politician and economist. He served as the second President of the Italian Republic between 1948 and 1955.-Early life:...

.

In America, Mises' work first influenced that of economists such as Benjamin Anderson
Benjamin Anderson
Benjamin McAlester Anderson, Jr. was an American economist in the Austrian tradition of Carl Menger.-Early life and education:...

, Leonard Read
Leonard Read
Leonard E. Read was an American economist and the founder of the Foundation for Economic Education, which was the first modern free market think tank in the United States....

 and Henry Hazlitt
Henry Hazlitt
Henry Stuart Hazlitt was an American economist, philosopher, literary critic and journalist for such publications as The Wall Street Journal, The Nation, The American Mercury, Newsweek, and The New York Times...

, but writers such as former radical Max Eastman
Max Eastman
Max Forrester Eastman was an American writer on literature, philosophy and society, a poet, and a prominent political activist. For many years, Eastman was a supporter of socialism, a leading patron of the Harlem Renaissance and an activist for a number of liberal and radical causes...

, legal scholar Sylvester J. Petro, and novelist Ayn Rand
Ayn Rand
Ayn Rand was a Russian-American novelist, philosopher, playwright, and screenwriter. She is known for her two best-selling novels The Fountainhead and Atlas Shrugged and for developing a philosophical system she called Objectivism....

 were also among his friends and admirers. His American students included Israel Kirzner
Israel Kirzner
Israel Meir Kirzner is a leading economist in the Austrian School.-Early life:The son of a well-known rabbi and Talmudist, Kirzner was born in London, England and came to the United States via South Africa.-Education:After studying with the University of Cape Town, South Africa in 1947-48 and...

, Hans Sennholz
Hans Sennholz
Hans F. Sennholz was an economist of the Austrian school of economics who studied under Ludwig von Mises. After serving in the Luftwaffe in World War II, he took degrees at the universities of Marburg and Köln. He then moved to the United States to study for a Ph.D. at New York University...

, Ralph Raico
Ralph Raico
Ralph Raico is an American historian, libertarian, and specialist in European classical liberalism and Austrian Economics. He is currently a professor of history at Buffalo State College and a senior faculty member at the Ludwig von Mises Institute. Raico was a student of Ludwig von Mises and...

, Leonard Liggio
Leonard Liggio
Leonard Liggio is a classical liberal author, research professor of law at George Mason University, and executive vice president of the Atlas Economic Research Foundation in Fairfax, Virginia, USA.-Present positions:...

, George Reisman
George Reisman
George Gerald Reisman is Professor Emeritus of Economics at Pepperdine University and author of Capitalism: A Treatise on Economics . He is also the author of an earlier book, The Government Against the Economy , which was praised by F.A...

 and Murray Rothbard
Murray Rothbard
Murray Newton Rothbard was an American author and economist of the Austrian School who helped define capitalist libertarianism and popularized a form of free-market anarchism he termed "anarcho-capitalism." Rothbard wrote over twenty books and is considered a centrally important figure in the...

. Mises later received an honorary doctorate
Honorary degree
An honorary degree or a degree honoris causa is an academic degree for which a university has waived the usual requirements, such as matriculation, residence, study, and the passing of examinations...

 from Grove City College
Grove City College
Grove City College is a Christian liberal arts college in Grove City, Pennsylvania, about north of Pittsburgh. According to the College Bulletin, its stated three-fold mission is to provide an excellent education at an affordable price in a thoroughly Christian environment...

.

Despite his growing fame, Mises listed himself plainly in the New York phone directory and welcomed students into his home. He retired from teaching at the age of 87, then the oldest active professor in America. Mises died at the age of 92 at St. Vincent's hospital
Saint Vincent's Catholic Medical Center
Saint Vincent Catholic Medical Centers ' was a healthcare system, anchored by its flagship hospital, St. Vincent's Hospital Manhattan, locally referred to as "St. Vincent's". St. Vincent's was founded in 1849 and closed in 2010...

 in New York. His body is buried at Ferncliff Cemetery
Ferncliff Cemetery
Ferncliff Cemetery and Mausoleum is located on Secor Road in the hamlet of Hartsdale, town of Greenburgh, Westchester County, New York, about 25 miles north of Midtown Manhattan. It was founded in 1902, and is non-sectarian...

