Profound Transformations

From August 1 to August 6, 1937, Mises took part in the meetings of the ninth international congress of philosophy, where he presented a paper on “The Logical Character of the Science of Human Conduct.” Here he met the Polish philosopher Tadeusz Kotarbinski, who delivered a fascinating paper on the “idea of the methodology of general praxiology.”⁶⁷ Though the paper itself did not have a lasting impact on Mises's thought, he was intrigued by the fact that Kotarbinski had used the word “praxiology” to designate a general theory of human action. Mises had already come across it in a 1926 paper from another Polish scholar, the mathematical economist Eugen Slutzky.⁶⁸He had occasionally used this term in the discussions of his Vienna private seminar.⁶⁹ But because he abhorred terminological innovations he had been reluctant to use it in print, even though he needed a good label for the cumbersome “general theory of human action.” Throughout the 1920s, he had used the word “sociology,” but by the early 1930s he had to acknowledge that most other social scientists had come to understand something completely different by this term. Under the influence of fanatic anti-economists such as Othmar Spann and Werner Sombart, “sociology” had become shorthand for an alternative social science—one that did not integrate the tenets of economics, but instead denied them and sought to replace economics with other explanations of the market economy, socialism, and the hampered market economy.

But now there was a new term: praxeology. It was gaining ground in the academic literature and, what is more, its champions seemed to use it in a way congruent with Mises's understanding of what a general science of human action was all about. Kotarbinski probably talked to Mises about his “general theory of fighting” in which he applied the general praxeological method to the phenomenon of war.⁷⁰ And it was probably also Kotarbinski who referred Mises to some of the pioneers of praxeology such as the French philosopher Alfred Espinas.⁷¹Mises found that the meaning of “praxeology” in Espinas's work was quite different from what he had in mind. Slutsky's use of the term was somewhat closer to his own views, but still did not quite hit the nail on the head.⁷² In any case, “praxeology” had not yet come to be as closely associated with anti-economics as had the term “sociology” (and Hayek reported from London that the term was unknown in English) and thus Mises eventually adopted it as a label for his general theory of human action.

Work on his great treatise also progressed in other fields. One of the important areas that he had neglected for the past two decades was methodology. He had written on the epistemology of economic science, but he had not yet dealt with the more narrowly technical aspects of economic analysis. Mises now proceeded to this task by elaborating on the scattered methodological observations he had made in previous writings.⁷³He presented his very first paper dealing with purely methodological questions in early March 1938 in Venice, at a conference held in memory of the French pioneer of mathematical economics, Augustin Cournot.⁷⁴ Fittingly, Mises dealt with one of the core elements of mathematical economics, namely, the concept of economic equilibrium. He argued that this concept did have an important role in economic analysis, but not nearly as important as the champions of mathematical economics made it out to be. The equilibrium construct was necessary as the logical opposite of entrepreneurial profit and loss. In equilibrium, there would be no such thing as profit or loss. Only in disequilibrium did these phenomena come into being. But where these statements only refined the basic conceptual framework that had already been elaborated by Frank Knight, Mises also emphasized that the equilibrium construct was necessary only for the correct conception of profit and loss—and for no other economic phenomena.⁷⁵

At about the same time the Austrian Chamber of Commerce was completely reorganized. Mises asked to be retired by January 1, 1938, emphasizing that he would continue to work for the new chambers of commerce if they sought his services.⁷⁶ They did. In early February 1938, Wilhelm Becker, right hand man to the new president of the Bundeskammer, asked Mises to become the chief of the department for monetary and financial affairs. The only caveat was that Mises had to give up his position in Geneva. Mises probably went to Vienna around February 20 to discuss the project.⁷⁷ One reason for his renewed interest in returning to Vienna might have been the precarious financial situation of the Institute: in the course of 1936 it had become clear that certain elements within the Rockefeller Foundation were increasingly reluctant to lend further support.

