Life of a Hero

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If you’re going to write a biography of Ludwig von Mises (1881-1973), you have your work cut out for you.

You face a mountain of books, articles, speeches, and correspondence by and about the great libertarian economist and his forebears, contemporaries, disciples, and critics, much of it in German. Because his productive career lasted from the 1880s into the 1960s, you have to be thoroughly grounded in the intellectual and political history of that time, sweeping all the way from Marxism, historicism, and fascism, through Keynesianism, and into the beginnings of monetarism. You must be conversant not just with economics, but with history, sociology, and philosophy, since Mises ranged over all these subjects. You must focus on the political and military events that shaped Austria and its neighbors in the early 20th century, because Mises was personally involved in many of them. You must come to grips with terms and concepts that are central to Mises but unknown outside the Austrian School of economics, of which he was a part – terms such as praxeology, catallactics, thymology, etatism, and Verstehen.

Your own prejudices will likely be activated either by Mises’ extreme positions or by an occasional belief that he failed to follow through on his own principles. You must try to divine the mental and emotional life of a man who kept his feelings to himself and whose devoted wife very likely took a number of his personal secrets to her grave. Lastly, you must condense and shape your work into something people will want to read.

J6rg Guido Hiilsmann has risen to all these challenges and produced “Mises: The Last Knight of Liberalism,” a work that is outstanding in several respects, starting with the volume itself. The type face is pleasing, the binding is sturdy, the bibliography is exhaustive: 31 pages, including 73 Mises citations. There are separate subject and name indices, and notes placed where the Lord intended: at the foot of the pages. (While some footnotes are just citations, many are worthwhile amplifications.) Photographs, many never seen before, are sprinkled conveniently through the text, not bunched in the middle.

The table of contents hints at the organization of the work, which can be seen as three different books, any of which could exist on its own, woven together like the strands of a rope. Strand A might be called “Mises the Man,” presenting snapshots and stories that illuminate his character. I would call Strand B “The World of Mises,” an account of the impact of local and world events on him, and of his role in shaping some of them. Strand C would be “Mises the Theoretician,” a summary of the principles of Austrian economics and the epistemological foundation that Mises provided for it.

The movements from strand to strand help make this book quite readable, despite its 1,100-page length. Chapter 21, for example, “The Epistemological Case for Capitalism,” is a difficult chapter that demands careful attention, but we get a change of pace in the next chapter as Hiilsmann switches back to Strand B with “Fragmentation of the Movement.”

Mises the Man

In addition to Margit von Mises’ memoir of her husband, “My Years with Ludwig von Mises” (Arlington House, 1976), a small autobiographical volume is in print entitled “Notes and Recollections” by Mises himself (Libertarian Press, 1978). Mises wrote these notes in 1940, the low point of his life and career, and put them aside with instructions to Margit to preserve them for posthumous publication. Thirdly, Israel Kirzner authored a short intellectual biography in 2001, “Ludwig von Mises: The Man and His Economics” (lSI Books, 2001). Hiilsmann recaps information already available in these works and adds considerable new personal material. In so doing, he conveys a more vivid sense of the man than we have had up to now.

He accomplishes this without descending into excessive speculation about Mises’ psychology: his devotion to his mother, his long bachelorhood, or the sacrifices of his wife, before and after their marriage. Hiilsrriann mentions the relationship between Ludwig and his brother Richard, an accomplished mathematician and aerodynamicist. They were never close, but Hiilsmann does not uncover any feuds or animosity. He does find it curious that the chapter in Mises’ “Human Action” about probability theory makes no mention of Richard’s previously published views on the subject, even though the two were in substantial agreement.

There was never any question in Mises’ mind that he would serve his country in the Great War – World War I, as we now call it. Unable or unwilling to finagle a desk job in Vienna, he went to the eastern front, where he commanded an artillery company and suffered a painful and lingering injury. We are told that Mises’ army buddies

Mises got expert instruction before attempting such activities as tennis, automobile driving, even mountain hiking.


nicknamed him Rotwild (wild deer) – a name that had nothing to do with politics.

We learn that Mises’ intellectual thoroughness spilled over into his recreational life. He got expert instruction before attempting such activities as tennis, automobile driving, even mountain hiking. Yet we also learn that although he liked to drive (he acquired a snappy Ford VB in 1936) he was a terrible driver. He and Margit were once in a serious automobile accident – fault unspecified.