, in Hartsdale, New York
Hartsdale, New York
Hartsdale is a hamlet and a census-designated place located in the town of Greenburgh, Westchester County, New York. The population was 5,293 at the 2010 census.-Geography:Hartsdale is located at ....

. Following his death, his entire library (and his personal desk) was donated to Hillsdale College
Hillsdale College
Hillsdale College in Hillsdale, Michigan, United States, is a co-educational liberal arts college known for being the first American college to prohibit in its charter all discrimination based on race, religion, or sex; its refusal of government funding; and its monthly publication, Imprimis...

 where it is available for student and public use.

Contributions to the field of economics



Mises wrote and lectured extensively on behalf of classical liberalism
Classical liberalism
Classical liberalism is the philosophy committed to the ideal of limited government, constitutionalism, rule of law, due process, and liberty of individuals including freedom of religion, speech, press, assembly, and free markets....

 and is seen as one of the leaders of the Austrian School
Austrian School
The Austrian School of economics is a heterodox school of economic thought. It advocates methodological individualism in interpreting economic developments , the theory that money is non-neutral, the theory that the capital structure of economies consists of heterogeneous goods that have...

 of economics. In his treatise
Treatise
A treatise is a formal and systematic written discourse on some subject, generally longer and treating it in greater depth than an essay, and more concerned with investigating or exposing the principles of the subject.-Noteworthy treatises:...

 on economics, Human Action
Human Action
Human Action: A Treatise on Economics is the magnum opus of the Austrian economist Ludwig von Mises. It presents a case for laissez-faire capitalism based on Mises' praxeology, or rational investigation of human decision-making. It rejects positivism within economics...

, Mises introduced praxeology
Praxeology
Praxeology is the study of human action. Praxeology rejects the empirical methods of the natural sciences for the study of human action, because the observation of how humans act in simple situations cannot predict how they will act in complex situations...

 as a more general conceptual foundation of the social sciences and established that economic laws were only arrived at through the means of methodological individualism
Methodological individualism
Methodological individualism is the theory that social phenomena can only be accurately explained by showing how they result from the intentional states that motivate the individual actors. The idea has been used to criticize historicism, structural functionalism, and the roles of social class,...

 firmly rejecting positivism
Positivism
Positivism is a a view of scientific methods and a philosophical approach, theory, or system based on the view that, in the social as well as natural sciences, sensory experiences and their logical and mathematical treatment are together the exclusive source of all worthwhile information....

 and materialism
Materialism
In philosophy, the theory of materialism holds that the only thing that exists is matter; that all things are composed of material and all phenomena are the result of material interactions. In other words, matter is the only substance...

 as a foundation for the social sciences. Many of his works, including Human Action, were on two related economic themes:
  1. monetary economics and inflation
    Inflation
    In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

    ;
  2. the differences between government controlled economies and free markets.


Mises argued that money is demanded for its usefulness in purchasing other goods, rather than for its own sake and that any unsound credit
Credit (finance)
Credit is the trust which allows one party to provide resources to another party where that second party does not reimburse the first party immediately , but instead arranges either to repay or return those resources at a later date. The resources provided may be financial Credit is the trust...

 expansion causes business cycles. His other notable contribution was his argument that socialism
Socialism
Socialism is an economic system characterized by social ownership of the means of production and cooperative management of the economy; or a political philosophy advocating such a system. "Social ownership" may refer to any one of, or a combination of, the following: cooperative enterprises,...

 must fail economically because of the economic calculation problem
Economic calculation problem
The economic calculation problem is a criticism of central economic planning. It was first proposed by Ludwig von Mises in 1920 and later expounded by Friedrich Hayek. The problem referred to is that of how to distribute resources rationally in an economy...

the impossibility of a socialist government being able to make the economic calculations required to organize a complex economy. Mises projected that without a market economy
Market economy
A market economy is an economy in which the prices of goods and services are determined in a free price system. This is often contrasted with a state-directed or planned economy. Market economies can range from hypothetically pure laissez-faire variants to an assortment of real-world mixed...

 there would be no functional price system
Price system
In economics, a price system is any economic system that affects its distribution of goods and services with prices and employing any form of money. Except for possible remote and primitive communities, all modern societies use price systems to allocate resources...