Thus in the fall of 1937, Mises seriously considered a return to Vienna. He then gave much thought to the central political problem of his fatherland: preserving the liberty of its citizens against the encroachments of the mighty neighbors north and south. Mises was convinced that this problem could only be solved within a federation of the east-European language communities (nations) under a strong Danubian central state. In early 1938, he laid out a confidential master plan for the necessary reforms in a ten-page paper with the title “Principles for the Creation of a New Order in the Danube Area.”⁷⁸ Here he argued that such a new order would require the east-European countries to overcome their protectionism, which Mises saw as the root cause of conflict among them, which was in turn the cause of their weakness confronted with their three mighty neighbors: Russia, Germany, and Italy. But to abandon protectionism requires far more than the legal abolition of customs and import quotas. It also implies abolishing the special privileges that come through monetary policy, taxation, health and safety regulations and construction codes, public works, railway rates, and many other fields of public administration. From this Mises draws a far-reaching conclusion. It is not sufficient to limit the sovereignty of the different governments through a customs union. Indeed, their whole administration would have to be run by a federal government. Without a central government overarching all national governments, the latter would engage in nationalistic policies against the minorities within their territory, thus creating tensions and conflicts that would ultimately explode the confederation.

In short, Mises proposed to counteract the military threat of the moment through a political federation with other smaller states of the Danube area, but such a federation could work only if national protectionism could be eliminated. It followed that the political institutions of the federation had to be radically centralized.⁷⁹

It needs to be stressed that the primary purpose of Mises's proposal was not to create closer economic cooperation in the Danube area. This could have been achieved, without any political unification whatsoever, through the simple unilateral adoption of free trade by each government. The point of his scheme was to secure a maximum of political liberty under present conditions. In his eyes, Austria and the other countries of the area had the choice between abandoning a part of their autonomy—to become strong enough to resist foreign pressure —or losing their autonomy altogether. Either they would become subservient provinces ruled by Germany, Russia, and Italy, or they would rule themselves in a common central state.

A majority of Austrian leaders abhorred the prospect of political centralization. They sought national self-determination first and foremost. The point of Mises's paper was to show that they were in error. National independence was not a suitable means, under present circumstances, to attain the end of national self-determination. Those who rejected a supra-national central government for the Danube basin implicitly believed that England and France were going to defend them permanently. But these two countries would become tired of fighting wars on behalf of the Eastern states and would eventually demand that they create a political system that could survive on its own.

With these plans in mind, Mises went to Vienna in February 1938.⁸⁰ He had other reasons to return to the city on the Danube: getting the paperwork done for marriage. For some ten years, Margit had waited patiently for him to propose. Eight months after the death of his mother, at Christmas 1937, Ludwig was finally ready. True to himself, he left out all ornamental talk and went on to propose with his habitual concision: “I cannot go on further. I cannot live without you, darling. Let's get married.”⁸¹Margit was incredulous and the happiest she had ever been. They lost no time making plans. One of the formalities was the public announcement of their wedding plans six weeks before the ceremony.

But world events conspired against personal happiness. During those weeks before their announced wedding date, Adolf Hitler threatened Austrian Chancellor Schuschnigg: Germany would provoke civil war in Austria, and invade the country. On extremely short notice, Schuschnigg announced a general referendum on Austria's unification with Germany. The vote was to take place the next Sunday, March 13. Mises was in town on one of his short visits, probably coming in from the Cournot conference he had attended in Venice. In the course of the week, it became clear that the Germans were preparing to invade Austria to prevent the referendum from ever taking place. The cautious Mises knew that he was high on the Nazi enemy list, and he left Vienna on Thursday the 10th or early on Friday the 11th of March—not a moment too soon, as it turned out.

