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MISES

The Last Knight of Liberalism

Ludwigvon MisesInstitute

Photos:

Bettina Bien Greaves, cover, 1, 8, 9, 18, 20, 32, 40, 76, 77, 98, 99, 210, 255,

324, 404, 446, 447, 473, 519, 521, 522, 562, 563, 567, 610, 681, 758, 787,

809, 817, 825, 829, 835, 836, 847, 851, 882, 889, 890, 923, 934, 945, 986,

988, 1011, 1012, 1014, 1034, 1042, 1050

Archival Repository of the Center for Advanced Research in Phenomenology,

University of Memphis, 365

David Jarrett photographs, 946

George Koether photographs, 888, 988

Harvard University Archives, 163

Hazlitt Photo Archive, Mises Institute, 795, 840, 852

Herbert Hoover Presidential Library, RWL #22, 840

Institut für Sozialforschung, 68

John Chamberlain Papers, Syracuse University, 840

Macmillan Publishers, 571,

Mises Archive at Grove City College, 833, 989

Mises Institute Photo Archive, 13, 94, 99, 111, 143, 145, 182, 253, 268, 365, 564,

840, 943, 928, 1036

Mont Pèlerin Society, 587, 679, 869, 870, 872

Moscow Archives, Mises, 262, 463

Österreich Lexikon, 83, 328, 366

Rothbard Photo Archive, Mises Institute, 840, 893, 929, 936, 939

Rubbettino Publishers, 476, 631

University of Vienna, 99, 453

Warren J. Samuels Portrait Collection, Duke University, 99, 102, 109, 139, 118,

155, 424

Wikipedia, 23, 113, 128, 137, 335, 396, 840

Preface. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xi

Acknowledgments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv P ARTIYOUNGLUDWIG. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1. Roots. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2. School Years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

Vienna. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Viennese Jews. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Akademisches Gymnasium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Austria-Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 Socialisms, Austrian Style . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53 Which Career?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59

3.Alma Mater Rudolphina. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61

The Grünberg Seminar. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 Military Service and Death of His Father . . . . . . . . . . . . . . . . . 74 In the Philippovich Seminar . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77 Birth of an Economist . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Years with a Master . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 P ARTII THEAUSTRIANSCHOOL. . . . . . . . . . . . . . . . . . . . . . . . . 99

4.Fin de siècle Economic Science. . . . . . . . . . . . . . . . . . . . . . . . . . . . 101

Carl Menger"Pioneer of Empirical TheoryŽ . . . . . . . . . . . . 101 Mengers Work in the German Context. . . . . . . . . . . . . . . . . . 115 v

Contents

vi Mises: The Last Knight of Liberalism Methodenstreit. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 The Austrian School and the Gossen School. . . . . . . . . . . . . . 125 The Breakthrough of the Austrian School. . . . . . . . . . . . . . . . 136 Friedrich von Wieser. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 Joseph A. Schumpeter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 162

5.Early Professions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175

Difficult Start in Professional Life . . . . . . . . . . . . . . . . . . . . . . 179 The Parallel Life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 Kammer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187 Storm Clouds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 193 Vienna Meeting of the Verein für Socialpolitik. . . . . . . . . . . . . . 195 Breakthrough at the Kammer. . . . . . . . . . . . . . . . . . . . . . . . . . 205 Theory of Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207

6.Treatise on Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211

The Nature of Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215 Integration of Value Theory and the Theory of Money . . . . . 223 Wiesers Theory of Money . . . . . . . . . . . . . . . . . . . . . . . . . . . . 225 Misess Theory of the Value of Money. . . . . . . . . . . . . . . . . . . 236 Money is Not Neutral: Cantillon Effects. . . . . . . . . . . . . . . . . 240

Exchange Rate Determination: Purchasing

Power Theory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 244 Fractional-Reserve Banking and Business Cycles . . . . . . . . . . 249 P ARTIII OFFICER, GENTLEMAN, SCHOLAR. . . . . . . . . . . . . . . . 255

7.The Great War. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 257

First Year in Battle. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 258 The Home Front. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 269 Back to the Front. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 278 New Life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 286 A Last Mission. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291

8.Nation, State, and Economy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 299

Migrations, Mixed Populations, and Modern Imperialism . . . 301 The Utilitarian Method of Social Analysis. . . . . . . . . . . . . . . . 306 The Fallacies of German Socialism in War and Peace . . . . . . 310 Political Economy of Language Communities. . . . . . . . . . . . . 316

9.1919. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 325

New Battlefields. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 Postwar Socialism and the Specter of Anarchy . . . . . . . . . . . 330 Pro-Government Emergencies. . . . . . . . . . . . . . . . . . . . . . . . 344 Toward Sound Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350 Vienna Circles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 360