, which he held essential for achieving rational and efficient allocation of capital goods to their most productive uses. If capital goods are the subject of neither rent nor exchange, as per private ownership of those means of production, then no barter terms or money prices can arise for them. Without the common nominal index of money pricing that allows comparison of costs of production to likely revenues, there can be no rational allocation of diverse capital goods in the production of diverse consumer goods whose production requires some use of scarce capital. In a socialist society, capital is not distributed according to the more efficient—thus profitable—capital structures, but rather to any use a theoretical socialist planner sees fit without the aid of monetary price signals to compare the profitability in a given use of capital.

According to Mises, socialism must fail, as demand cannot be known without prices. Therefore, socialist waste of capital goods is as chronic as the incentives for production and retention of capital are low, while capital goods are coercively monopolised by a dysfunctional State operating with only the data pertaining to interpersonal comparisons of utility, as per democratic production. These data are not sufficient for economic calculation, and therefore are not sufficient for efficient use and allocation of capital. Capital's place in a free market is ordained by the prices set by private owners of the means of production, who keep capital where its production is remunerated best by consumers, and who liquidate it and pass it to other uses if production is bankrupt. In socialism, such means for liquidation of capital goods, and the passage or maintenance of the means of production across extremely diverse applications throughout the divisions of labour according to the expense or cheapness of bidding capital away from vital production, is simply not present.

Mises' criticism of socialist paths of economic development is well-known, such as in his 1922 work Socialism
Socialism (book)
Socialism: An Economic and Sociological Analysis is a book by Austrian School economist and libertarian thinker Ludwig von Mises, first published in German by Gustav Fischer Verlag in Jena in 1922 under the title Die Gemeinwirtschaft: Untersuchungen über den Sozialismus...

: An Economic and Sociological Analysis
:
The only certain fact about Russian affairs under the Soviet regime with regard to which all people agree is: that the standard of living of the Russian masses is much lower than that of the masses in the country which is universally considered as the paragon of capitalism, the United States of America. If we were to regard the Soviet regime as an experiment, we would have to say that the experiment has clearly demonstrated the superiority of capitalism and the inferiority of socialism.
These arguments were elaborated on by subsequent Austrian economists such as Nobel laureate Friedrich Hayek
Friedrich Hayek
Friedrich August Hayek CH , born in Austria-Hungary as Friedrich August von Hayek, was an economist and philosopher best known for his defense of classical liberalism and free-market capitalism against socialist and collectivist thought...

 and students such as Hans Sennholz
Hans Sennholz
Hans F. Sennholz was an economist of the Austrian school of economics who studied under Ludwig von Mises. After serving in the Luftwaffe in World War II, he took degrees at the universities of Marburg and Köln. He then moved to the United States to study for a Ph.D. at New York University...

.

In Interventionism, An Economic Analysis (1940), Ludwig von Mises wrote:
The usual terminology of political language is stupid. What is 'left
Left-wing politics
In politics, Left, left-wing and leftist generally refer to support for social change to create a more egalitarian society...

' and what is 'right
Right-wing politics
In politics, Right, right-wing and rightist generally refer to support for a hierarchical society justified on the basis of an appeal to natural law or tradition. To varying degrees, the Right rejects the egalitarian objectives of left-wing politics, claiming that the imposition of equality is...

'? Why should Hitler
Adolf Hitler
Adolf Hitler was an Austrian-born German politician and the leader of the National Socialist German Workers Party , commonly referred to as the Nazi Party). He was Chancellor of Germany from 1933 to 1945, and head of state from 1934 to 1945...

 be 'right' and Stalin
Joseph Stalin
Joseph Vissarionovich Stalin was the Premier of the Soviet Union from 6 May 1941 to 5 March 1953. He was among the Bolshevik revolutionaries who brought about the October Revolution and had held the position of first General Secretary of the Communist Party of the Soviet Union's Central Committee...

, his temporary friend, be 'left'? Who is 'reactionary
Reactionary
The term reactionary refers to viewpoints that seek to return to a previous state in a society. The term is meant to describe one end of a political spectrum whose opposite pole is "radical". While it has not been generally considered a term of praise it has been adopted as a self-description by...

' and who is 'progressive
Progressivism
Progressivism is an umbrella term for a political ideology advocating or favoring social, political, and economic reform or changes. Progressivism is often viewed by some conservatives, constitutionalists, and libertarians to be in opposition to conservative or reactionary ideologies.The...

