I have worked on
von Mises distribution long before you even learnt how to work a quadratic equation.
I meant Ludwig von Mises the Austrian economist
Ludwig Heinrich Edler von Mises (1881 – 1973)
One of the most notable economists and social philosophers of the twentieth century, Ludwig von Mises, in the course of a long and highly productive life, developed an integrated, deductive science of economics based on the fundamental axiom that individual human beings act purposively to achieve desired goals. Even though his economic analysis itself was “value-free” — in the sense of being irrelevant to values held by economists — Mises concluded that the only viable economic policy for the human race was a policy of unrestricted laissez-faire, of free markets and the unhampered exercise of the right of private property, with government strictly limited to the defense of person and property within its territorial area.
For Mises was able to demonstrate (a) that the expansion of free markets, the division of labor, and private capital investment is the only possible path to the prosperity and flourishing of the human race; (b) that socialism would be disastrous for a modern economy because the absence of private ownership of land and capital goods prevents any sort of rational pricing, or estimate of costs, and (c) that government intervention, in addition to hampering and crippling the market, would prove counter-productive and cumulative, leading inevitably to socialism unless the entire tissue of interventions was repealed.
Holding these views, and hewing to truth indomitably in the face of a century increasingly devoted to statism and collectivism, Mises became famous for his “intransigence” in insisting on a non-inflationary gold standard and on laissez-faire.
Effectively barred from any paid university post in Austria and later in the United States, Mises pursued his course gallantly. As the chief economic adviser to the Austrian government in the 1920s, Mises was single-handedly able to slow down Austrian inflation; and he developed his own “private seminar” which attracted the outstanding young economists, social scientists, and philosophers throughout Europe. As the founder of the "neo-Austrian School" of economics, Mises’s business cycle theory, which blamed inflation and depressions on inflationary bank credit encouraged by Central Banks, was adopted by most younger economists in England in the early 1930s as the best explanation of the Great Depression.
Having fled the Nazis to the United States, Mises did some of his most important work here. In over two decades of teaching, he inspired an emerging Austrian School in the United States. The year after Mises died in 1973, his most distinguished follower, F.A. Hayek, was awarded the Nobel Prize in economics for his work in elaborating Mises’s business cycle theory during the later 1920s and 1930s.
Mises was born on Sept 29, 1881, in the city of Lemberg (now Lvov) in Galicia, where his father, a Viennese construction engineer working for the Austrian railroads, was then stationed. Both Mises’s father and mother came from prominent Viennese families; his mother’s uncle, Dr Joachim Landau, served as deputy from the Liberal Party in the Austrian Parliament.
Entering the University of Vienna at the turn of the century as a leftist interventionist, the young Mises discovered
Principles of Economics by Carl Menger, the founding work of the Austrian School of economics, and was quickly converted to the Austrian emphasis on individual action rather than unrealistic mechanistic equations as the unit of economics analysis, and to the importance of a free-market economy.
Mises became a prominent post-doctoral student in the famous University of Vienna seminar of the great Austrian economist Eugen von Bohm-Bawerk (among whose many accomplishments was the devastating refutation of the Marxian labor theory of value).
The Mises Institute's coat of arms is that of the Mises family, awarded in 1881 when Ludwig von Mises's great-grandfather Mayer Rachmiel Mises was ennobled by the Emperor Franz Josef I of Austria. In the upper right-hand quadrant is the staff of Mercury, god of commerce and communication (the Mises family was successful in both; they were merchants and bankers). In the lower left-hand quadrant is a representation of the Ten Commandments. Mayer Rachmiel, as well as his father, presided over various Jewish cultural organizations in Lemberg, the city where Ludwig was born. The red banner displays the Rose of Sharon, which in the litany is one of the names given to the Blessed Mother, as well as the Stars of the Royal House of David, a symbol of the Jewish people. Ludwig's lifelong motto was from Virgil:
tu ne cede malis, sed contra audentior ito. Here is a full view.
