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Ludwig von Mises: The Man and His Economics

Sheldon Richman

Anyone wishing to answer the question, “Who is Ludwig von Mises?,” faces a formidable, if exciting, task. Where to start? Human Action, which runs close to 900 pages, is not something everyone has the time or inclination to plunge into, rewarding as that would be. Socialism, an extremely important book, addresses a relatively narrow aspect of Mises’s work. His shorter books and articles, always enlightening, do not give the newcomer a sense of the awe-inspiring breadth and depth of his accomplishment.

So I was delighted to learn that Israel Kirzner had written a brief, yet substantial, book on Mises’s economics. No one is better qualified for the job. Kirzner took his Ph.D. under Mises at New York University and has spent the subsequent years elaborating and extending Mises’s work on competition and entrepreneurship. Kirzner’s writings comprise some of the most important contributions made in economics (not just Austrian economics) in the second half of the twentieth century. Until his recent retirement, he was the dean of Austrian economics.

The book is a gem, and I unhesitatingly recommend it to anyone who wants to understand Misesian economics. Kirzner’s deep admiration for Mises the man and economist shines from every page. But this is no uncritical paean. While Kirzner clearly shares Mises’s views on the nature and substance of economic science, he is willing to indicate where disagreement is understandable and perhaps even justifiable.

Before discussing Mises’s views on the nature of economics, the workings of the market process, monetary theory, the trade cycle, and time and interest, Kirzner begins with a superb, brief biographical sketch. Mises led an interesting life. Born in 1881 in the Austro-Hungarian empire, Mises dates his transformation into an economist to his reading of Carl Menger’s Principles of Economics. He studied under the Austrian master economist Eugen Böhm-Bawerk in Vienna during a time of great intellectual ferment in various disciplines. Mises made his first mark in 1912 with his book The Theory of Money and Credit. After World War I he disabused many a young thinker (including F. A. Hayek) of socialist ideas with his powerful thesis that central economic planning must founder because, without markets and private property, the planner is unable to make rational calculations. As the Nazi threat gained momentum, Mises, who was Jewish, fled to Switzerland and then to the United States.

Kirzner captures the drama of Mises’s triumphs and the disappointment of his new life in America, where his professional colleagues, with few exceptions, failed to appreciate who had come to their shores. (Among the exceptions, of course, were Henry Hazlitt and, later, FEE founder Leonard Read.)

A valuable aspect of Kirzner’s book is his placement of Mises in the development of economic thought. Kirzner emphasizes that Mises’s economics became more distinct from neoclassical economics as time went on. “Mises’ first works as an economic theorist were contributions to mainstream neoclassical economics as it was broadly understood and practiced at that time on both the continent and in the U.K. . . . But during the concluding decades of Mises’ career his work was thoroughly at odds with mainstream economics, not only in substance and methodology, but in terms of policy implications.” The differences in Mises’s thought became increasingly clear during the socialist-calculation debate. As he strove to spell out the central role of prices, entrepreneurship, and discovery in a competitive context, he more fully appreciated that the market-process dynamism which distinguishes the Austrian tradition was missing from the neoclassical vision. As neoclassical economics proceeded further down the road of mathematical formalism, Mises continued to push the subjectivist ideas of Menger and Böhm-Bawerk to their logical conclusion.

I especially like Kirzner’s resolution of the apparent paradox of Mises’s commitment to value-free economic science (Wertfreiheit) and his passionate advocacy of individual freedom and capitalism. I won’t give away the details of Kirzner’s excellent discussion.

Familiar with Mises or not, anyone interested in economics or individual liberty will profit from this book. It’s the story of a great man. As Kirzner writes: “It is a tribute to his intellectual integrity that Mises was . . . never to swerve from what he was convinced was the truth, no matter how unpopular that truth might be in the public and professional areas. . . .[I]n terms of the vigor and passion with which he attacked socialist and interventionist alternatives to laissez-faire capitalism, Ludwig von Mises was the foremost economist of the twentieth century.”

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