[A-List] Academic life of Mises

[Annewilliamson]

            The Tenacity of Ludwig von Mises
            by Gary North

            Ludwig von Mises (1881-1973) is not widely regarded as a major
            figure of twentieth-century economic theory. The main reason for
            this assessment is the fact that those within the economics
            profession who make such career-enhancing imputations regarding
            other economists have adopted economic theories that he had
refuted
            before most of them were born, or in some cases, before their
            fathers were born. His contemporaries adopted a time-honored
            technique of dealing with him: the memory hole. "Mises? Who's
            Mises?" Their successors remained in the dark.

            He fully understood the game. When his wife once told him that
his
            ideas would be more widely received some day, he replied that an
            academic man's influence can be estimated by references to him
the
            footnotes of his contemporaries. His name and work were missing.

            The vast majority of professionals in any field, including
academic
            disciplines, never make a major intellectual contribution. Few
of
            them make even a minor contribution. Few of them are remembered
            after they retire, if they were known before they retired. They
are
            practitioners of what Thomas Kuhn has called "normal science,"
and
            most of them are normal practitioners. Mises was in this sense
            highly abnormal.

            Three Major Contributions

            Mises made three major contributions to economic theory. The
first
            was his monetary theory of the trade cycle, which he presented
in
            1912 in his book, The Theory of Money and Credit. In that book,
as a
            kind of aside, he presented his regression theory of the value
of
            money: whatever constitutes money in a market must originally
have
            derived its value from a non-monetary use. Few economists ever
make
            a breakthrough even this momentous.

            Mises's theory of the trade cycle was the foundation of F. A.
            Hayek's work on monetary theory in the 1930's, for which he won
the
            Nobel Prize in 1974, the year after Mises's death. Yet, even
today,
            the typical Ph.D. graduate in economics would reply, "Mises?
Who's
            Mises?" The less sharp ones would pronounce it "MYEseez." The
            brighter ones might reply, "Mises. Oh, yes. He was the economist
            refuted by Oskar Lange, or so everyone thought before 1991."

            This brings me to his second major contribution: his theory of
the
            impossibility of rational economic calculation in a socialist
            economy. He first presented this theory in a 1920 essay,
"Economic
            Calculation in a Socialist Commonwealth." He fleshed out his
theory,
            and added much more, in his 1922 book, Socialism. Without free
            pricing, private ownership, and capital markets, he argued,
            socialist central planners cannot allocate scarce resources
            rationally. They cannot know what anything costs. They cannot
match
            supply with demand.

            This insight was generally ignored by economists for seventy
years.
            In fact, an attempted refutation in 1936 by a Communist
economist,
            Oskar Lange, received far wider attention in textbooks on the
            history of economic thought. A decade later, Lange left the
United
            States to become the chief economist for Communist Poland, where
he
            ignored his own theory of how a socialist economic planning
board
            can overcome Mises's assertions. Of course, the textbooks never
            refer to Lange's Communist affiliation and his subsequent
neglect in
            practice of his supposed practical solution to Mises's
objections:
            trial-and-error pricing by the planning board. We can hardly
blame
            him. In Communist countries, errors too often led to trials.

            Mises's third contribution was his a priori epistemology. He
based
            his entire economic theory on a small set of axioms, postulates,
and
            corollaries. In a century in which a posteriori positivism was
            dominant in most academic fields, especially the economics
            profession, his insights on epistemology received little
recognition
            and no praise from mainstream economists. The only Mises to
receive
            any recognition for work in epistemology was Richard, his
            mathematician-positivist brother. (This fact did not sit well
with
            Ludwig.)

            In all three areas, Mises never gave an inch, nor did he give
            quarter. He was intransigent. He was also tenacious. He would
not
            change his mind, and he would not go away quietly. There are not
            many men in any generation who possess both qualities. Those who
do
            rarely possess great intelligence, nor do they live to age 92.

            A Long Career

            Mises' finished his Ph.D. dissertation in 1906, at the age of
25.
            The Theory of Money and Credit appeared six years later. Mises
was
            off to a flying start. Unfortunately, as an opinionated Jew in
            Austria, he was allowed to fly only in circles. He was employed
by
            the Austrian Chamber of Commerce. He never attained a salaried
            position in any state-funded Austrian institution of higher
            learning.