During this period, in his first great work, The
Theory of Money and Credit (1912) Mises performed what had been deemed an impossible task: to integrate the theory of money into the general theory of marginal utility and price (what would now be called integrating “macroeconomics” into “microeconomics.”) Since Bohm-Bawerk and his other Austrian colleagues did not accept Mises’s integration and remained without a monetary theory, he was therefore obliged to strike out on his own and found a “neo-Austrian” school.
In his monetary theory, Mises revived the long forgotten British Currency School principle, prominent until the 1850s, that society does not at all benefit from any increase in the money supply, that increased money and bank credit only causes inflation and business cycles, and that therefore government policy should maintain the equivalent of a 100 percent gold standard.
Mises added to this insight the elements of his business cycle theory: that credit expansion by the banks, in addition to causing inflation, makes depressions inevitable by causing “malinvestment,” i.e. by inducing businessmen to overinvest in “higher orders” of capital goods (machine tools, construction, etc.) and to underinvest in consumer goods.
The problem is that inflationary bank credit, when loaned to business, masquerades as pseudo-savings, and makes businessmen believe that there are more savings available to invest in capital goods production than consumers are genuinely willing to save. Hence, an inflationary boom requires a recession which becomes a painful but necessary process by which the market liquidates unsound investments and reestablishes the investment and production structure that best satisfies consumer preferences and demands.
Mises, and his follower Hayek, developed this cycle theory during the 1920s, on the basis of which Mises was able to warn an unheeding world that the widely trumpeted “New Era” of permanent prosperity of the 192Os was a sham, and that its inevitable result would be bank panic and depression. When Hayek was invited to teach at the London School of Economics in 1931 by an influential former student at Mises’s private seminar, Lionel Robbins, Hayek was able to convert most of the younger English economists to this perspective. On a collision course with John Maynard Keynes and his disciples at Cambridge, Hayek demolished Keynes’s Treatise on Money, but lost the battle and most of his followers to the tidal wave of the Keynesian Revolution that swept the economic world after the publication of Keynes’s
General Theory in 1936.
The policy prescriptions for business cycles of Mises-Hayek and of Keynes were diametrically opposed. During a boom period, Mises counseled the immediate end of all bank credit and monetary expansion; and, during a recession, he advised strict laissez-faire, allowing the readjustment forces of the recession to work themselves out as rapidly as possible.
Not only that: for Mises the worst form of intervention would be to prop up prices or wage rates, causing unemployment, to increase the money supply, or to boost government spending in order to stimulate consumption. For Mises, the recession was a problem of under-saving, and over-consumption, and it was therefore important to encourage savings and thrift rather than the opposite, to cut government spending rather than increase it. It is clear that, from 1936 on Mises was totally in opposition to the worldwide fashion in macroeconomic policy.
Socialism-communism had triumphed in Russia and in much of Europe during and after World War I, and Mises was moved to publish his famous article, “Economic Calculation in the Socialist Commonwealth,” (1920) in which he demonstrated that it would be impossible for a socialist planning board to plan a modern economic system; furthermore, no attempt at artificial “markets” would work, since a genuine pricing and costing system requires an exchange of property titles, and therefore private property in the means of production.
Mises developed the article into his book
Socialism(1922), a comprehensive philosophical and sociological, as well as economic critique which still stands as the most thorough and devastating demolition of socialism ever written. Mises’s Socialism converted many prominent economists and social philosophers out of socialism, including Hayek, the German Wilhelm Ropke, and the Englishman Lionel Robbins.
In the United States, the publication of the English translation of
Socialism in 1936 attracted the admiration of the prominent economic journalist Henry Hazlitt, who reviewed it in the New York Times, and converted one of America’s most prominent and learned Communist fellow-travelers of the period, J.B. Matthews, to a Misesian position and to opposition to all forms of socialism.
Socialists throughout Europe and the United States worried about the problem of economic calculation under socialism for about fifteen years, finally pronouncing the problem solved with the promulgation of the “market socialism” model of the Polish economist Oskar Lange in 1936. Lange returned to Poland after World War II to help plan Polish Communism. The collapse of socialist planning, in Poland and the other Communist countries in 1989, left Establishment economists across the ideological spectrum, all of whom bought the Lange “solution”, mightily embarrassed.
