Ludwig von Mises: Setting the Record Straight (The free market icon was not an anarchist)

Ludwig von Mises (1881-1973) is an iconic figure on the right, known as a great economist and a leading theoretician of free markets. (The surname is pronounced "MEE-zes" -- like "Moses" with a long "e" instead of "o." His books are often alphabetized under "v" because of the honorific title "von.") Unfortunately, Mises often is misunderstood. My purpose here is to correct some of these misapprehensions.

After a decades-long career in his native Austria, Mises, a Jew, emigrated to escape Hitler. In the postwar years, Mises mentored four Ph.D.s in economics at New York University: Hans Sennholz, Louis Spadaro, Israel Kirzner, and George Reisman. Several decades later, I earned my Ph.D. under Dr. Sennholz. During that period of study, I read all of Mises' books. Mises, then, is my "intellectual grandfather." Although I never met him, I owe him a great debt. Since he isn't here to correct misrepresentations of his ideas, I will try to pinch-hit for him.

First, for the sake of readers who aren't familiar with his ideas, let's briefly review Mises' significance. His contributions to the advancement of economics remain unsurpassed. All of his books were powerfully illuminating, but four stand out as economic classics.

In The Theory of Money and Credit (1912), Mises integrated money into the larger body of neoclassical marginalist thought; showed how inflation redistributes, rather than creates wealth; and laid the foundation for his and Hayek's future work on how central bank monetary policy causes the widespread "cluster of errors" that characterizes the boom-bust cycle.

In Socialism: An Economic and Sociological Analysis (1922), Mises made, in my opinion, the single greatest economic breakthrough of the 20th century. He proved, with irrefutable logic, why socialism is inherently unviable, due to the impossibility of meaningful economic calculation in the absence of market-based prices. His socialist critics claimed to have surmounted this difficulty by saying that socialist regimes could copy capitalist prices -- hardly a "triumph" for the alleged superiority of socialism if it is ultimately a parasite dependent on capitalism. Many tens of millions of human beings could have been spared untold grief, blight, poverty, suffering, and premature death in the wretched experiments with socialism that darkened the 20th century, if only Mises's insights and warnings had been heeded.

Mises's magnum opus is Human Action (1949). This book summarizes all of his vast economic understanding and synthesizes it into a comprehensive theory of (what else?) human action, called "praxeology." At a time when economics was becoming so fragmented and specialized that agricultural economists, for example, might have difficulty understanding international trade economists, Mises accomplished the intellectual equivalent of putting Humpty-Dumpty back together again by developing the economic equivalent of the unified theory in physics.

Mises's fourth masterpiece is Theory and History (1957), a surprisingly readable examination of methodology that includes discussions of how both economic theory and the study of history demonstrate the superiority of free-market over government-planned economic action. (This book is the most accessible of "the big four" to the non-economist.)

In recent years, I have been surprised by how often Mises has been misunderstood outside the still-small fraternity of Austrian economists. Sad to say, one of the most accurate representations of Mises' ideas was made, improbably enough, by liberal congressman Barney Frank.

On Feb. 24, 2004, Rep. Frank took to the floor of the House and expressed amazement that many of his Republican colleagues, who had professed to believe in the free-market principles of Ludwig von Mises, were arguing for larger agricultural subsidies. Bravo! Although he himself opposes free markets, Barney Frank knows that Mises never would have advocated subsidies for a special interest.

Alas, the same cannot be said for David Cay Johnston, reporter for The New York Times. Johnston wrote the 2007 book Free Lunch, recounting many of the ways in which the well-to-do and powerful receive special favors from government. He lifted the veil from the sordid, corrupt process of what we economists call "rent-seeking."

So far, so good. But Johnston errs egregiously by citing Mises as one of the high priests of these unscrupulous plunderers. Nothing could be farther from the truth. One of Mises' cardinal principles was the central importance of the impartial rule of law and a concomitant rejection of privileges. (Cf. Liberalism, pp. 27-30, Theory and History, pp. 236-239).

Another widespread misunderstanding involves Mises' insistence on a strict adherence to Wertfrei (German for "value-free") economic analysis. Mises didn't believe in conservative or liberal economics any more than one would believe in conservative or liberal arithmetic or laws of physics. Yet in his recent history of supply-side economics, Econoclasts, historian Brian Domitrovic writes that Mises' work has climbed the "normative heights" of an absolutist ethical stance.

Some Christians, meanwhile, denounce Mises for exactly the opposite reason, charging him with "moral relativism." This false charge is particularly cruel, for Mises steadfastly refused to compromise economic truth, often standing alone against the statist tide. It seems that Mises can't win. In fact, he was neither a moral preacher nor a moral relativist. He was a scientist, conscientiously and consistently illustrating cause/effect relationships that are not malleable to human will.