            He left Austria in the mid-1930's because he feared that the
Nazis
            (members of the National Socialist Democratic Workers Party,
lest we
            forget, as textbook writers would prefer we forget) would take
over
            in Austria. He warned several Jewish economists to leave, and
some
            of them did, probably saving their lives. Fritz Machlup was one
of
            them-a far more famous economist than Mises after 1940. Mises
went
            to the Graduate Institute of Geneva, where his former student,
            Wilhelm Roepke, had secured a position for him. This was the
only
            university-funded academic position that he ever held.

            In 1941, he and his wife fled Switzerland by risking a bus ride
            across Nazi-occupied France. He arrived in the United States
without
            any academic position or prospects. He was then hired by New
York
            University as a visiting professor. NYU condescended to allow
donors
            to put up his salary. Lawrence Fertig did so for decades.
            The sharper members of the NYU economics faculty had no use for
            Mises or his theories; the rest of them despised his ideas. His
            famous weekly graduate seminar eventually attained a following,
but
            the attendees were increasingly people from off campus. Murray
            Rothbard was the premier example. Bettina Bien and Percy Greaves
            (who decades later got married) attended weekly for almost two
            decades.

            Mises was at NYU. He was not of NYU. He got even with his
detractors
            in the department by remaining on the job from 1941 to 1966. He
            outlived them.

            Think about his career. He fled Switzerland at the age of 60. He
had
            no job prospects when he landed in the United States. He had
been
            employed in academia for only a few years as an expatriate. The
            Keynesian era had just begun, and it was to dominate academic
            economics for the next five decades. He died knowing that the
only
            visible academic challengers to the Keynesians were the
fiat-money
            positivists of the Chicago School.

            He never gave up. Yale University press published his little
            masterpiece, Bureacracy, in 1944. Human Action was published by
Yale
            in 1949. Slowly, Mises gained a new audience through the efforts
of
            Henry Hazlitt, a widely read economics columnist, and from the
            Foundation for Economic Education and its publication, The
Freeman.
            Hayek's unexpected prominence in 1974 and subsequently helped
create
            a posthumous awareness of Mises. The Mises Institute is an
            institutional witness to his significance.

            Mises never stopped saying in print that the dominant economic
ideas
            of his era were all tainted to one degree or other with the
            irrationalism of socialism. He never stopped saying that all
civil
            governments are at bottom inflationary because politicians seek
to
            extract wealth from those under their jurisdiction, and at some
            point, the victims resist. Governments turn to fiat money in
order
            to extract wealth by stealth.

            One by one, the socialist paradises have collapsed. One by one,
the
            central banks have inflated. By 1945, the twin processes of
            socialist economic inefficiency and central bank price inflation
had
            been manifested during two world wars. In between the wars, the
            boom-bust cycle that Mises's monetary theory of the trade cycle
had
            predicted had decimated the world's economy. But the dominant
            thinkers of Mises's era did not acknowledge any of this. They
called
            for more government intervention and more central bank
stimulation
            of the economy. The collapse of the Soviet economy in 1989,
sixteen
            years after his death, came as a surprise to the economics
textbook
            writers, Paul Samuelson included. Even today, the Federal
            Reserve-created banking cartel remains a sacred cow in every
            college-level economics textbook.

            There is much that remains to be done.

            Conclusion

            Mises never gave up. He never shut up. He never pulled a punch.
But
            he never hit below the belt, unlike his academic detractors,
most of
            whom spent their careers ignoring his writings, preferring at
most
            to mention him in the context of Lange, insisting that Lange had
            refuted him. Most of them had not read Lange, either.

            Today's generation of academic economists can probably now get
away
            with saying, "Lange? Who's Lange?" I suppose that this is an
            improvement. For academic economists, little improvements count
for
            a great deal. Most of them never achieve even one.

            Mises achieved more than one. He should be a model to us all, in
            every field. Not many of us will ever contribute three major
            revolutionary insights, or even one, but we can keep the faith.
We
            can refuse either to sit down or shut up.

            August 20, 2001