On a more serious note, the “wild deer’s” demeanor sometimes handicapped him. As his student Fritz Machlup put it, “He is usually too reserved and all buttoned up, so to speak . . . He will stick stubbornly to his convictions. Although this is really a merit it sometimes antagonizes people” (367). In a video interview for “The Commanding Heights” (PBS), Milton Friedman chuckles over an incident that took place at the founding meet- ing of the classical liberal Mont Pelerin Society, where Mises “stormed out of the room, exclaiming, ‘You’re all a bunch of socialists!'” Friedman adds that the topic under discussion was income redistribution, a concept on which one would expect all libertarians to have similar views. Mises never developed Friedman’s ability to “disagree without being disagreeable,” and this may partly explain the fact that his influence on the post-war world was much smaller than Friedman’s.

Mises’ skills as a businessman evidently lagged substantially behind his academic prowess. Thus when he agreed to have publisher Gustav Fischer handle “Socialism,” his pathbreaking SOO-page treatise, their February 1922 agreement, signed in the midst of Germany’s raging hyperinflation, made no specific reference to inflation adjustments. Nevertheless, when the book came out in July 1922, Fischer generously increased his payment to Mises by 50% – to 1,920 marks, then worth about US $38.92! Had he held these marks until October, they would have slipped to about $6.04. Presumably, he changed them to Austrian krone, which were managing to hold some of their value against the dollar, but he cannot be said to have profited much from his book (392).

Mises and His World

At its peak, Mises’ influence in Austria approached that of Alan Greenspan in America. Although Mises held no government post, his position in the Chamber of Commerce made him, by his own reckoning, Austria’s number one economist. Greenspan chose to couch his public statements in “Fedspeak” so as to avoid roiling

Hillsmann conveys a more vivid sense of the man than we have had, without descending into excessive speculation about Mises’ psychology.


the markets; Mises, in his anti-inflation campaign of 1919, was “so carefully read· that he preferred to publish some of his pieces anonymously.” For a time, the Neues Wiener Tagblatt sent a stenographer to his apartment every morning at 8:00 to transcribe articles to be published anonymously in the next day’s paper (352).

Conditions in Austria following World War I were dire. Strikes and shortages were pandemic. The government was feeding a large portion of the population, especially in Vienna, and paying its bills by running the printing press. Questions of monetary policy had moved out of the academy and onto center stage. Decisions had to made quickly, and the wrong decisions could bring starvation or blood-shed. While Mises continued to write and speak against the evils of inflation, he sometimes felt compelled to support compromises that seem directly contrary to his teachings. Thus in 1919 he resigned himself to printing money as simply the only way to maintain law and order through the winter (344). Hiilsmann reports that “in a truly grotesque episode from mid-January 1919, the champion of sound money provided hands-on support for banknote production” by arranging the importation of a number of printing presses for the Austro-Hungarian bank to use in stamping banknotes (347). The reason for this measure was to distinguish them from notes that were circulating outside the greatly shrunken Austria. Outsiders would thus be unable to bring notes into Austria and use them to drain real resources out of the country. Htilsmann clearly disapproves of these astonishing episodes, attributing them to Mises’ utilitarian social philosophy. But later in 1919, in a confidential memorandum, Mises proposed a radical tactic that would have pleased some of his latter-day anarchist followers. In a desperate tone, he wrote, “Political ideas that have dominated the public mind for decades cannot be refuted through rational arguments. They must run their course in life and cannot collapse otherwise than in great catastrophes.” Citizens should “simply ignore the government and make the reform of the monetary system an affair of the country’s leading bankers, merchants, and industrialists” (358). Fearing a collapse of the krone, he called on entrepreneurs to seek a credit of 30 million Swiss francs, in small denominations suitable for paying workers and suppliers – knowing full well that this was contrary to Austrian law. (There is no record that this proposal was ever implemented.)

And so it appears that during this time of crisis Mises veered first into opportunism and then toward anarchism. But perhaps we shouldn’t be too quick to pass judgment from our comfortable vantage point. Who among us is so “principled” that he might not feel compelled to “compromise” in a crisis .situation?

In any event, Mises was unable to arrest the tide of hyperinflation, which lasted until 1922 when a credit was granted by the Allied nations. Perhaps he took some solace in the fact that the Austrian price level at the end of 1922 was I I only” 14,000 times the prewar level,*in contrast to Germany where the price level reached a factor of trillions.

