Purpose: To convey an impression of the work that makes Mises one of the sleeping giants of the 20th century. Mises followed Carl Menger, the founder of the Austrian School of economics and social thought, after Boehm Bawerk and Wieser. Peter Boettke has provided an introduction and overview. Due to Menger’s inactivity during the 25 years before he died in 1921 and Boehm-Bawerk’s early death in 1914 it was left to Mises to consolidate the Austrian program and to be the primary teacher, first in Vienna of the 20s and 30s and later in the US from the 40s to the 60s. His students included Haberler, Machlup, Morgenstern, Kirzner, Hayek and Rothbard in economics as well as Alfred Schutz and Felix Kaufman in sociology and philosophy respectively. Trivia enthusiasts will be delighted to learn that Menger was a keen fisherman and Kaufman wrote songs to sing in the coffee shop where the Mises seminar group rocked on into the small hours of the morning.
The life and work of Mises
Mises took a doctorate in law and economcs from the Uni of Vienna in 1906 with a thesis on the peasants of Galica (the province where he was born). His father was an engineer and his brother Richard was a physicist and mathematician with a high profile in probability theory. Like Ludwig Mises, Richard Mises and Karl Menger (son of Carl) convened private seminars which brought together some of the most famous names of the time. Karl Popper was pleased to be invited to the Richard Mises and Karl Menger groups at a time when he was never invited to join the Vienna Circle group.
From 1909 to 1934 Ludwig Mises worked in the Austrian Chamber of Commerce (much of the time as the chief of the finance department) giving advice to the Government on monetary and financial policy. This was broken during the Great War by a year with the artillery in the Ukraine and a spell with the Department of War.
The first of his three major books was The Theory of Money and Credit (1912) which applied the concept of marginal utility to money and also set forth the first version of the Austrian theory of the trade cycle. In 1913 he was appointed as a Professor the the university, not a paid post but one that entitled him to give lectures if he could attract an audience.
In 1919 he published a criticism of “war socialism” and National Socialism” followed by his papers on the impossibility of economic calculation under socialism that culminated in his second major book On Socialism: An Economic and Sociological Analysis (1922). A pendant to that work is his beautiful sketch of the principles of liberalism Liberalism: In the Classical Tradition (1927).
Like Popper, he saw what was likely to happen when Hitler came to power and he moved from Vienna to Geneva in 1934. When Hitler swallowed Austria he no longer felt safe in Switzerland and he moved on to the US in 1940. The Germans stole his library in Vienna and it ended up in Moscow, neatly catologued and filed, after the Russians captured a trainload of German booty late in the war. In Geneva he completed the German version of the book that later appeard as his third masterpiece Human Action (1949).
Through the 1920s and 1930s he wrote a series of papers on philosophical and methodological issues that underpinned his approach to economics and the socal sciences at large. The Austrian school is a school of economics and social thought, not just economics although the divorce of economics and sociology in the 20th century (apart from the work of Mises) has debilitated both economics and sociology. His essays have been reproduced in a series of books and they need to be subjected to critical appraisal to find if there is some more effective and economical way to describe the Austrian approach, or to modify it if necessary.
The marginalisation of the Austrian school
The Austrian school of economics and social thought was maginalised for a mixture of reasons, among them:
The failure of the major pioneers Menger and Bohm-Bawerk to play the academic games and do some of the boring PR work that would have gained more support in the early 20th century.
The dominance of the anti-theoretical “historical school”, the “historicists” in the German-speaking universities at that time.
The rise of the positivist philosophy of science in the English-speaking world to replace the historicists as the major opposition in philosophy and methodology.
The professionalisation and specialisation of academic life in the 20th century that tended to exclude the educated public from developments in many fields including philosophy, economics and political economy. Silly ideas like logical positivism were protected by highly trained technicians with doctorates and academic tenure.
The Keynesian diversion and the retreat of leaders like Robbins and Hayek in the 1930s.
The mistaken perception that the “individualistic” method of explanation (methodological individualism) requires a simple minded view of people as “social atoms” or “economic calculators” or selfish hedonists lacking altruism and community spirit.
The perception that the school was merely a front for capitalist propaganda.
Mises on methods and epistemology
Exploring the views of Mises on some of the philosophical and methodological isses that make the Austrians a bit strange and different. He devoted three books to these matters, apart from the treatment in Human Action which ran over much of the same ground.
The first of these was a collection of essays that he wrote during the 1920s and early 1930s after the first round of the “calculation debate” when he realised that there were deep issues of method that divided him from the central planners. Hayek also turned his attention to the problem of knowledge at the same time, resulting in his classical papers on the topic (which are strangely not referenced in the later two books by Mises). Mises thought that the Austrians suffered from some mistaken ideas from Menger and also Max Weber which he set out to correct in the same book.
Epistemological Problems in Economics appeared in English in 1978, translated by George Reisman.