10.A Copernican Shift. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 369

The Argument. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 373 The Intellectual Context. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380 Triumph. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 392 The Incomplete Revolution . . . . . . . . . . . . . . . . . . . . . . . . . . 399

11.A Treatise on Socialism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 405

Benefits Derived from the Means of Production

under Capitalism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 407 The Utilitarian Case for Democracy . . . . . . . . . . . . . . . . . . . 410 Political Economy of the Family . . . . . . . . . . . . . . . . . . . . . . 413 Implications of the Calculation Problem . . . . . . . . . . . . . . . . 418 Moral Hazard"The Other Nemesis of Socialism . . . . . . . . 422 The Feeble and Compromising John Stuart Mill . . . . . . . . . 424 The Law of Association. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 426 Monopoly Theory. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 431 Christian Ethics versus the Market?. . . . . . . . . . . . . . . . . . . . 437 Socialism = Destructionism. . . . . . . . . . . . . . . . . . . . . . . . . . . 443 P ARTIV MISES INHISPRIME. . . . . . . . . . . . . . . . . . . . . . . . . . . 447

12.Winds of War. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 449

Hayek and the Bureau for Claims Settlements . . . . . . . . . . . 451 Fighting Inflation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 455 Seminars. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 461 Wiesers Long Shadow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 464 The LSE Connection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 479 Advent of the Gold-Exchange Standard. . . . . . . . . . . . . . . . . 483

Contents vii

viii Mises: The Last Knight of Liberalism Hyperinflation, Currency Competition, and Monetary Reform . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 493 Theory of Money and Credit Reconsidered . . . . . . . . . . . . . 505 German Economists Return to Classical Liberalism. . . . . . . 508 Silver Linings on the Horizon . . . . . . . . . . . . . . . . . . . . . . . . 513

13. A System of Political Philosophy . . . . . . . . . . . . . . . . . . . . . . . . . 523

First Outline of a Theory of Interventionism . . . . . . . . . . . . 525 Critique of the Anti-MarxistsŽ . . . . . . . . . . . . . . . . . . . . . . . 530 Critique of the New Liberals . . . . . . . . . . . . . . . . . . . . . . . . . 538 The Transformation of Economic Science. . . . . . . . . . . . . . . 544 Liberalismus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 556

14. Booms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 565

1926 Journeys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 567

Institute for Business Cycle Research. . . . . . . . . . . . . . . . . . . 573 Austrian Politics at the Onset of the Gold-Exchange Standard . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 577 Free Trade, Monetary Stabilization, and Cyclical Policy . . . 581 The New Theoreticians . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585 The Theory of Value Reconsidered . . . . . . . . . . . . . . . . . . . . 589 Toward a New Epistemology of the Social Sciences . . . . . . . 599 A Private Boom-Bust. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 606

15.Crises. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 611

The Causes of the Great Depression . . . . . . . . . . . . . . . . . . . 617 A Lieutenant in London . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 631 Return to Foreign-Exchange Controls. . . . . . . . . . . . . . . . . . 640 Second Edition of Socialism. . . . . . . . . . . . . . . . . . . . . . . . . . . 652 Dresden Meeting of the Verein für Sozialpolitik. . . . . . . . . . . 657 Economic Theory Completed . . . . . . . . . . . . . . . . . . . . . . . . 664 Twilight in Vienna. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 674 P ARTVMISES INGENEVA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 681

16. The Geneva Years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 683

Institut des Hautes Études Internationales. . . . . . . . . . . . . . . 685 Academic Life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 689 Alienation from Former Associates. . . . . . . . . . . . . . . . . . . . . 698 Mises and the Neo-Liberals . . . . . . . . . . . . . . . . . . . . . . . . . . 708 Popular Fronts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 712 Profound Transformations . . . . . . . . . . . . . . . . . . . . . . . . . . . 719 The Walter Lippmann Colloquium . . . . . . . . . . . . . . . . . . . . 734 Plans for after the War . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 740 Escape from Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 746

17.A Treatise on Economics. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 759

The System in an Overview . . . . . . . . . . . . . . . . . . . . . . . . . . 761 Anti-Psychologism. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 765 Capitalism and Liberalism are Rational . . . . . . . . . . . . . . . . . 767 Equilibrium, Profit and Loss, and Entrepreneurship . . . . . . 770 Consumer Sovereignty and Interest . . . . . . . . . . . . . . . . . . . . 773 Business Cycle Theory Restated. . . . . . . . . . . . . . . . . . . . . . . 779 Update of the Socialist-Calculation Debate. . . . . . . . . . . . . . 781 A Pure Cash Balance Approach . . . . . . . . . . . . . . . . . . . . . . . 785 P ARTVI MISES INAMERICA. . . . . . . . . . . . . . . . . . . . . . . . . . . . 787

