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Ludwig von Mises
Ludwig Von Mises was a great economist and advocate for human liberty.
David Stewart
January 1, 2025
Great People of Ukraine
Economic and Sociological Contributions of Von Mises
Ludwig Von Mises was born in Lemberg of the Kingdom of Galicia and Lodomeria, Austrian Empire (now Lviv, Ukraine) in 1881. Sam Bowman of the Adam Smith Institute described von Mises as “the greatest economist of all time as the man who systematized the Austrian school of economics and developed some of its key insights.” MIT economist and Nobel laureate Paul Samuelson, who held many ideas contrary to von Mises, wrote that had the Nobel prize had been introduced earlier, von Mises would have been one of its early recipients. The Nobel Prize in economics was instituted only in 1969, the year von Mises retired at 88. Some of von Mises’ contributions include:
Defense of liberalism, including free-market economics, private property, and anti-imperialism. He documented that free markets and private property facilitate rational economy and social cooperation, leading to continual increases in societal welfare and real wages.
The economic calculation problem. Von Mises demonstrated in his 1920 work Socialism that socialist states based on planned economies would be unable to allocate resources effectively or generate optimum wealth and societal well-being.
Interventionism. Von Mises demonstrated that government intervention in the economy would result in net losses to society compared to free markets.
Subjective value. Von Mises explained why prices as they are, rather than as they "should" be by some “objective” standard, and how the aggregate of human choice and preferences helps markets to arrive at price discovery.
The theory of money and credit. Von Mises revolutionized understanding of money, inflation, and recessions.
Theory of the business cycle, based on expansion and contraction of money supply.
Praxeology, the basis of human action.
Defender of Liberty and Social Cooperation
Von Mises was far ahead of his time. One contemporary described him as “the greatest economist of the century - the next century." Reading his books published nearly a century ago, one is astonished today by his penetrating insights and his more accurate appraisal of current events than almost any contemporary author. If political leaders, ostensible experts, and the public understood and applied the principles von Mises taught, the world would be far better today.
Economics professor Art Carden wrote of Ludwig von Mises in Forbes Magazine: “In my humble opinion, he was the greatest social thinker of the twentieth century.” Von Mises studied how freedom facilitates social cooperation. He documented that non-free systems including socialism and interventionism are in fact antisocial, fueling conflict and the breakdown of social cooperation. In Liberalism in the Classic Tradition, he wrote:
“The goal of the domestic policy of liberalism is the same as that of its foreign policy: peace. It aims at peaceful cooperation just as much between nations as within each nation. The starting point of liberal thought is the recognition of the value and importance of human cooperation, and the whole policy and program of liberalism is designed to serve the purpose of maintaining the existing state of mutual cooperation among the members of the human race and of extending it still further. The ultimate ideal envisioned by liberalism is the perfect cooperation of all mankind, taking place peacefully and without friction. Liberal thinking always has the whole of humanity in view and not just parts. It does not stop at limited groups; it does not end at the border of the village, of the province, of the nation, or of the continent. Its thinking is cosmopolitan and ecumenical: it takes in all men and the whole world. Liberalism is, in this sense, humanism; and the liberal, a citizen of the world, a cosmopolite.”
Von Mises has been described as “the leading critic of the inflationism, managerialism, and authoritarianism that haunts the world today.” In his book Bureaucracy, he wrote:
“The champions of socialism call themselves progressives, but they recommend a system which is characterized by rigid observance of routine and by a resistance to every kind of improvement. They call themselves liberals, but they are intent upon abolishing liberty. They call themselves democrats, but they yearn for dictatorship. They call themselves revolutionaries, but they want to make the government omnipotent. They promise the blessings of the Garden of Eden, but they plan to transform the world into a gigantic post office. Every man but one a subordinate clerk in a bureau. What an alluring utopia! What a noble cause to fight!”
More than a century later, Von Mises 1922 book Socialism: An Economic and Sociological Analysis remains the definitive critique of socialist ideology and has never been answered. He wrote:
“In fact, Socialism is not in the least what it pretends to be. lt is not the pioneer of a better and finer world, but the spoiler of what thousands of years of civilization have created. lt does not build; it destroys. For destruction is the essence of it. lt produces nothing, it only consumes what the social order based on private ownership in the means of production has created. Since a socialist order of society cannot exist, unless it be as a fragment of Socialism within an economic order resting otherwise on private property, each step leading towards Socialism must exhaust itself in the destruction of what already exists.”