Some prominent socialists, such as Robert Heilbroner, have had the grace to admit publicly that “Mises was right” all along (the phrase “Mises was Right” was the title of a panel at the annual 1990 meeting of the Southern Economic Association at New Orleans).
If socialism was an economic catastrophe, government intervention could not work, and would tend to lead inevitably to socialism. Mises elaborated these insights in his Critique of
Interventionism (1929), and set forth his political philosophy of laissez-faire liberalism in his
Liberalism (1927).
In adition to setting himself against all the political trends of the twentieth century, Mises combated with equal fervor and eloquence what he considered the disastrous dominant philosophical and methodological trends, in economics and other disciplines. These included positivism, relativism, historicism, polylogism” the idea that each race and gender has its own “logic” and therefore cannot communicate with other groups), and all forms of irrationalism and denial of objective truth. Mises also developed what he considered to be the proper methodology of economic theory--logical deduction from evident axioms, which he labeled “praxeology”, and he leveled trenchant critiques of the growing tendency in economics and other disciplines to replace praxeology and historical understanding by unrealistic mathematical models and statistical manipulations.
Emigrating to the United States in 1940, Mises’s first two books in English were important and influential. His
Omnipotent Government (1944) was the first book to challenge the then-standard Marxian view that fascism and Nazism were imposed upon their nations by big business and the “capitalist class.” His Bureaucracy (1944) was a still unsurpassed analysis of why government operation must necessarily be “bureaucratic” and suffer from all the ills of bureaucracy.
Mises’s most monumental achievement was his
Human Action (1949), the first comprehensive treatise on economic theory written since the first World War. Here Mises took up the challenge of his own methodology and research program and elaborated an integrated and massive structure of economic theory on his own deductive, “praxeological” principles. Published in an era when economists and governments generally were totally dedicated to statism and Keynesian inflation, Human Action was unread by the economics profession. Finally, in 1957 Mises published his last major work,
Theory and History, which, in addition to refutations of Marxism and historicism, set forth the basic differences and functions of theory and of history in economics as well as all the various disciplines of human action.
In the United States as in his native Austria, Mises could not find a paid post in academia. New York University, where he taught from until 1945 until his retirement at the age of 88 in 1969, would only designate him as Visiting Professor, and his salary had to be paid by the conservative-libertarian William Volker Fund until 1962, and after that by a consortium of free-market foundations and businessmen. Despite the unfavorable climate, Mises inspired a growing group of students and admirers, cheerfully encouraged their scholarship, and himself continued his remarkable productivity.
Mises was also sustained by and worked together with free-market and libertarian admirers. From its origin in 1946 until his death, Mises was a part-time staff member of the Foundation for Economic Education at Irvington-on-Hudson, New York; and he was in the 1950s an economic advisor to the National Association of Manufacturers (NAM) working with their laissez-faire wing which finally lost out to the tide of “enlightened” statism.
As a free trader and a classical liberal in the tradition of Cobden, Bright, and Spencer, Mises was a libertarian who championed reason and individual liberty in personal as well as economic matters. As a rationalist and an opponent of statism in all its forms, Mises would never call himself a “conservative,” but rather a liberal in the nineteenth-century sense.
Indeed, Mises was politically a laissez-faire radical, who denounced tariffs, immigration restrictions, or governmental attempts to enforce morality. On the other hand, Mises was a staunch cultural and sociological conservative, who attacked egalitarianism, strongly denounced political feminism as a facet of socialism. In contrast to many conservative critics of capitalism, Mises held that personal morality and the nuclear family were both essential to, and fostered by, a system of free-market capitalism.
Mises’s influence was remarkable, considering the unpopularity of his epistemological and political views. His students of the 1920s, even those who later became Keynesians, were permanently stamped by a visible Misesian influence. These students included, in addition to Hayek and Robbins, Fritz Machlup, Gottfried von Haberler, Oskar Morgenstern, Alfred Schutz, Hugh Gaitskell, Howard S. Ellis, John Van Sickle, and Erich Voegelin.