'? Reaction against an unwise policy is not to be condemned. And progress towards chaos is not to be commended. Nothing should find acceptance just because it is new, radical, and fashionable. 'Orthodoxy
Orthodoxy
The word orthodox, from Greek orthos + doxa , is generally used to mean the adherence to accepted norms, more specifically to creeds, especially in religion...

' is not an evil if the doctrine on which the 'orthodox' stand is sound. Who is anti-labor, those who want to lower labor to the Russian level, or those who want for labor the capitalistic
Capitalism
Capitalism is an economic system that became dominant in the Western world following the demise of feudalism. There is no consensus on the precise definition nor on how the term should be used as a historical category...

 standard of the United States? Who is 'nationalist
Nationalism
Nationalism is a political ideology that involves a strong identification of a group of individuals with a political entity defined in national terms, i.e. a nation. In the 'modernist' image of the nation, it is nationalism that creates national identity. There are various definitions for what...

,' those who want to bring their nation under the heel of the Nazis, or those who want to preserve its independence?


After the fall of the Soviet Union Robert Heilbroner
Robert Heilbroner
Robert L. Heilbroner was an American economist and historian of economic thought. The author of some twenty books, Heilbroner was best known for The Worldly Philosophers , a survey of the lives and contributions of famous economists, notably Adam Smith, Karl Marx, and John Maynard...

, a lifelong advocate of socialism, said that "It turns out, of course, that Mises was right" about the impossibility of socialism. "Capitalism has been as unmistakable a success as socialism has been a failure. Here is the part that's hard to swallow. It has been the Friedmans, Hayeks, and von Miseses who have maintained that capitalism would flourish and that socialism would develop incurable ailments."

Mises developed the theory of the 'sovereignty of the consumer' in a free-market economy; in his view, the consumer ultimately dictates everything that happens. This argument was set out in Human Action:

The captain is the consumer…the consumers determine precisely what should be produced, in what quality, and in what quantities…They are merciless egoistic bosses, full of whims and fancies, changeable and unpredictable. For them nothing counts other than their own satisfaction…In their capacity as buyers and consumers they are hard-hearted and callous, without consideration for other people…Capitalists…can only preserve and increase their wealth by filling best the orders of the consumers… In the conduct of their business affairs they must be unfeeling and stony-hearted because the consumers, their bosses, are themselves unfeeling and stony-hearted.


The context does not suggest that Mises is trying here to denigrate the consumer society. On the contrary, he is describing the free-market economy as he believes that it naturally is and should be.

Criticism


Milton Friedman
Milton Friedman
Milton Friedman was an American economist, statistician, academic, and author who taught at the University of Chicago for more than three decades...

 considered Mises inflexible in his thinking:

The story I remember best happened at the initial Mont Pelerin
Mont Pelerin Society
The Mont Pelerin Society is an international organization composed of economists , philosophers, historians, intellectuals, business leaders, and others who favour classical liberalism...

 meeting when he got up and said, "You're all a bunch of socialists." We were discussing the distribution of income, and whether you should have progressive income taxes. Some of the people there were expressing the view that there could be a justification for it.

Another occasion which is equally telling: Fritz Machlup
Fritz Machlup
Fritz Machlup was an Austrian-American economist. He was notable for being one of the first economists to examine knowledge as an economic resource....

 was a student of Mises's, one of his most faithful disciples. At one of the Mont Pelerin meetings, Machlup gave a talk in which I think he questioned the idea of a gold standard
Gold standard
The gold standard is a monetary system in which the standard economic unit of account is a fixed mass of gold. There are distinct kinds of gold standard...

; he came out in favor of floating exchange rate
Floating exchange rate
A floating exchange rate or fluctuating exchange rate is a type of exchange rate regime wherein a currency's value is allowed to fluctuate according to the foreign exchange market. A currency that uses a floating exchange rate is known as a floating currency....

s. Mises was so mad he wouldn't speak to Machlup for three years. Some people had to come around and bring them together again. It's hard to understand; you can get some understanding of it by taking into account how people like Mises were persecuted in their lives.