A few of his countless insightful quotes include:
“From time immemorial, political freedom has been recognized as the most precious good in the zone of influence of Western civilization.
“To improve the social order, first of all, it is necessary to restore unlimited freedom of thought and speech.
“The only thing that gives a citizen all the fullness of freedom, which is only compatible with life in society, is a market economy.
“Democracy is not only not revolutionary, but it always seeks to avoid revolution.
“It is inflation that is the real opium for the people and is supplied to them by anti-capitalist parties and governments.”
The Von Mises Family: Builders of Ukraine
In Austrian Galicia, there was no more prominent family with consistent intergenerational achievements to build Ukraine than the von Mises. The family had lived in Lviv for at least five generations, and appears to have lived on the territory of modern Ukraine for at least three centuries. Each generation of the von Mises family distinguished itself in a new enterprise and with public leadership. His great-great grandfather was a wealthy Lviv merchant. His great-grandfather Mayer Rachmiel Mises (1801-1891) received a noble title a few months before Ludwig’s birth.
His grandfather Hirsche Mises became a partner and managing director of the Hallerstein and Nirenstein Bank in Lviv. Hirsche’s brother Abraham Mises managed the Rothschild bank branch in Lviv. Located at No 14 on vul. Sichovykh Striltsiv, this building is on the next block from Ludwig von Mises’ childhood home and is now part of the Faculty of Law of Ivan Franko National University. Banking provided important financing for entrepreneurs and industry, elevating the living standard in Galicia.
Ludwig’s father Arthur was an engineer at the Lviv station of the Czernowitz (Chernivtsi) railway company. Arthur and his brother Hermann Mises co-owned a construction company and invested in railroads. The construction of the rail network in Galicia starting in the 1860s catalyzed rapid economic growth.
The von Mises were also distinguished in public service. All three of the Jewish representatives of Galicia in the Austrian parliament were relatives of von Mises. In 1848, the year of revolutions, Ludwig's grandfather was one of four Jewish petitioners to the Austrian parliament for the abolition of serfdom in Galicia which was granted the following month. This freed Ukrainian peasants from virtual slavery to the Polish nobility in which they were bound to the land and had virtually no rights.
Von Mises Biography, Ukrainian Roots
Many Ukrainians have never heard of Ludwig von Mises. One acquaintance claimed that von Mises wasn’t really Ukrainian, as a native German-speaking Jew. Yet culture consists in more than ethnic traditions and birth language, but values and understanding.
It was precisely Ludwig’s upbringing in Ukrainian-majority eastern Galicia that provided the foundation of values and insights and distinguished him from his Austrian and later American colleagues. Ludwig maintained the principles of his upbringing in Ukrainian Galicia throughout his life.
Ludwig was born in this home at what is now Akademika Hnatiuka Street, house 13, in the center of Lviv. Ludwig was fluent in German, Polish, Russian, and French, read Latin and understood Ukrainian.
When Ludwig was between 8 and 11 years old, his family moved to Vienna where he continued his education. Coming from a highly competent family with expertise in multiple fields, Von Mises was a keen observer and voracious reader from childhood. In his years at the University of Vienna, he met many of Europe’s leading intellectuals. Ludwig’s vast command of facts and understanding was uniquely juxtaposed with practical competency.
During the First World War, von Mises volunteered to defend his native Galicia from the Russians and served as an artillery captain. His brother Richard, who later became a world-renowned mathematician and Harvard professor, served as a pilot in the Austro-Hungarian army during the war. Ludwig’s colleagues noted that he would work on economic treatises as the bullets whistled by. During the war, Ludwig perfected his mastery of the Ukrainian language. Ludwig was wounded near Przemyśl. He received several high awards from the Austrian crown for his bravery.
After returning from the first World War, von Mises experienced a “lifelong obsession of finding a workable doctrine of peace among nations,” reflected in his later works.
In February 1918, the Ukrainian state was formed on the Left Bank, and Galicia was annexed to Poland. Von Mises received an invitation from the government of Hetman Pavlo Skoropadsky and Chairman of the Council of Ministers of the Ukrainian People's Republic Borys Martos. He traveled to Odesa, where he supervised the creation of the Ukrainian State Bank, which opened on September 2, 1918.