In France, General DeGaulle’s major economic and monetary adviser, who helped swing France away from socialism, was Jacques Rueff, an old-friend and admirer of Mises. And part of post-World War II Italy’s shift away from socialism was due to its President Luigi Einaudi, a distinguished economist and long-time friend and free-market colleague of Mises. In the United States, Mises was scarcely as influential. Under less promising academic conditions, his students and admirers included Henry Hazlitt, Lawrence Fertig, Percy Greaves, Jr., Bettina Bien Graeves, Hans F. Sennholz, William H. Peterson, Louis M. Spadaro, Israel M. Kirzner, Ralph Raico, George Reisman, and Murray N. Rothbard. But Mises was able to build a remarkably strong and loyal following among businessmen and other non-academics; his massive and complex Human Action has sold extraordinarily well ever since the year of its original publication.
Since Mises’s death in New York City on October 10, 1973 at the age of 92, Misesian doctrine and influence has experienced a renaissance. The following year saw not only Hayek’s Nobel Prize for Misesian cycle theory, but also the first of many Austrian School conferences in the United States. Books by Mises have been reprinted and collections of his articles translated and published. Courses and programs in Austrian Economics have been taught and established throughout the country.
Taking the lead in this revival of Mises and in the study and expansion of Misesian doctrine has been the Ludwig von Mises Institute, founded by Llewellyn Rockwell, Jr. in 1982 and headquartered in Auburn, Alabama. The Mises Institute publishes scholarly journals and books, and offers courses in elementary, intermediate and advanced Austrian economics, which attract increasing numbers of students and professors. Undoubtedly, the collapse of socialism and the increased attractiveness of the free market have greatly contributed to this upsurge of popularity.
What is Austrian Economics?
The story of the Austrian School begins in the fifteenth century, when the followers of St. Thomas Aquinas, writing and teaching at the University of Salamanca in Spain, sought to explain the full range of human action and social organization.
These Late Scholastics observed the existence of economic law, inexorable forces of cause and effect that operate very much as other natural laws. Over the course of several generations, they discovered and explained the laws of supply and demand, the cause of inflation, the operation of foreign exchange rates, and the subjective nature of economic value—all reasons Joseph Schumpeter celebrated them as the first real economists.
The Late Scholastics were advocates of property rights and the freedom to contract and trade. They celebrated the contribution of business to society, while doggedly opposing taxes, price controls, and regulations that inhibited enterprise. As moral theologians, they urged governments to obey ethical strictures against theft and murder. And they lived up to Ludwig von Mises's rule: the first job of an economist is to tell governments what they cannot do.
The first general treatise on economics,
Essay on the Nature of Commerce, was written in 1730 by Richard Cantillon, a man schooled in the scholastic tradition. Born in Ireland, he emigrated to France. He saw economics as an independent area of investigation, and explained the formation of prices using the "thought experiment." He understood the market as an entrepreneurial process, and held to an Austrian theory of money creation: that it enters the economy in a step-by-step fashion, disrupting prices along the way.
Cantillon was followed by Anne Robert Jacques Turgot, the pro-market French aristocrat and finance minister under the
ancien regime. His economic writings were few but profound. His paper "Value and Money" spelled out the origins of money, and the nature of economic choice: that it reflects the subjective rankings of an individual's preferences. Turgot solved the famous diamond-water paradox that baffled later classical economists, articulated the law of diminishing returns, and criticized usury laws (a sticking point with the Late Scholastics). He favored a classical liberal approach to economic policy, recommending a repeal of all special privileges granted to government-connected industries.
Turgot was the intellectual father of a long line of great French economists of the eighteenth and nineteenth century, most prominently Jean Baptiste Say and Claude-Frederic Bastiat. Say was the first economist to think deeply about economic method. He realized that economics is not about the amassing of data, but rather about the verbal elucidation of universal facts (for example, wants are unlimited, means are scarce) and their logical implications.
Say discovered the productivity theory of resource pricing, the role of capital in the division of labor, and "Say's Law": there can never be sustained "overproduction" or "underconsumption" on the free market if prices are allowed to adjust. He was a defender of laissez-faire and the industrial revolution, as was Bastiat. As a free-market journalist, Bastiat also argued that nonmaterial services are subject to the same economic laws as material goods. In one of his many economic allegories, Bastiat spelled out the "broken-window fallacy" later popularized by Henry Hazlitt.