Theory and History: An Interpretation of Social and Economic Evolution was published in 1957 (no translation required) and The Ultimate Foundations of Economic Science: An Essay on Method followed in 1962.
Economists need to know more than economics
The main message from these books is that economists need to be on top of a lot of other things in addition to the contents of the economics course. The list of other things is rather formidible and one of his students complained that he did not have time to become conversant with mathematics, physics, biology, history and jurisprudence and some philosophy as well. To which Mises replied that nobody was forcing him to become an economist.
Mises was obviously a man of encoclopedic learning and in addition he was well acquainted with the practical side of politics and public affairs from the many years that he spent as a public servant and advisor to the Austrian government. He was not just an “ivory tower” academic (a strange term of abuse as Barzun pointed out, why rubbish a building material that is at once durable, pleasing to the eye and easy to maintain, and a structure designed specifically to give a good view on all sides and into the distance). He probably knew a thing or two about artillery from his time in military service and he frequently used literary and musical allusions to remind us that he was thoroughly at home in the high culture of central Europe.
Economics, catallactics and the third way
Against the “two cultures” of science and the arts, Mises asserted that there are at least three areas of investigation, each of which calls for a distinctive approach. (1) The methods of natural sciences, best known from the study of physics. (2) The method of history, actually critical history, not the “scissors and paste” approach castigated by Collingwood, piling up information without analysis under the influence of a false ideas about (1). And (3) the methods of the human sciences - economics and the larger domain that Mises sometimes called “sociology” or, later, the “catallaxy” to cover the full range of influences on human action including culture, politics, the legal system and market forces.
The major methodological views of Mises boil down to (1) a defence of the use of the “praxeological a priori” for economics and the catallaxy and (2) the demolition of historicism and scientisim (or positivism). Historicism claims that there are laws of historial development and the positivists insist that the methods of the natural sciences should be used in economics.
It has to be emphasised that Mises was perfectly happy with the study of history, in fact the point of developing the laws of praxeology was to make more sense out of history, to provide better explanations of historical events and to provide better policy advice to get what we want out of our economic and social system.
For those of us who first encountered the demolition of historicism and scientism in the work of Popper, a lot of Hayek on methodology is a bit “ho hum” and the same applies to Mises who for most people is only a distant rumour. You would never see his books in the shop and even university libraries only have a handfull of them and not the ones on methods. For some strange reason the Mosman public library had both Human Action and also a memoire that Mises wrote in old age, including some ruminations on methods, however during the last 20 years the memoire has been junked to make room for new books!
What are the praxeological a prioris?
Praxeololgy is based on a number of axioms, starting with the fundamental premise that humans act in a purposeful manner. From that starting point, various other principles can be deduced to build up a body of theory that is applied to explain the phenomena of econonomic and social life. Actually it is necessary to do a situational analysis to apply the principles, in the way an astronomer has to specify relevant details of the situation, the “initial conditions” (like the location of a set of planets) before natural laws (say Newton’s), can be use to explain what happens next.
Among the laws of economics there is the subjective theory of value, the law of diminishing returns (marginal utlity), comparative advantage, opportunity cost, etc.
The need to repack the liberal scrum
I have often thought that the classical liberal agenda would have been advanced more effectively if Hayek and Popper and Mises had been ball players, or at least conversant with manly outdoor games like cricket and football. There are two reasons for this. First, they could have explained a lot of things about the causal factors at work in the human sciences (laws of physics, rules of the game, laws of the land, customs and traditions, strategy and tactics, technological advances, human error etc) using sporting analogies that would be very effective as teaching aids for other people with a keen interest in sports.
Second, they would have been alerted to the need for teamwork, for a game plan (subject to revision), for the imperatives of backing up the ball carrier, doing your share of work in defence, being prepared to run it on the sixth and turning up when your team-mate is in a blue.
The lack of coordination between Mises and Popper, and between the Austrians and the Popperians after them defies belief. How come both Popper and Mises turned the full weight of their massive scholarship and argumentation against the same two targets - historicism and positivism, without even hinting at the existence of the other? Their publications on these topics appeared (some in German, most in English) in parallel over four decades.
1933 - the first book of Mises on methods (in German), 1934, Popper’s first book on the philosophy of science (German), 1944/45 Popper’s first critique of historicism appeared in a joural edited by Hayek, following correspondence while Hayek was helping to find a publisher for the Open Society, 1945 The Open Society with critiicsm of historicism and scientism, 1957 Poppers The Poverty of Hiistoricism in book form, 1957, Mises on Theory and History, 1963 Mises on The Ultimate Foundations, 1963, Popper’s collection of essays Conjectures and Refutations, 1973 Popper’s Objective Knowledge with more criticism of scientism and stuff on the mind-dependent explanation of human action.
Anyway, the first job for the coach of the all-time team to represent the liberal order will be to get Mises and Popper packed into the front row of the scrum, hooked into the same game plan, and passing the ball to each other. Then with half-decent service from the halves and a good kicking game the rest will be history!
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