Von Mises returned to Vienna, where he served as an economic advisor for the Austrian government. He worked to avert starvation and hyperinflation in “Red Vienna” in the aftermath of the war caused by destructive policies of the socialist government.
From 1913 to 1934, von Mises taught economics at the University of Vienna. Von Mises was an advocate for truth, never wavering despite strong academic currents to the contrary. He took his personal motto from Aenid 6:95-97: “Do not give way to misfortunes, meet them more bravely, as your destiny allows. The path of safety will open up for you from where you least imagine it, a Greek city.”
Due to his pro-liberty convictions, he was blacklisted from advancement. He served as a professorius extraordinarius with the same status as other professors, but without his own secretary, staff, and permanent salary. But his seminars were regularly attended by 40-50 students, almost double the 20-25 that attended other professors’ lectures, and almost all economics students came through his classes.
After the National Socialists gained power in Germany, Ludwig moved to Geneva. He left Vienna the day before the Nazis annexed Austria. His apartment was searched, his papers seized, and books banned and burned. The Gestapo tried to get him even in Switzerland. Only through miraculous events was he able to escape to Portugal in 1940 and then to the United States with his wife, arriving in New York to start a new life at age 59. He became a visiting professor at New York University from 1945 to 1969, retiring at the age of 88. Von Mises passed away in 1973 at 92 years of age.
Von Mises’ Ukrainian Influence and Perspective
Von Mises’ Austrian contemporary Erik von Kuehnelt-Leddihn wrote that “his Polish, more than his Jewish background, was decisive for Mises’s earliest years.” Von Kuehnelt understood that von Mises’ insights arose from his Galician roots, but misidentified them as arising from the Polish republican tradition rather than with the struggle for freedom of the Ukrainian peasants.
The Ukrainian-majority population of the countryside and their relationships with the predominantly Polish landowners were the subject of von Mises’ 1902 dissertation which launched his academic career, “The Development of the Landlord-Peasant Relationship in Galicia (1772-1848)” [German title: “Die Entwicklung des gutsherrlich-bäuerlichen Verhältnisses in Galizien” (1772-1848)] The dissertation provides a detailed economic, social, and legal overview. Ukrainian peasants became bound to the land and serfs of Polish landlords after a decree in 1573. Von Mises noted that Ukrainians experienced a form of slavery under Polish suzerainty, and documented the systemic issues this incurred. Von Mises biographer Jörg Hülsmann wrote:
“[Von Mises] explained that the Polish aristocracy was essentially a club of slaveholders with no backing in the wider population. This was a major reason why they were unable to avoid partitioning of the country (1772 to 1795) and could not re-establish its independence thereafter. Ruthenian slave-peasants liable to come under Prussian or Austrian dominion had nothing to lose; they could only expect an improvement in their situation.”
Von Mises advocated for the emancipation of national minorities and self-determination of communities. In his book Liberalism in the Classic Tradition, von Mises drew from his observation of the Ukrainian peasants bound to the land by predominantly Polish and German owners to advocate for broad freedoms. He wrote: “Liberalism does not acknowledge the historical right of a prince to inherit a province. A king can rule, in the liberal sense, only over persons and not over a certain piece of land, of which the inhabitants are viewed as mere appendages.”
In Liberalism in the Classic Tradition, von Mises wrote: “Community of language binds members of the same nationality close together, while linguistic diversity gives rise to a gulf between nations.” He described the importance of local autonomy of his native Kingdom of Galicia and Lodomeria under the Austrian monarchy in preserving the Ukrainian language as a necessary prerequisite for subsequent national independence. In Nation, State, Economy, he wrote:
“If Ukraine had not lost its political independence in the seventeenth century to the Great Russian state of the Czars, then a separate Ukrainian standard language would probably have developed. If all Ukrainians, including those in Galicia, Bukovina, and upper Hungary, had come under the rule of the Czars as late as the first half of the nineteenth century, then this might not have hindered the development of a separate Ukrainian literature; but this literature would probably have assumed a position in relation to Great Russian no different from that of Plattdeutsch writings in relation to German. It would have remained dialect poetry without particular cultural and political pretensions. However, the circumstance that several million Ukrainians were under Austrian rule and were also religiously independent of Russia created the preconditions for the formation of a separate Ruthenian standard language…
“The Ukrainian movement in Galicia, then, significantly furthered, at least, the separatist strivings of the Ukrainians in South Russia and perhaps even breathed life into them. The most recent political and social upheavals have furthered South Russian Ukrainianism so much that it is not entirely impossible that it can no longer be overcome by Great Russianism. But that is no ethnographic or linguistic problem. Not the degree of relationship of languages and races will decide whether the Ukrainian or the Russian language will win out but rather political, economic, religious, and general cultural circumstances. It is easily possible for that reason that the final outcome will be different in the former Austrian and Hungarian parts of the Ukraine than in the part that has long been Russian.”