Despite the theoretical sophistication of this developing pre-Austrian tradition, the British school of the late eighteenth and early nineteenth centuries won the day, mostly for political reasons. This British tradition (based on the objective-cost and labor-productivity theory of value) ultimately led to the rise of the Marxist doctrine of capitalist exploitation.
The dominant British tradition received its first serious challenge in many years when Carl Menger's
Principles of Economics was published in 1871. Menger, the founder of the Austrian School proper, resurrected the Scholastic-French approach to economics, and put it on firmer ground.
Together with the contemporaneous writings of Leon Walras and Stanley Jevons, Menger spelled out the subjective basis of economic value, and fully explained, for the first time, the theory of marginal utility (the greater the number of units of a good that an individual possesses, the less he will value any given unit). In addition, Menger showed how money originates in a free market when the most marketable commodity is desired, not for consumption, but for use in trading for other goods.
Menger's book was a pillar of the "marginalist revolution" in the history of economic science. When Mises said it "made an economist" out of him, he was not only referring to Menger's theory of money and prices, but also his approach to the discipline itself. Like his predecessors in the tradition, Menger was a classical liberal and methodological individualist, viewing economics as the science of individual choice. His
Investigations, which came out twelve years later, battled the German Historical School, which rejected theory and saw economics as the accumulation of data in service of the state.
As professor of economics at the University of Vienna, and then tutor to the young but ill-fated Crown Prince Rudolf of the House of Habsburg, Menger restored economics as the science of human action based on deductive logic, and prepared the way for later theorists to counter the influence of socialist thought. Indeed, his student Friederich von Wieser strongly influenced Friedrich von Hayek's later writings. Menger's work remains an excellent introduction to the economic way of thinking. At some level, every Austrian since has seen himself as a student of Menger.
Menger's admirer and follower at the University of Innsbruck, Eugen Böhm-Bawerk, took Menger's exposition, reformulated it, and applied it to a host of new problems involving value, price, capital, and interest. His
History and Critique of Interest Theories, appearing in 1884, is a sweeping account of fallacies in the history of thought and a firm defense of the idea that the interest rate is not an artificial construct but an inherent part of the market. It reflects the universal fact of "time preference," the tendency of people to prefer satisfaction of wants sooner rather than later (a theory later expanded and defended by Frank Fetter).
Böhm-Bawerk's
Positive Theory of Capital demonstrated that the normal rate of business profit is the interest rate. Capitalists save money, pay laborers, and wait until the final product is sold to receive profit. In addition, he demonstrated that capital is not homogeneous but an intricate and diverse structure that has a time dimension. A growing economy is not just a consequence of increased capital investment, but also of longer and longer processes of production.
Böhm-Bawerk engaged in a prolonged battle with the Marxists over the exploitation theory of capital, and refuted the socialist doctrine of capital and wages long before the communists came to power in Russia. Boehm-Bawerk also conducted a seminar that would later become the model for Mises's own Vienna seminar.
Böhm-Bawerk favored policies that deferred to the ever-present reality of economic law. He regarded interventionism as an attack on market economic forces that cannot succeed in the long run. In the last years of the Habsburg monarchy, he three times served as finance minister, fighting for balanced budgets, sound money and the gold standard, free trade, and the repeal of export subsidies and other monopoly privileges.
It was his research and writing that solidified the status of the Austrian School as a unified way of looking at economic problems, and set the stage for the School to make huge inroads in the English-speaking world. But one area where Böhm-Bawerk had not elaborated on the analysis of Menger was money, the institutional intersection of the "micro" and "macro" approach. A young Ludwig von Mises, economic advisor to the Austrian Chamber of Commerce, took on the challenge.
The result of Mises's research was
The Theory of Money and Credit, published in 1912. He spelled out how the theory of marginal utility applies to money, and laid out his "regression theorem," showing that money not only originates in the market, but must always do so. Drawing on the British Currency School, Knut Wicksell's theory of interest rates, and Böhm-Bawerk's theory of the structure of production, Mises presented the broad outline of the Austrian theory of the business cycle. A year later, Mises was appointed to the faculty of the University of Vienna, and Böhm-Bawerk's seminar spent a full two semesters debating Mises's book.