Within the post-WW2, mainstream economics establishment, Mises suffered severe personal rejection: for example, in a 1957 review of his book The Anti-Capitalistic Mentality
The Anti-Capitalistic Mentality
The Anti-Capitalistic Mentality is a book written by Austrian School economist and libertarian thinker Ludwig von Mises. It is an investigation into the psychological roots of the anti-capitalistic stance that is widespread in the general populations of the capitalist world...

, The Economist
The Economist
The Economist is an English-language weekly news and international affairs publication owned by The Economist Newspaper Ltd. and edited in offices in the City of Westminster, London, England. Continuous publication began under founder James Wilson in September 1843...

said of von Mises: "Professor von Mises has a splendid analytical mind and an admirable passion for liberty; but as a student of human nature
Human nature
Human nature refers to the distinguishing characteristics, including ways of thinking, feeling and acting, that humans tend to have naturally....

 he is worse than null and as a debater he is of Hyde Park
Speakers' Corner
A Speakers' Corner is an area where open-air public speaking, debate and discussion are allowed. The original and most noted is in the north-east corner of Hyde Park in London, United Kingdom. Speakers there may speak on any subject, as long as the police consider their speeches lawful, although...

 standard." Conservative commentator Whittaker Chambers
Whittaker Chambers
Whittaker Chambers was born Jay Vivian Chambers and also known as David Whittaker Chambers , was an American writer and editor. After being a Communist Party USA member and Soviet spy, he later renounced communism and became an outspoken opponent later testifying in the perjury and espionage trial...

 published a similarly negative review of that book in the National Review
National Review
National Review is a biweekly magazine founded by the late author William F. Buckley, Jr., in 1955 and based in New York City. It describes itself as "America's most widely read and influential magazine and web site for conservative news, commentary, and opinion."Although the print version of the...

, stating that Mises's thesis that anti-capitalist sentiment was rooted in "envy" epitomized "know-nothing conservatism" at its "know-nothingest." Economic historian Bruce Caldwell
Bruce Caldwell (economic historian)
Bruce J. Caldwell is a historian of economics, Research Professor of Economics at Duke University, and Director of the Center for the History of Political Economy. Prior to holding this position, Caldwell was the Joe Rosenthal Excellence Professor of Economics at the University of North Carolina at...

 described Ludwig von Mises as the mid-20th century's "archetypal 'unscientific' economist."

In a 1978 interview, Friedrich Hayek said about his book Socialism
Socialism (book)
Socialism: An Economic and Sociological Analysis is a book by Austrian School economist and libertarian thinker Ludwig von Mises, first published in German by Gustav Fischer Verlag in Jena in 1922 under the title Die Gemeinwirtschaft: Untersuchungen über den Sozialismus...

: "At first we all felt he was frightfully exaggerating and even offensive in tone. You see, he hurt all our deepest feelings, but gradually he won us around, although for a long time I had to -- I just learned he was usually right in his conclusions, but I was not completely satisfied with his argument." (Hayek's critique of Central Planning never incorporated Mises' fundamental insight that prices as an indicator of scarcity can only arise in monetary exchanges among responsible owners, a particular case of the universal economic law that value judgements are utterly dependent on property rights constraints)

After his death, his wife quoted a passage that Mises had written about Benjamin Anderson
Benjamin Anderson
Benjamin McAlester Anderson, Jr. was an American economist in the Austrian tradition of Carl Menger.-Early life and education:...

, and said that it best described Mises' own personality: "His most eminent qualities were his inflexible honesty, his unhesitating sincerity. He never yielded. He always freely enunciated what he considered to be true. If he had been prepared to suppress or only to soften his criticisms of popular, but irresponsible, policies, the most influential positions and offices would have been offered him. But he never compromised."

See also

  • Richard von Mises
  • Analytic-synthetic distinction and Ludwig von Mises' response to the Kantian challenge
  • Classical liberalism
    Classical liberalism
    Classical liberalism is the philosophy committed to the ideal of limited government, constitutionalism, rule of law, due process, and liberty of individuals including freedom of religion, speech, press, assembly, and free markets....

  • Contributions to liberal theory
    Contributions to liberal theory
    Individual contributors to classical liberalism and political liberalism are associated with philosophers of the Enlightenment. Liberalism as a specifically named ideology begins in the late 18th century as a movement towards self-government and away from aristocracy...