18. Émigré in New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 789

Arrival in New York. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 790 National Bureau of Economic Research. . . . . . . . . . . . . . . . . 798 Dark Hours and New Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 800 Six Weeks in Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 812 The Austrian National Committee. . . . . . . . . . . . . . . . . . . . . 816 New Friends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821 American Citizen. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 832

19. Birth of a Movement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 837

Libertarian Seedbeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 839 The Long Visit at New York University . . . . . . . . . . . . . . . . 845 Leonard Read and the FEE . . . . . . . . . . . . . . . . . . . . . . . . . . 849 Frederick Nymeyer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 853 Mises Debates American Libertarians . . . . . . . . . . . . . . . . . . 857 Planned Chaos. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 862 A Conference at Mont Pèlerin . . . . . . . . . . . . . . . . . . . . . . . . 864

Contents ix

x Mises: The Last Knight of Liberalism Preparing the Counter-Revolution. . . . . . . . . . . . . . . . . . . . . 872 A Neo-Liberal Coup in Germany . . . . . . . . . . . . . . . . . . . . . 874 A New Yorker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 881

20.Human Action and Its Consequences. . . . . . . . . . . . . . . . . . . . . . 883

First Reactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 885 Misesians . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 893 Speeches and Papers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 897 The Freeman. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 901 The Nymeyer Connection . . . . . . . . . . . . . . . . . . . . . . . . . . . 914 American Edition of Theory of Money and Credit. . . . . . . . . . 919 Grey Eminence and Itinerant Scholar . . . . . . . . . . . . . . . . . . 923 New York Circles. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 927 A Misesian Treatise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 935 Sennholz at Grove City College. . . . . . . . . . . . . . . . . . . . . . . 942

21. The Epistemological Case for Capitalism. . . . . . . . . . . . . . . . . . . 947

The Argument in a Nutshell. . . . . . . . . . . . . . . . . . . . . . . . . . 951 Science and the Culture of Salutary Dissent . . . . . . . . . . . . . 957 Heroic Elites in a Mass Democracy . . . . . . . . . . . . . . . . . . . . 963 The Study of History . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 971 The Anti-Capitalistic Mentality. . . . . . . . . . . . . . . . . . . . . . . . . 980 Christianity Reconsidered. . . . . . . . . . . . . . . . . . . . . . . . . . . . 982

22.Fragmentation of the Movement. . . . . . . . . . . . . . . . . . . . . . . . . 987

Conservative Movement and Libertarian Remnant. . . . . . . . 991 Demise of the Circle Bastiat . . . . . . . . . . . . . . . . . . . . . . . . . . 996 Against the Neo-Liberals . . . . . . . . . . . . . . . . . . . . . . . . . . . 1003

23.Last Years. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1013

Last Writings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1016 Last Skirmishes with the Anarchists . . . . . . . . . . . . . . . . . . . 1023 Last Skirmishes with the Monetarists. . . . . . . . . . . . . . . . . . 1030 Last Honors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1034

Epilogue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1043

Bibliography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1051

Index of Names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1083 Index of Subjects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1103 IN THE SUMMER OF1940, with Hitler"s troops moving through France to encircle Switzerland, Ludwig von Mises sat beside his wife Margit on a bus filled with Jews fleeing Europe. To avoid cap- ture, the bus driver took back roads through the French country- side, stopping to ask locals if the Germans had been spotted ahead"reversing and finding alternative routes if they had been. Mises was two months shy of his fifty-ninth birthday. He was on the invaders" list of wanted men. Two years earlier, they had ransacked his Vienna apartment, confiscating his records, and freezing his assets. Mises then hoped to be safe in Geneva. Now nowhere in Europe seemed safe. Not only was he a prominent intellectual of Jewish descent; he was widely known to be an arch- enemy of National Socialism and of every other form of socialism.

Some called him "the last knight of liberalism."