Mises's career was interrupted for four years by World War I. He spent three of those years as an artillery officer, and one as a staff officer in economic intelligence. At war's end, he published
Nation, State, and Economy (1919), arguing on behalf of the economic and cultural freedoms of minorities in the now-shattered empire, and spelling out a theory of the economics of war. Meanwhile, Mises's monetary theory received attention in the U.S. through the work of Benjamin M. Anderson, Jr., an economist at Chase National Bank. (Mises's book was panned by John Maynard Keynes, who later admitted he could not read German.)
In the political chaos after the war, the main theoretician of the now-socialist Austrian government was Marxist Otto Bauer. Knowing Bauer from the Böhm-Bawerk seminar, Mises explained economics to him night after night, eventually convincing him to back away from Bolshevik-style policies. The Austrian socialists never forgave Mises for this, waging war against him in academic politics and successfully preventing him from getting a paid professorship at the university.
Undeterred, Mises turned to the problem of socialism itself, writing a blockbuster essay in 1921, which he turned into the book
Socialism over the next two years. Socialism permits no private property or exchange in capital goods, and thus no way for resources to find their most highly valued use. Socialism, Mises predicted, would result in utter chaos and the end of civilization.
Mises challenged the socialists to explain, in economic terms, precisely how their system would work, a task which the socialists had heretofore avoided. The debate between the Austrians and the socialists continued for the next decade and beyond, and, until the collapse of world socialism in 1989, academics had long thought that the debate was resolved in favor of the socialists.
Meanwhile, Mises's arguments on behalf of the free market attracted a group of converts from the socialist cause, including Hayek, Wilhelm Röpke, and Lionel Robbins. Mises began holding a private seminar in his offices at the Chamber of Commerce that was attended by Fritz Machlup, Oskar Morgenstern, Gottfried von Haberler, Alfred Schutz, Richard von Strigl, Eric Voegelin, Paul Rosenstein-Rodan, and many other intellectuals from all over Europe.
Also during the 1920s and 30s, Mises was battling on two other academic fronts. He delivered the decisive blow to the German Historical School with a series of essays in defense of the deductive method in economics, which he would later call praxeology or the logic of action. He also founded the Austrian Institute for Business Cycle Research, and put his student Hayek in charge of it.
During these years, Hayek and Mises authored many studies on the business cycle, warned of the danger of credit expansion, and predicted the coming currency crisis. This work was cited by the Nobel Prize committee in 1974 when Hayek received the award for economics. Working in England and America, Hayek later became a prime opponent of Keynesian economics with books on exchange rates, capital theory, and monetary reform. His popular book
Road to Serfdom helped revive the classical liberal movement in America after the New Deal and World War II. And his series
Law, Legislation, and Liberty elaborated on the Late Scholastic approach to law, and applied it to criticize egalitarianism and nostrums like social justice.
In the late 1930s, after suffering from the worldwide depression, Austria was threatened by a Nazi takeover. Hayek had already left for London in 1931 at Mises's urging, and in 1934, Mises himself moved to Geneva to teach and write at the International Institute for Graduate Studies, later emigrating to the United States. Knowing Mises as the sworn enemy of national socialism, the Nazis confiscated Mises's papers from his apartment and hid them for the duration of the war. Ironically, it was Mises's ideas, filtered through the work of Roepke and the statesmanship of Ludwig Erhard, that led to Germany's postwar economic reforms and rebuilt the country. Then, in 1992, Austrian archivists discovered Mises's stolen Vienna papers in a reopened archive in Moscow.
While in Geneva, Mises's wrote his masterwork,
Nationalokonomie, and, after coming to the United States, revised and expanded it into
Human Action, which appeared in 1949. His student Murray N. Rothbard called it "Mises's greatest achievement and one of the finest products of the human mind in our century. It is economics made whole." The appearance of this work was the hinge of the whole history of the Austrian School, and it remains the economic treatise that defines the School. Even so, it was not well received in the economics profession, which had already made a decisive turn towards Keynesian.