On Friday, March 11, 1938, S.S. Chief Heinrich Himmler arrived in Vienna with an advance contingent to arrest the most important adversaries of Hitler and seize their property.⁸² Two days later, on March 13, after the German army had reached Vienna at the end of a triumphant march through the country, a group of men broke into Mises's apartment and searched it. At the end of March, the Gestapo came and took twenty-one boxes full of Mises's possessions and sealed the apartment when they left. In the fall, the Gestapo returned and took the rest. They looted everything they could find—the books Mises had lovingly collected over decades, his personal correspondence, paintings, silver, personal and administrative documents—everything, even the laundry. Mises would never see these belongings again and never learn what happened to them.⁸³ At the end of World War II, the Red Army found his personal files, together with the documents of other prominent enemies of the Nazi regime, in a train in Bohemia. They were then sent to a secret archive in Moscow. In 1991, eighteen years after Mises's death, they were rediscovered and are today a most precious tool for biographers of the great economist.⁸⁴

The looting of his apartment was only the beginning. The new authorities soon discontinued his salary and pension payments and attached his bank account for an “escape tax” (Reichsfluchtsteuer) and a Jewish tax (Judenabgabe).⁸⁵ They also confiscated the most marketable part of Ludwig and Richard's inheritance: a widely known collection of some 150 rare gold coins and more than 3,000 other coins and medals that their father, Arthur von Mises, had bequeathed to his sons in 1903.⁸⁶ Mises family property had become free booty.

The Nazis had prepared the takeover of Austria with diligent care. They had studied all writings that even remotely questioned the Nazi cause or any of its ideals. After the takeover, they sought the authors of these works. Perfectly harmless men such as Carl Brockhausen, a philanthropist and pacifist of some international reputation, were interviewed by the German secret police.⁸⁷ But the Gestapo also took on the greatest champion of national socialism in Vienna, Othmar Spann. The author of Der wahre Staat was all in favor of strong government, but it would have to be a government in the service of the right ideas—his ideas. Attempts to co-opt him as a Hitler propagandist quickly failed, and he and his son Raphael ended up in the Dachau concentration camp, where he was tortured and partially lost his eyesight.⁸⁸

This was not a time of people with backbone. It was the time of the Hans Mayers of the world. A few weeks after the Anschluss, Mayer wrote the members of the Nationalökonomische Gesellschaft, announcing that the membership of non-Aryans had been cancelled. Mayer kept his chair at the university, just as he would retain it when the social democrats returned to power after World War II.

Decades afterward, Lionel Robbins recalled exactly the time when his love affair with Vienna came to an abrupt end, namely,

when to his eternal shame, Hans Mayer, the senior Professor of Economics in the University of Menger, Wieser and Böhm-Bawerk, whom I myself had more than once heard denouncing Hitler and all his works, instead of closing down, as he could honourably have done, expelled the Jewish members from the Nationalökonomische Gesellschaft of which he was the president. I have never been able to screw myself up to go back since.⁸⁹

This is also how Mises felt about the incident. It took him many years after the end of the war before he could bring himself to return to his once-beloved city.

Many scholars had to leave Austria to make way for the Hans Mayers of the new era, and a great number of them passed through Switzerland. In the coming months and years, Mises increased his efforts to find employment for Austrian expatriates abroad.⁹⁰ This came at a time when his own position in Geneva became financially precarious. Together with his brother Richard he also took care of relatives and personal friends who had not managed to flee in time. These efforts were instrumental in bringing about a rapprochement of the Mises brothers, even though it could still not be called a warm relationship. When Ludwig married Margit in July, he did not deem it necessary to mention the fact in their correspondence. Richard found out about it a month later through their aunt Fanny and asked Ludwig for a confirmation, yet even then it was not Ludwig who replied, but Margit. Through her warmth and charm she eventually eased the relationship between the recalcitrant brothers when they were later in some proximity on the western shores of the Atlantic.