He had personally steered Austria away from Bolshevism, saved his country from the level of hyperinflation that destroyed inter- war Germany, and convinced a generation of young socialist intel- lectuals to embrace the market. Now he was a political refugee headed for a foreign continent. The couple arrived in the United States with barely any money and no prospects for income. Mises"s former students and disci- ples had found prestigious positions in British and American uni- versities (often with his help), but Mises himself was considered an anachronism. In an age of growing government and central xi

Preface

xii Mises: The Last Knight of Liberalism planning, he was a defender of private property and an opponent of all government intervention in the economy. Perhaps worst of all, he was a proponent of verbal logic and realism in the beginning heyday of positivism and mathematical modeling. No university would have him. Margit began to train as a secretary. Over the next decade, they would slowly rebuild and Mises would find new allies. He would also publish his most important book, Human Action. It would earn him a following whose admira- tion and devotion were beyond anything he had known in Europe. When he died in October 1973, he had only a small circle of admirers and disciples, but this group became the nucleus of a movement that has grown exponentially. Today his writings inspire economists and libertarians throughout the world, and are avidly read by an increasing number of students in all the social sciences. There is an entire school of "Misesian" economists flourishing most notably in the United States, but also in Spain, France, the Czech Republic, Argentina, Romania, and Italy. This movement is testimony to the lasting power and impact of his ideas. The purpose of the present book is to tell the story of how these ideas emerged in their time. It is the story of an amazing econo- mist, of his life and deeds. It is the story of his personal impact on the Austrian School and the libertarian movement. It is above all the story of a man who transformed himself in an uncompromis- ing pursuit of the truth, of a man who adopted his ideas step-by- step, often against his initial inclinations. Once a student of the historical method in the social sciences, he would become the dean of the opposition Austrian School and humanistic social theory. He went from left-leaning young idealist in Vienna to grand old man of the American Right. Dismissive of "the metallists" early in his career, he became an unwavering spokesman for a 100 percent gold standard. His example inspired students and followers, many of whom would take his message and method farther than he himself would go. The portrait of Ludwig von Mises offered here is primarily con- cerned with his intellectual development in the context of his time. Not much is known about the emotional layer of his personality. Early on he conceived of himself as a public persona: Professor Mises. He took great care to destroy any evidence"from receipts to love letters"anything that could have been useful to potential opponents. We can report on some of the more intimate episodes of his life only because of the private records stolen from his Vienna apartment by Hitler"s agents in March of 1938. These doc- uments eventually fell into the hands of the Red Army, were redis- covered in a secret Moscow archive in 1991, and have been for us a precious source of information. The present book is squarely based on Mises"s personal docu- ments in the Moscow archive and in the archive at Grove City College. I have also used relevant documents available from the Vienna Chamber of Commerce, the Akademisches Gymnasium in Vienna, the Graduate Institute of International Studies in Geneva, the Hoover Institution at Stanford University, as well as the mate- rials that Mrs. Bettina Bien Greaves has inherited from the Mises estate. It goes without saying that I have studied Mises"s writings in great detail, as well as those of the most significant other econo- mists of his time. Furthermore, I have tried to familiarize myself with the historical context of his work, although remaining an amateur on these general questions. All this material is brought together here for the first time. I hope it will be a useful starting point for future research on Mises. This brings me to a final remark on the scope and purpose of this book. Though I never met Mises in person, I have been a stu- dent and admirer of his works for many years. The following pages are last but not least a token of my gratitude toward this great thinker. In my economic research, I have tried to go on where he had left off, though not necessarily in the direction he seemed to be taking. This raised a few basic questions for my work on this biography: Should I talk about the research that Mises has inspired in our day? Should I discuss the sometimes different interpreta- tions of Mises that are now current? It might have enhanced the present work and been more interesting to the present-day experts in the field to have included critical annotations on the literature, and there are many, but I decided to refrain from this. It would have drawn me away from speaking about Mises himselfand into speaking about the literature on Mises. To keep a book that is

Preface xiii

xiv Mises: The Last Knight of Liberalism already rather voluminous focused on its main subject, it was nec- essary to minimize the discussion of the secondary literature, including not only my own works, but also the works of eminent Mises scholars such as Murray Rothbard, Richard Ebeling, Israel Kirzner, Joseph Salerno, Hans-Hermann Hoppe, Bettina Bien Greaves, Julian DelGaudio, Eamonn Butler, Patrick Gunning, Jef- frey Herbener, Percy Greaves, Hans Sennholz, Ralph Raico, James Rolph Edwards, Laurence Moss, Gary North, Carsten Pallas, and David Gordon. This is an inconvenience, but an acceptable one in the age of the Internet. The main point of a Mises biography in our present day, when so little is known about the man and biographical research is still in its infancy, is to come to grips with a figure who, without any significant institutional backing, by the sheer power of his ideas, inspires, more than thirty years after his death, a growing interna- tional intellectual movement. What are these ideas that have such magnetic power? Who was this man? What were his aims, his struggles, his triumphs, his defeats? How did his ideas originate in the context of his time and against the odds he faced? These, I think, are the main questions at the present stage. Those who love ideas"especially those who believe that ideas shape our world" may find the following pages worthwhile reading. If it does no more than raise further interest in Ludwig von Mises and his work, this book will have attained its goal.