Though Mises never held the paid academic post he deserved, he gathered students around him at New York University, just as he had in Vienna. Even before Mises emigrated, journalist Henry Hazlitt had become his most prominent champion, reviewing his books in the
New York Times and
Newsweek, and popularizing his ideas in such classics as
Economics in One Lesson. Yet Hazlitt made his own contributions to the Austrian School. He wrote a line-by-line critique of Keynes's
General Theory, defended the writings of Say, and restored him to a central place in Austrian macroeconomic theory. Hazlitt followed Mises's example of intransigent adherence to principle, and as a result was pushed out of four high-profile positions in the journalistic world.
Mises's New York seminar continued until two years before his death in 1973. During those years, Rothbard was his student. Indeed, Rothbard's
Man, Economy, and State (1963) was patterned after
Human Action, and in some areas—monopoly theory, utility and welfare, and the theory of the state—tightened and strengthened Mises's own views. Rothbard's approach to the Austrian School followed directly in the line of Late Scholastic thought by applying economic science within a framework of a natural-rights theory of property. What resulted was a full-fledged defense of a capitalistic and stateless social order, based on property and freedom of association and contract.
Rothbard followed his economic treatise with an investigation of the great depression, which applied Austrian business cycle theory to show that the stock market crash and economic downturn was attributable to a prior bank credit expansion. Then in a series of studies on government policy, he established the theoretical framework for examining the effects of all types of intervention in the market.
In his later years, Mises saw the beginnings of the revival of the Austrian School that dates from the appearance of
Man, Economy, and State and continues to this day. It was Rothbard who firmly established the Austrian School and classical liberal doctrine in the U.S., especially with
Conceived in Liberty, his four-volume history of colonial America and the secession from Britain. The reunion of natural-rights theory and the Austrian School came in his philosophical work,
The Ethics of Liberty, all while he was writing a series of scholarly economic pieces gathered in the two-volume
Logic of Action, published in Edward Elgar's "Economists of the Century" series.
These seminal works serve as the crucial link between the Mises-Hayek generation and the Austrians now working to expand the tradition. Indeed, without Rothbard's willingness to defy the intellectual trends of his time, progress in the Austrian School tradition might have come to a halt. As it was, his wide and deep scholarship, cheerful personality, encyclopedic knowledge, and optimistic outlook inspired countless students to turn their attention to the cause of liberty.
Though Austrians are now in a more prominent position than at any point since the 1930s, Rothbard, like Mises before him, was not well treated by academia. Although he held a chair in his later years at the University of Nevada, Las Vegas, he never taught in a capacity that permitted him to direct dissertations. Nonetheless, he managed to recruit a large, active, and interdisciplinary following for the Austrian School.
The founding of the Mises Institute in 1982, with the aid of Margit von Mises as well as Hayek and Hazlitt, provided a range of new opportunities for both Rothbard and the Austrian School. Through a steady stream of academic conferences, instructional seminars, books, monographs, newsletters, studies, and even films, Rothbard and the Institute carried the Austrian School forward into the post-socialist age.
The first issue of the Rothbard-edited
Review of Austrian Economics appeared in 1987, became a semiannual in 1991, and becomes a quarterly in 1998,
The Quarterly Journal of Austrian Economics. The Mises Institute's instructional summer school has been held every year since 1984. For many of these years, Rothbard presented his research into the history of economic thought. This culminated in his two-volume
An Austrian Perspective on the History of Economic Thought, which broadens the history of the discipline to encompass centuries of writing.
Through the Mises Institute's student fellowships, study guides, bibliographies, and conferences, the Austrian School has permeated, at some level, virtually every department of economics and the social sciences in America, and in many foreign countries as well.
The fascinating history of this great body of thought, through all its ebbs and flows, is the story of how great minds can advance science and oppose evil with creativity and courage. Now the Austrian School enters a new millennium as the intellectual standard bearer for the free society. That it does so is thanks to the heroic and brilliant minds that make up the family history of the School, and to those who are carrying that legacy forward with the Mises Institute.