Finally, the strangest misconception today involves anarchism. One of my colleagues now avoids labeling himself an Austrian economist because his interlocutors then assume that he is an anarchist. Mises, the definitive Austrian economist, rejected anarchism. But today, Austrian economics and anarcho-capitalism are often regarded as two sides of the same coin.

Society cannot do without a social apparatus of coercion and compulsion, i.e. without state and government. The Anti-Capitalist Mentality, p. 90.

There are people who call government an evil, although a necessary evil. However, what is needed in order to attain a definite end must not be called an evil ... Government may even be called the most beneficial of all earthly institutions as without it no peaceful human cooperation, no civilization and no moral life would be possible. Economic Freedom and Interventionism, p. 57.

Liberalism [in the European sense-the philosophy of free markets and limited government] differs radically from anarchism. It has nothing in common with the absurd illusions of the anarchists... Liberalism is not so foolish as to aim at the abolition of the state. Omnipotent Government, p. 48

[Anarchists are] shallow-minded, dull, [and suffer from] illusions and self-deception. The Ultimate Foundation of Economic Science, pp. 98-9.

How, then, did Austrian economics -- and by extension, Ludwig von Mises -- come to be painted with an anarchist brush? Ironically, from the success of the Ludwig von Mises Institute.

Lew Rockwell founded The Mises Institute in 1983. (I attended its inaugural dinner.) As the Institute evolved, it came to be dominated by Murray Rothbard. Rothbard's economic thought was derived from Mises, but his anarcho-capitalist political philosophy was drawn from other sources.

The Mises Institute is doing a lot of excellent work in exposing the counterproductive nature of government intervention into economic matters. Indeed, I wish them continued success in their fight against economic illiberalism. In retrospect, though, it seems that there would be less confusion about Austrian/Misesian economics today if Rockwell had named his think-tank "The Rothbard Institute."

I think Mises would be disappointed that the institute named after him would be known as a center of anarchist thought, but what's done is done. I am sure that if Mises were here today, his energies would be focused on the fight for economic rationality -- i.e., free markets -- rather than defending his personal reputation.

-- Professor Mark Hendrickson teaches in the Economics Department at Grove City College.

Lew Rockwell founded The Mises Institute in 1983.

I think this is why there are a lot of misconceptions about Mises. Lewellen has taken his own filters and really placed them over all of the info on Mises he posts. If you read just Mises, you'll see a pretty rational economist. If, however, you go and read Lewellen's Libertarian slant, he cuts it up so much that you are left with the impression that Mises was an anarcho-capitalist. Lew Rockwell has done more harm to Mises image than almost any other. The sad part is, his stuff dominates the info on Mises on the web.

I’ve read three of his books.

They are accessible to the non-economist, because they are rooted in logic which he explains in relatively common language. Someone said I ought to have read Menger before tackling Von Mises, so I did, and found Menger quite accessible as well. You don’t get in a big hurry when you read this stuff, a few pages at a time and it takes as long as it takes. You want time to think about it as you go, anyway.

He rather takes the mystery out of economics, and you aren’t surprised anymore by what happens. You don’t “follow” Von Mises’ economics anymore than you follow arithmetic. You make your decisions, and the laws of cause and effect kick in like them or not. For political or philosophical reasons or simply out of personal preference you may make whatever economic decisions you like, but you will not escape the consequences good and bad of those decisions. Von Mises’ point is to look with clear eyes at the actual effects that follow any course of action.

The author of the above article teaches at Grove City College.

This is one of a handful of colleges that still teaches the Austrian School of Economics and still holds Von Mises in high regards. The original papers of Von Mises himself are housed at the college’s museum.

They’re a small undergraduate college in Pennsylvania that does not have as much influence as say, Yale or Harvard.

In fact, they’re also one of a handful of colleges in America that refuses to take any Federal money whatsoever.

“Rockwell has done way too much courting of the anti-war left”

As did Ron Paul, the “Libertarian”. And among some Libertarian purists there is no shortage of anarchists.

The article by Prof. Hendrickson is dead wrong in what he wrote was an error in my book FREE LUNCH.

I have sent him the relevant cutting from the book and have also posted a corrective at American Thinker, where the article originated.

Free Lunch is a defense of competitive markets that exposes numerous stealth subsidies to large corporations and various wealthy individuals. In no way does Free Lunch suggest that von Mises followers want to plunder public property for private gain by acquiring the land at below market prices, which the plunderers I do tell about have done through abuse of eminent domain laws. Free Lunch describes as "nutty" the idea that all public parks are inherently coercive abuses of power by the state and explains the reasoning, which includes a failure to fully account for economic costs and benefits of eliminating all publicly owned parks. That is a different issue, on which people can reasonably disagree

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