In this way, Austrian Galicia kept alive the dream of Ukrainian statehood. Without this, there would likely be no independent Ukraine today. For this reason, von Mises’ native Lviv, while on the periphery of modern Ukraine, is regarded as the capital of Ukrainian culture. The freedom from both Russian and Polish oppression during the Austrian period allowed Ukrainian culture to flourish.
Von Mises on Russia
Having fought to protect Ukrainians against the Russians in Galicia and having observed the devastation posed by Russian and Soviet ideology firsthand, Ludwig von Mises identified the threats to humanity and social cooperation posed by the Russian nation. In 1927, he wrote in his book Liberalismus, later translated into English as Liberalism in the Classical Tradition:
“Today there is only one great nation that steadfastly adheres to the militaristic ideal, the Russians. Ever since Russia was first in a position to exercise an influence on European politics, it has continually behaved like a robber who lies in wait for the moment when he can pounce upon his victim and plunder him of his possessions. At no time did the Russian Czars acknowledge any other limits to the expansion of their empire than those dictated by the force of circumstances. The position of the Bolsheviks in regard to the problem of the territorial expansion of their dominions is not a whit different…
“What we maintain is only that [Russians] do not wish to enter into the scheme of human social cooperation. In relation to human society and the community of nations their position is that of a people intent on nothing but the consumption of what others have accumulated. People among whom the ideas of Dostoyevsky, Tolstoy, and Lenin are a living force cannot produce a lasting social organization. They must revert to a condition of complete barbarism. Russia is endowed far more richly by nature with fertility of soil and mineral resources of all kinds than is the United States. If the Russians had pursued the same capitalistic policy as the Americans, they would today be the richest people in the world. Despotism, imperialism, and Bolshevism have made them the poorest. Now they are seeking capital and credits from all over the world.”
“It clearly follows what must be the guiding principle of the policy of the civilized nations toward Russia…Do not let them pass beyond the boundaries of their own land to destroy European civilization…Russia [is] the land of mass murder and mass misery…
“The governments of Europe and America must stop promoting Soviet destructionism by paying premiums for exports to Soviet Russia and thereby furthering the Russian Soviet system by financial contributions. Let them stop propagandizing for emigration and the export of capital to Soviet Russia…The only thing that needs to be resisted is any tendency on our part to support or promote the destructionist policy of the Soviets.”
Ludwig von Mises. Liberalism in the Classic Tradition, Third Edition. Translated by Ralph Raico. New York: Foundation for Economic Education, 1985. pp. 151-153. German original, 1927.
Classical Liberal, not Libertarian
One of the great disservices to Ludwig von Mises’ legacy has been its attempted hijacking by the libertarian political movement, appropriating the von Mises name while advocating ideologies he opposed. Von Mises was not a libertarian, but a classical liberal as he explained in his book, Liberalism in the Classic Tradition. He explicitly rejected many precepts of libertarianism.
Much of the confusion has arisen from the so-called Mises Institute, a libertarian organization which Ludwig von Mises never authorized or endorsed. The Institute was founded in 1982, nine years after von Mises’ death, not by proponents of Mises’ ideas, but by Lew Rockwell, a political operative who was chief of staff to Republican Congressman Ron Paul.
When von Mises' widow Margot was approached about the proposed organization, she told Rockwell: “I know you‘re just interested in my name, you‘re not interested in anything else.” She reluctantly gave permission when assured this was not the case, and helped to republish some of von Mises’ books. Yet her prescience proved true. The von Mises name was little more than lip service for an organization which advocated ideas radically at odds with Ludwig’s. Even the title of his Mises Institute biography, “Mises: The Last Knight of Liberalism,” acknowledges Mises’ role as the “last knight” and that the organization does not principally promulgate classic liberal beliefs.
