Epilogue

If ever it could be said that one man stood against the ideological tide of an era, that was von Mises. But whether his efforts have turned that tide is a question to be resolved in the future by those who understand his theories and share his love of liberty.¹

LUDWIG VON MISES WAS the “last knight of liberalism” but to think of him as a political thinker only is to underestimate his place in the history of ideas. He pioneered the integration of monetary theory into value theory (macro- and microeconomics), the theory of economic calculation, and the inquiry into the a priori foundations of economic science. Even more than that, he excelled as a systematic thinker. He created a comprehensive system of economic theory and also highlighted the place of economics among the sciences and its role within human civilization. More than any other economist before or after him, he has clarified its political, social, and cultural implications. Economics was not merely the foundation of a comprehensive political program centered on private property rights; it was the scientific cornerstone of an entire worldview in which peace, cooperation, and tolerance reigned supreme.

As he saw it, opting for a free society did not demand coldheartedness or mistrusting the intellect. It was the type of society that was demonstrably best at promoting the material, cultural, and spiritual well-being of the overwhelming majority of mankind—of all those who did not aspire to live off spoliation. Human reason, despite its limitations, was the most precious tool in man's pursuit of happiness; and it led straight to the case for classical liberalism and the market economy. Other thinkers, most notably F.A. Hayek, had criticized socialism and statism as the fruit of excessive rationalism. For Mises, the planning state and the interventionist state were not reasonable enough. Their intellectual champions were quite simply wrong on the essential questions. But rather than admitting the case for liberty and capitalism, these advocates spent their time finding ever new justifications for government interventionism—by contesting the very existence of economic laws if necessary. This was not so much an intellectual hubris as it was a moral one. It was not, above all, an empty pretense of knowledge. It was a “revolt against reason.”²

The chief contribution of Human Action is to make this point. Ever since its first publication in 1949, Mises's magnum opus has remained for our time what the Enquiry into the Nature and Causes of the Wealth of Nations was for the eighteenth and nineteenth centuries: a handbook of the science of human liberty, a treatise of the scientific foundations underpinning political liberalism. Just as Adam Smith's work was based on comprehensive acquaintance with the economic knowledge of his day, Human Action portrays the grammar of modern economics. The foundation of “modern” economic thought is the theory of subjective value, developed by Menger and others. Mises complemented this theory by a general theory of economic calculation. Its central idea is that economic rationality is logically and historically contingent. Contradicting on this point all economic literature since Adam Smith—as well as fellow Austrians including Wieser and Hayek—Mises stressed that calculation in terms of money prices is not just one form of economic calculus; it is the only type of economic calculus there is.

It follows that human civilization is the fragile fruit of certain cultural conditions that are necessary for the emergence of money and monetary calculus. Here economics comes again into play. Learning, developing, and spreading the teachings of economic science has brought about an unheard-of increase of living standards after the eighteenth century, along with the cultural achievements of a great number of people who then became affluent enough to dedicate their lives to the arts and the sciences. To preserve these cultural standards it is necessary not to lose sight of their economic foundations. It is necessary to learn economics. Mises stresses: “This is, in our age, the primary civic duty.”³ And he insists that the matter is too important to be entrusted to public education and government experts:

Economics must not be relegated to classrooms and statistical offices and must not be left to esoteric circles. It is the philosophy of human life and action and concerns everybody and everything. It is the pith of civilization and of man's human existence.⁴

In the concluding chapters of his magnum opus he emphasized the importance of private education. It was an important lesson he had learned firsthand in his long life: government sponsorship introduces a pro-government bias into economic education and economic research, thus undermining the social function of economic science. He concluded Human Action with this statement:

The body of economic knowledge is an essential element in the structure of human civilization; it is the foundation upon which modern industrialism and all the moral, intellectual, technological, and therapeutic achievements of the last centuries have been built. It rests with men whether they will make the proper use of the rich treasure with which this knowledge provides them or whether they will leave it unused. But if they fail to take the best advantage of it and disregard its teachings and warnings, they will not annul economics; they will stamp out society and the human race.⁵

When he wrote these lines, Mises could look back on a lifetime invested in the development of economics. Little by little he had come to realize that this discipline was the intellectual foundation of modern civilization and that all people who care about other people and the progress of human civilization had to become acquainted with it. This was not a conviction he had adopted in youthful exuberance when he first came across the writings of Menger and the classical economists. It was an opinion that grew in him, even after he had already reached a fairly advanced age. The passage just quoted is from Human Action. Nine years earlier, in Nationalökonomie, Mises could not bring himself to assign to economics quite such an elevated place. But then he was only fifty-eight years old.