For many years, Mises conducted a private seminar for advanced students that met in his office in the Chamber of Commerce. He wholeheartedly supported women students with encouragement and letters of recommendation at a time when barriers to their participation in academic life were just begin- ning to fall. Many years later, one of them recalled, “I am sure there does not exist a second circle where the intensity)r, the interest and the intellectual standard of the discussion is as high as it was in the Mises Seminar.” Mises’ uncompromising standard in favor of classical liberal ideas in a world that was increasingly socialist earned him the moniker der Liberale, which we might translate as “Mr. Libertarian.”

Mises foresaw the Nazi takeover of Austria and knew that he would be a prime target, partly because of his Jew- ish descent, but mainly because of his liberal views. He fled to Switzerland, where he secured a good post at the Graduate School of International Relations, later fetching Margit from Vienna and marrying her. But as the Nazis swept over Europe, he began to feel unsafe even in neutral Switzerland. In 1940, he and Margit undertook a harrowing journey by automobile, train, and ship, finally landing in New York, a strange land where he had few contacts and an inadequate command of the language. But at age 60, and with unwavering help from Margit, he pulled himself out of his depression and launched another 25-year period of productivity, during which he published his great- est works, including the monumental “Human Action” (1949).

It is a telling indictment of the state of the American academy that Mises was never able to achieve a regular academic appointment in the United States. He did get appointments at New York University (as a visiting professor), at the National Association of

In 1919 Mises resigned himself to printing money as simply the only way to maintain law and order through the winter.

Manufacturers, and at the libertarian Foundation for Economic Education as a part-time staff member. None of these provided him with a power base for significant involvement in current affairs. Perhaps the best reception he received in the New World was in Mexico, where he and Margit spent six weeks in 1942. There he received an offer to become the head of the economics departments of two business associations, at a comfortable salary (813). He was sorely tempted but in the end had to say no because of his poor grasp of Spanish as well as the roots he had already put down in New York.

Hiilsmann recounts Mises’ some- times stormy friendship with novelist and philosopher Ayn Rand, as documented in Barbara Branden’s biography “The Passion of A yn Rand” (Doubleday, 1986). Mises praised Rand’s novel “Atlas Shrugged” as “a cogent analysis of the evils that plague our societ}r,” and Rand respected him, in tum, for his intellect and courage. But she abhorred his utilitarian ethics, and he was appalled by the way she treated people who asked her questions. Be that as it may, many students, including this writer, first came to Mises and the other Austrian economists through the institute founded by Rand and her associate Nathaniel Branden, which advertised Mises’ books on its list of recommended readings. Hiilsmann’s dismissal of Rand’s Objectivist movement as simply a cult (996 ff.) is disappointing but not surprising, since this was the attitude of Mises’ disciple Murray Rothbard and many of his current Mises Institute followers. Both Barbara and Nathaniel Branden freely admit that the New York circle exhibited cult-like behavior, but none of it could be found in the Cleveland Objectivist group to which I once belonged, and probably not in many other groups outside New York. Fortunately, disinterested scholars have begun to analyze and extend Rand’s significant achievements, leaving the craziness behind.

If in his years in America Mises had gotten the recognition he deserved, admittance to his seminars would have been reserved for serious academics. But in 1970 anybody, including this reviewer, who was then a graduate student in engineering, could get into a FEE summer seminar at which Mises spoke. I don’t remember what he talked about, just the sense that I was in the presence of a very great man, but a man who was tired and discouraged. His voice was low and his facial expression was sullen. At one point he must have seen or imagined someone acting restless in the audience, because he said something .like “I know my time is almost up and I will soon finish.” Perhaps he was thinking not just of the restless student but also of his coming death. Afterward in the library, he dutifully autographed copies of “Human Action,” including mine, but after he had signed a few, George Roche, the director of seminars at FEE, stopped the proceedings, explaining that Mises’ “writer gave out.” Perhaps the times felt to Mises like the “last night of liberalism.” He died three years later.

Mises the Theoretician

Mises secured a place for himself as a top theoretician with the 1912 publication of his “Theorie des Geldes und der Umlaufsmittel.” As Hiilsmann points out, the title chosen for the English translation, “Theory of Money and Credit,” was poor. It should have been “Theory of Money and Fiduciary Media,” which, though ponderous, would have conveyed Mises’ crucial distinction between money and money certificates, on the one hand, and unbacked fiduciary media on the other. Mises argued that unbacked or partially backed paper money was necessarily unstable and inflationary. This is an issue that splits the present-day Austrian movement, with Rothbard and others insisting that only gold or fully backed certificates are legitimate money, whereas Lawrence White and George Selgin demonstrate that fractionally backed money can arise via “immaculate conception” – without fraud or deception – and that private banks tempted to over-issue unbacked paper will be disciplined by actual or threatened bank runs. (See White, “Free Banking in Britain” [Institute of Economic Affairs, 2nd ed., 1995]; Selgin, “The Theory of Free Banking” [Rowman & Littlefield, 1988].)