Angers, France

May 2007

THIS WORK WOULD NOThave been possible without the initia- tive of Lew Rockwell, who encouraged me to write a Mises biography and then provided relentless support when the proj- ect grew bigger and bigger, far beyond our initial plans. It would not have been possible without the financial support of numerous dedicated men and women, and in particular of those patrons who are mentioned on the front pages of this book. Many other persons have helped and encouraged me in the course of my work. I have been especially blessed with generous aid from Mrs. Bettina Bien Greaves, who at the beginning of my research put me on the right tracks and made available to me the materials she had inherited from the Mises estate, as well as her own biographical research on Ludwig von Mises. She has also readily made available the wonderful collection of photographs of Ludwig and Margit von Mises that have been in her care. I gratefully acknowledge friendly help from the staff of the Special Archive for Historico-Documentary Collections in Moscow: Vladimir Kuselenkov (director), Vladimir Kurutajev (vice-director), Rostislav Sokolov (translator), and Natacha Samsonova (archivist). Similarly, I received liberal on-site sup- port from Herr Magister Siegel, director of the Akademische Gymnasium in Vienna, and from Professor Jeffrey Herbener, custodian of the Mises Archive at Grove City College. I have xv

Acknowledgments

xvi Mises: The Last Knight of Liberalism benefited from the kind assistance of Professor Hans-Hermann Hoppe, who shared with me the archival material he had obtained from the Vienna Chamber of Commerce; of Professor Jesús Huerta de Soto, who shared with me his archival material from the Vienna Staatsarchiv; and of Mr. Ivo Sarjanovich, who researched for me the archives of the Graduate Institute of International Studies in Geneva. Many other individuals have graciously pointed out references or provided hard to find material. I should like to thank in particular Mr. Philipp Bagus, Professor Gabriel Calzada Alvarez, Professor Paul Cwik, Dr. Nikolay Gertchev, Dr. Floy Lilly, Dr. Anthony de Jasay, Profes- sor Ralph Raico, Mr. Reinhard Stiebler, Mr. Joseph Stromberg, Dr. Mark Thornton, Professor Shigeki Tomo, Mr. Jeffrey Tucker, and Professor Ki"ichiro Yagi. To the great benefit of my readers, I have enjoyed the services of a competent and efficient editorial team under the leadership of Mr. Jeffrey Tucker, including Mr. B.K. Marcus, Mrs. Arlene Oost-Zinner, Mrs. Judy Thommesen, Dr. David Gordon, Mr. Jule Herbert, Jr., Mrs. Kathy White, and Mr. Harry David. Moreover, I have the honor to acknowledge my debt and immense gratitude to the readers and referees who helped improve the quality of this book, in particular Professor Walter Block, Dr. David Gordon, Mr. B.K. Marcus, Mr. Joseph Potts, Professor Ralph Raico, and dear wife Nathalie for bearing with me during all the years invested in this project, and for sharing a beautiful life beyond economics and great economists.

Part I

Young Ludwig

ONSEPTEMBER29, 1881, Ludwig Heinrich Edler von Mises was the first in his family to be born a nobleman. A few months earlier, the Austrian emperor had ennobled Ludwig"s great- grandfather, Meyer Rachmiel Mises. The family would hence- forth bear the new name "von Mises." The emperor also con- ferred on them the honorific "Edler" which literally translates into "the noble" and was frequently accorded to Jews. 1 Ludwig"s birthplace was the city of Lemberg, the capital of the bygone "Kingdom of Galicia and Lodomeria." For cen- turies Galicia had belonged to Poland before it fell to the house of Habsburg in 1772 when large chunks of Poland were divided among its three mighty neighbors: Russia, Prussia, and Austria. 2 Even though the Habsburgs were the emperors of the German Reich, they never incorporated Galicia into Germany, but kept 1 On the Mises family, see in particular the 1881 Adelsakt (Ennoblement Act) for Meyer (or Mayer) Rachmiel Mises, Österreichisches Staatsarchiv. See also Österreichisches Biographisches Lexikon 1815...1950(Vienna: Verlag der Österreichischen Akademie der Wissenschaften, 1975), vol. 6. 2 The "Kingdom of Galicia and Lodomeria" had not existed before the division of Poland. The Habsburgs chose this name as a quasi-historical jus- tification of the annexation. In the late Middle Ages, the Hungarian King Andrew had been a Rex Galiciae et Lodomeriae, that is, a king of the oldquotesdbs_dbs33.pdfusesText_39

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