By “economics” Mises meant the science that came from classical figures such as Hume, Smith, Ricardo, Say, and Bastiat; that had been transformed by Menger and others in the light of the new subjective value theory; which had further been transformed by Mises and others in the twentieth century; and which Mises expected to be transformed ever further by future generations. It was the science that analyzed the logical implications of human action dealing with scarce goods. It was the science that demonstrated, again and again, that government interventionism could not work miracles, but was bound by inexorable laws of cause and effect.

This science came to be supplanted in the course of the twentieth century, and in particular after World War II, by a new discipline that, while being taught under the same name as the old economics, set out to apply the methods of the natural sciences to elucidate phenomena such as prices, income, unemployment, inflation, and growth. Mises digested the challenges that the various strands of this new discipline raised for the old economics. When he published Human Action, then, it was not merely a summary of his own previous works, but a new synthesis, developed in critical response, not only to historicism and Marxism, but also to positivism, experimental psychology, and game theory—disciplines that still dominate the social sciences in our day. Ironically, the very success of the ideas that Mises combated in a lonely struggle more than thirty years ago now make for the lasting importance of his own system of thought.

Misesian economics is today a strong and fast-growing paradigm, as witnessed by the number of publications that elaborate where he left off, as well as by the increasing attention paid to this paradigm in textbooks on contemporary and historical economic thought. The most surprising aspect of this growth is that it has virtually no institutional backing. Mises himself turned politically incorrect at an early stage of his career and later on he fell even more out of fashion due to his epistemological views. The colleges and universities shunned him. The political parties in power did not listen and were certainly glad that nobody else seemed to do so either. Mises enjoyed some personal backing by private foundations, most notably the Volker Fund and the Earhart Foundation. After his death, his legacy was promoted actively by the Ludwig von Mises Institute in Alabama. But these few and financially insignificant institutions had a hard time competing with organizations that bore the stamp of official (government) approval. It was and still is an uphill battle.

Thus the main explanation of the present-day growth of the Misesian paradigm is the extraordinary vigor of the ideas that inspire it. Mises is a classic, but in our day he is more than that. A classic author has given mankind a timeless formulation of essential questions and, sometimes, time-tested answers. Yet these questions and answers are not necessarily the ones that move us today or are relevant to solve the problems that we confront. Not so in the case of Mises. More than thirty years after his death his writings still strike the reader, academic and layman alike, as relevant and thought provoking. His books and articles are still bought by the thousands each year and—most of all—read. How many economics students today actually read something Adam Smith or David Ricardo have written? Any teacher of economics knows the answer. The same answer holds true for the writings of twentieth-century luminaries such as Gustav Cassel or Frank Knight. It holds true even for the writings of John Maynard Keynes; the greatest champion ever of interventionism is constantly referred to in the classroom and in the media, but few people have ever held one of his books in their hands. In contrast, Mises is still read and studied attentively all over the world, second only to the fashionable textbook authors of our day.

What is it that makes for this continued relevance? Looking back, at the end of this volume on the life and work of Mises, many plausible answers could be given to this question. One could single out a substantial number of path-breaking contributions in various fields of economic analysis. One could refer to his personal virtues entailing admiration and inspiration on the part of many close associates. But we would like to stress another consideration, an aspect of overriding importance that helps explain both the fascination of his work and his place in the history of thought: realist epistemology. Mises's work stands for the idea or hypothesis that some aspects of social reality cannot be adequately analyzed with the methods used in the natural sciences and in historical investigation. Yet this layer of the social world can be described with praxeology and economics. There are time-invariant causes and effects in human action. Praxeology is the descriptive knowledge of these causes and effects. It was this idea that attracted Mises to Menger and that turned him into an economist once he convinced himself that Menger was on to something. It is the same idea that still attracts people to Mises's writings as a radical alternative to the great number of contemporary approaches that, while discarding the realist hypothesis from the outset, seem to fail to deliver the goods.

Whoever wishes to engage in the analysis of the causes and effects that prevail in the social world would do well to start with Mises, unless he wishes to go even further back and find his own way from the classical economists or from the School of Salamanca. As things stand today, Mises's writings provide the only continuous link between modern economic thought and the long tradition of realist social analysis that reaches back to Nicolas Oresme in the fourteenth century.

This is not to say, of course, that the Misesian paradigm defines some sort of perfection in the social sciences. But it has given us the most recent system of social thought from a realist point of view; and thus it seems to be at present the most useful starting point to engage in that great intergenerational venture that we call the social sciences. It has also given us a most fruitful intellectual apparatus for understanding the workings of society in all times and places.

Mises at the Festschrift dinner honoring the 50th anniversary of his doctorate