  • Liberalism in Austria
    Liberalism in Austria
    This article gives an overview of liberalism in Austria. It is limited to liberal parties with substantial support, mainly proved by having had a representation in parliament. The sign ⇒ denotes another party in that scheme...

  • Libertarianism
    Libertarianism
    Libertarianism, in the strictest sense, is the political philosophy that holds individual liberty as the basic moral principle of society. In the broadest sense, it is any political philosophy which approximates this view...

  • List of Austrian scientists
  • Mont Pelerin Society
    Mont Pelerin Society
    The Mont Pelerin Society is an international organization composed of economists , philosophers, historians, intellectuals, business leaders, and others who favour classical liberalism...

  • Karl Polanyi
    Karl Polanyi
    Karl Paul Polanyi was a Hungarian philosopher, political economist and economic anthropologist known for his opposition to traditional economic thought and his book The Great Transformation...

    , whom von Mises debated leading to Polanyi's book The Great Transformation
  • F. A. Hayek, important disciple of von Mises
  • Wilhelm Röpke
    Wilhelm Röpke
    Wilhelm Röpke was Professor of Economics, first in Jena, then in Graz, Marburg, Istanbul and finally in Geneva, and the main spiritual father of the German social market economy, theorising and collaborating to organise the post-World War II economic re-awakening of the then destroyed German...

    , important disciple of Mises
  • Henry Hazlitt
    Henry Hazlitt
    Henry Stuart Hazlitt was an American economist, philosopher, literary critic and journalist for such publications as The Wall Street Journal, The Nation, The American Mercury, Newsweek, and The New York Times...

    , important disciple of von Mises
  • Max Eastman
    Max Eastman
    Max Forrester Eastman was an American writer on literature, philosophy and society, a poet, and a prominent political activist. For many years, Eastman was a supporter of socialism, a leading patron of the Harlem Renaissance and an activist for a number of liberal and radical causes...

    , important disciple of von Mises
  • Israel Kirzner
    Israel Kirzner
    Israel Meir Kirzner is a leading economist in the Austrian School.-Early life:The son of a well-known rabbi and Talmudist, Kirzner was born in London, England and came to the United States via South Africa.-Education:After studying with the University of Cape Town, South Africa in 1947-48 and...

    , important disciple of von Mises
  • Hans Sennholz
    Hans Sennholz
    Hans F. Sennholz was an economist of the Austrian school of economics who studied under Ludwig von Mises. After serving in the Luftwaffe in World War II, he took degrees at the universities of Marburg and Köln. He then moved to the United States to study for a Ph.D. at New York University...

    , important disciple of von Mises
  • Murray Rothbard
    Murray Rothbard
    Murray Newton Rothbard was an American author and economist of the Austrian School who helped define capitalist libertarianism and popularized a form of free-market anarchism he termed "anarcho-capitalism." Rothbard wrote over twenty books and is considered a centrally important figure in the...

    , important disciple of von Mises
  • George Reisman
    George Reisman
    George Gerald Reisman is Professor Emeritus of Economics at Pepperdine University and author of Capitalism: A Treatise on Economics . He is also the author of an earlier book, The Government Against the Economy , which was praised by F.A...

    , important disciple of von Mises
  • Lew Rockwell
    Lew Rockwell
    Llewellyn Harrison "Lew" Rockwell, Jr. is an American libertarian political commentator, activist, proponent of the Austrian School of economics, and chairman of the Ludwig von Mises Institute.-Life and work:...

    , founder of Ludwig von Mises Institute
  • Ludwig von Mises Institute
    Ludwig von Mises Institute
    The Ludwig von Mises Institute , based in Auburn, Alabama, is a libertarian academic organization engaged in research and scholarship in the fields of economics, philosophy and political economy. Its scholarship is inspired by the work of Austrian School economist Ludwig von Mises...

  • Gitta Sereny
    Gitta Sereny
    Gitta Sereny is an Austrian-born biographer, historian and investigative journalist whose writing focuses mainly on the Holocaust and child abuse. She is the stepdaughter of the economist Ludwig von Mises....