A major accomplishment of Mises’ book was an integration of monetary theory with the rest of economics. Mises refuted the idea of the neutrality of money – the idea that money is simply a placeholder for other goods and can therefore be explained fully in historical and legal terms. He applied to money the laws of supply and demand, much as they are applied to ordinary goods and services. He also saw that one could not do full justice to monetary theory outside the wider context of economics, although circumstances prevented him from elaborating that context to the extent he would have liked. He foresaw the coming of a world war and knew that academic publishing would cease for the dura-

A major accomplishment of Mises’ book was an integration of monetary theory with the rest of economics.


tion, so he got “Theorie des Geldes” into print sooner than he wished. While the book drew considerable notice among German readers, an English translation did not appear until 1934, when it was swept away by the Keynesian tide.

It may be difficult to appreciate, so many years later, what a bombshell Mises set off with the 1922 publication

Mises wholeheartedly supported women students at a time when barriers to their participation in academic life were just beginning to fall.


of his “Socialism.” He demonstrated that full socialism is simply impossible, even conceding the best intentions of the socialist planners and the enthusiastic agreement of all the citizens. Because, in essence, under socialism capital goods would not be traded, no real prices for these goods could arise. Economic administrators would therefore be deprived of any capacity to determine how to allocate scarce capital and achieve the results desired. Mises’ challenge was taken quite seriously. One reviewer, who “loaded his two reviews of ‘Socialism’ with invectives against the author,” admitted that “economic calculation in terms of marginal utility is not a feature of any particular economic order, but can and must be applied in the communist order as in the capitalist one” (403). Mises was accurate, if perhaps immodest, in assessing the result: “All arguments in favor of the great reform collapsed. From that time on socialists no longer based their hopes upon the power of their arguments but upon the resentment, envy and hatred of the masses” (“Theory and History,” 1957, quoted in Hiilsmann 399).

In “Nationalokonomie” Mises realized his dream of publishing a comprehensive treatise on economics. The book appeared in May 1940, “just in time to survive the collapse of its publisher, only to be buried under the avalanche of the war” (759). But this was not the end; Mises prepared a revised English version that was published as “Human Action” in 1949, and that work received far more notice, continuing in print to this day. Hiilsmann views “Human Action” as having “completed the project Mises had started in 1912 with his treatise of money” calling the mature Mises “a better monetary theorist than the author of ‘Theory of Money and Credit.'” In the later work, Mises emphasizes the demand for money as truly “a demand for cash balances.” Hiilsmann also points out “Human Action’s” more radical analysis of the detrimental effects of monetary expansion as compared to his 1912 analysis, which allowed that monetary expansion “might be needed to accommodate greater growth under plausible circumstances” (786).

Notwithstanding these shifts, Hiilsmann’s summaries convey a remarkable degree of consistency across the long span of Mises’ professional career.

Last Knight of Liberalism

What of Hiilsmann’s subtitle, “The Last Knight of Liberalism”? Some might say that “liberalism” has been lost to statists and we must fall back on “libertarianism” or “classical liberalism.” But “liberalism” mostly retains its classical meaning outside the United States. In this reviewer’s opinion, the refusal to concede “liberal” to the statists is worth the cost of occasional misunderstanding.

Others might object that Mises was first and foremost a theorist, so we should call him the “Last Knight of Praxeolog~” the theory of human action. The phrase would, of course, greatly confuse casual browsers. Yes, Mises’ most important contributions were theoretical, and he kept them separate from his political views; nevertheless, they were motivated by a burning passion to preserve the great achievements of Western civilization. Near the end of “Human Action,” we read, “It rests with men whether they will make the proper use of the rich treasure with which … knowledge provides them or whether they will leave it unused. But if they fail to take the best advantage of it and disregard its teachings and warnings, they will not annul economics; they will stamp out society and the human race” (4th ed., Regnery, 1966, 885). Hiilsmann’s subtitle is a good one, and his book is a major contribution, one that will inform both newcomers to Mises and veteran students.

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