The Mises Institute recruited Murray Rothbard, an economics student of von Mises who was an ideological competitor. While sharing belief in the principle of liberty and free markets, von Mises and Rothbard could hardly have been more different. Von Mises was widely recognized as the greatest economist of his time, and made numerous contributions to mainstream economics which remain at the core of economic understanding today. Rothbard was a fringe figure within academia who was primarily a political activist and polemicist. His libertarian anarcho-capitalism was an ideological movement not derived primarily from economic scholarship that was squarely rejected by his colleagues within the Austrian School of Economics. Rothbard was cited for his bizarre views, antisemitism and association with Holocaust deniers, opposition to egalitarianism and civil rights, and historical revisionism. Rothbard’s specious accusations without evidence against Adam Smith and other economists led to charges of deliberate dishonesty and alienation of most of his professional colleagues. Commenting on Rothbard’s enthusiasm for the 1960s student radicals, von Mises wrote, “It’s sad to see a brilliant mind go to pot that way.”
Von Mises and Rothbard fundamentally disagreed on basic matters. Von Mises noted the necessity of government for defense, law, protection of person and property, and the preservation of peace. He took pains to clarify that he was not anti-government, but advocated only for understanding the tasks the government could best fulfill to society’s benefit. He wrote:
“If I am of the opinion that it is inexpedient to assign to the government the task of operating railroads, hotels, or mines, I am not an ‘enemy of the state’ any more than I can be called an enemy of sulphuric acid because I am of the opinion that, useful though it may be for many purposes, it is not suitable either for drinking or for washing one’s hands.”
Rothbardian libertarianism and the anarcho-capitalist movement dismiss the need for the state at all, despite von Mises having thoroughly demolished this idea. The year following von Mises’ death, Rothbard and other libertarians attacked his work to reinterpret it in their own ideological framework in The Economics of Ludwig von Mises: Toward a Critical Reappraisal. Rothbard hypothesized that the state would wither away under anarcho-capitalism and that government mechanisms were unnecessary even for defense and security. William Baumgarth, a libertarian political science professor cited by the Mises Institute, advocated anarchism and disputed the need for the state based on personal suppositions without evidence:
“According to Mises, liberalism is necessarily opposed to anarchism…But the logical extension of Mises' defense of liberalism may, in fact, point the way to anarchism…Anarchism need not endorse a belief in man's natural goodness or even a belief in utopian pacifism, as Mises apparently supposed.”
Why indeed is a stateless society impracticable? Von Mises wrote in Liberalism in the Classic Tradition:
“Anarchism misunderstands the real nature of man. It would be practicable only in a world of angels and saints. Liberalism is not anarchism, nor has it anything whatsoever to do with anarchism. The liberal understands quite clearly that without resort to compulsion, the existence of society would be endangered and that behind the rules of conduct whose observance is necessary to assure peaceful human cooperation must stand the threat of force if the whole edifice of society is not to be continually at the mercy of any one of its members. One must be in a position to compel the person who will not respect the lives, health, personal freedom, or private property of others to acquiesce in the rules of life in society. This is the function that the liberal doctrine assigns to the state: the protection of property, liberty, and peace.”
Our concern is with the real world, which von Mises was far more attuned to than Rothbard and Baumgarth. Baumgarth demonstrates the modus operandi of the libertarian movement in claiming von Mises as their patron saint, while cherry-picking convenient citations out of context to arrive at contrary conclusions.
Von Mises debunked chiliasm, a term he applied to metaphysical pseudo-religious claims that various ideological movements would bring about a millennialist utopia, in landmark works which left no intellectual defensibility. Rothbard’s metaphysical assumptions of improved societal outcomes with the withering of the state in his supposed anarcho-utopia despite millennia of contrary experience is not a scientific, but a chiliastic ideology akin to Marx’s assertions of the hyperproductivity of workers in a socialist paradise.
Von Mises expressly rejected the libertarian and anarcho-capitalist movements. The ideologies promulgated by the Mises Institute and Mises Caucus are contrary to his own beliefs and teachings. The libertarian and anarcho-capitalists have advocated many positions expressly repudiated by Ludwig von Mises, and vice versa. They have appropriated von Mises’ name to push their own political agenda and ideology, primarily because von Mises is perceived as a far more credible figure than Rothbard. This is propagandizing, not scholarship. Von Mises found no worthy heir to carry his legacy, and those who have claimed his name are not his disciples.