    , his stepdaughter

Further reading

  • Hülsmann, Jörg Guido. Mises: The Last Knight of Liberalism (Auburn: Ludwig von Mises Institut, 2007) ISBN 978-1-933550-18-3
  • Kirzner, Israel M. Ludwig von Mises: the man and his economics (2001)
  • Eamonn Butler
    Eamonn Butler
    Eamonn Butler is Director and co-founder of the Adam Smith Institute think tank, and an author and broadcaster on economic and social issues.-Career:...

    , Ludwig von Mises - A Primer, Institute of Economic Affairs (2010)
  • Brian Doherty
    Brian Doherty (journalist)
    Brian Doherty is an American journalist. He is a Senior Editor at Reason magazine. He is the author of This Is Burning Man: The Rise of a New American Underground , Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement and Gun Control on Trial: Inside the...

    , Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement
    Radicals for Capitalism
    Radicals for Capitalism: A Freewheeling History of the Modern American Libertarian Movement is a book by American journalist and Reason senior editor Brian Doherty. It is about the history of libertarianism in the 20th century. It traces the evolution of the movement, as well as the life stories...

    (2007)
  • Richard M. Ebeling, Political Economy, Public Policy, and Monetary Economics: Ludwig von Mises and the Austrian Tradition, (London/New York: Routledge, 2010) 354 pages, ISBN 978-0415779517.
  • Richard M. Ebeling, "Ludwig von Mises: The Political Economist of Liberty, Part II", (The Freeman, June 2006)
  • Richard M. Ebeling, "Ludwig von Mises: The Political Economist of Liberty, Part I", (The Freeman, May 2006)
  • Richard M. Ebeling,"Ludwig von Mises and the Vienna of His Time, Part II", (The Freeman, April 2005)
  • Richard M. Ebeling, "Ludwig von Mises and the Vienna of His Time, Part I", (The Freeman, March 2005)
  • Richard M. Ebeling, "Austrian Economics and the Political Economy of Freedom", (The Freeman, June 2004)
  • Jörg Guido Hülsmann, Mises: The Last Knight of Liberalism (Auburn, Alabama: Ludwig von Mises Institute
    Ludwig von Mises Institute
    The Ludwig von Mises Institute , based in Auburn, Alabama, is a libertarian academic organization engaged in research and scholarship in the fields of economics, philosophy and political economy. Its scholarship is inspired by the work of Austrian School economist Ludwig von Mises...

    , 2007), xvi+1143 pages, ISBN 978-1-933550-18-3. (Also available as a PDF file.)
  • David Gordon
    David Gordon (philosopher)
    David Gordon is a libertarian philosopher and intellectual historian influenced by Rothbardian views of economics. He is a senior fellow at the Ludwig von Mises Institute and editor of "The Mises Review."...

     (2011-02-23) Mises's Epistemology, Ludwig von Mises Institute
    Ludwig von Mises Institute
    The Ludwig von Mises Institute , based in Auburn, Alabama, is a libertarian academic organization engaged in research and scholarship in the fields of economics, philosophy and political economy. Its scholarship is inspired by the work of Austrian School economist Ludwig von Mises...

  • Margit von Mises, My Years With Ludwig von Mises, Arlington House, 1976, rereleased in 1984 by Libertarian Press. ISBN 0915513005
  • Ron Paul
    Ron Paul
    Ronald Ernest "Ron" Paul is an American physician, author and United States Congressman who is seeking to be the Republican Party candidate in the 2012 presidential election. Paul represents Texas's 14th congressional district, which covers an area south and southwest of Houston that includes...

    , "Mises and Austrian economics: A personal view" The Ludwig von Mises Institute of Auburn University (1984), 31 pages.
  • Murray N. Rothbard
    Murray Rothbard
    Murray Newton Rothbard was an American author and economist of the Austrian School who helped define capitalist libertarianism and popularized a form of free-market anarchism he termed "anarcho-capitalism." Rothbard wrote over twenty books and is considered a centrally important figure in the...

    , "Mises. Ludwig Edler von," The New Palgrave: A Dictionary of Economics, 1987, v. 3, pp. 479–80.
  • "A Tribute to Ludwig Von Mises". A list of works by and on Ludwig Von Mises by the Foundation for Economic Education
    Foundation for Economic Education
    The Foundation for Economic Education is one of the oldest free-market organizations established in the United States to study and advance the freedom philosophy. Murray Rothbard recognizes FEE for creating a "crucial open center" that he credits with launching the movement...

    .

External links