Margit and her daughter Gitta had remained in Vienna for several weeks after the Anschluss because they did not have the necessary paperwork to leave the country. At this time, their lives would have been in great danger if their relationship with Mises had been known. Eventually they were able to leave, and Ludwig greeted them at the train station in Zurich, flowers in hand. She later recalled:

In the thirteen years we shared before our marriage, I had never seen Lu cry. Nor did I ever see him cry in all the thirty-five years of our married life. He wept—unrestrained and unabashed. Tears were streaming down his face, and he was not ashamed of them.⁹¹

On July 6, 1938 they were married in Geneva.⁹² It was a simple administrative ceremony before a civil judge and two witnesses: Hans Kelsen and Gottfried von Haberler. Ludwig and Margit spent their honeymoon in the French Alps. It was a grand opening to a happy period of their lives. Ludwig now worked quickly and productively on the completion of his magnum opus. And he had the time and money to live a joyful life in the company of Margit (her children were at boarding schools and stayed with them only during vacations).

His years with Margit brought about a profound positive transformation of Mises's personality. He was still obstinate in his opinions and formal in his demeanor, but in interacting with other people he became much less buttoned-down. Most importantly, his temper improved. The outbursts and tantrums that Margit had so dreaded disappeared completely after a few years.⁹³ He greatly needed her love, and he got it. Even though she herself had a great ego, she adapted her life to make him happy. Arriving in Geneva, she had to start at square one. Mises's good friend, Weiss-Wellenstein, had warned her that her life with Ludwig would not be easy. And indeed, it was quite difficult at first. Mises introduced her to his closest associates only after the marriage, and not without warning: “Here in Geneva, when men talk, women have to be silent. They only listen.”⁹⁴ Even Kelsen and Haberler, who were after all their witnesses, she met only shortly before the wedding. And only afterward did Margit move into Ludwig's apartment. There she found—to no surprise—a bachelor's residence:

The furniture was first class and beautifully kept. But the whole apartment looked to me like a display in a department store. It was cold and impersonal.⁹⁵

But right from the first day, the transformation of his personality set in. Mises had changed his attitude. Margit was no longer just a friend and lover. She was now Mrs. von Mises, the comrade he had longed for and the object of his true and deep love. So complete and radical was this change that he would henceforth refuse to even talk about the thirteen years before the wedding. “It was as if he had put the past in a trunk, stored it in the attic, and thrown away the key”⁹⁶ For Margit, this total break with the past would always be a burden, but the benefits were obvious:

From the day of our marriage, Lu was a changed person. Not that he spoiled me with gifts or presents—he would not have known how to do that—but he was relaxed, affectionate, and his eyes were sparkling with happiness. Every little thing I did was of interest to him. The world had changed for him.... Lu was overpowering in his love and affection for me. Never was he cross or dissatisfied with anything I did; he could not nag. There was not one day, to the very end of his life, that he did not tell me: “I love you, darling, oh... how I love you.” It seemed to me, after our marriage, that for the first time in his life he felt really fulfilled and happy⁹⁷

The events in Austria had brought a number of their former Vienna friends to Geneva, and it was almost like the old days: lunches and dinners with Helene Lieser, Louise Sommer, Lise Berger, Hans Kelsen, and the Nirensteins.⁹⁸ They went out almost every weekend for a drive across the French border, and with the help of the Michelin Guide they explored the delights of French cuisine and the beauties of the Alpine landscape on both sides of the border. Margit bravely assisted her new husband on the road. He definitely had an adventurous side and enjoyed the thrills of high speed and the centrifugal pull of mountain curves. On one of these curves, he lost control of the car, which suddenly lurched over the roadside barrier into the valley's abyss. Margit and Ludwig held their breath, but the car did not move. Then he pulled back slowly and they continued the rest of the way in a more civilized composure.⁹⁹

They had other scary moments for completely different reasons. One day a dark car stopped them on one of their excursions, and a man in a long dark coat told Mises he had to talk to him. He asked Mises to follow him into the other car, which of course Mises refused to do. There were veiled threats, but the situation was resolved when a friend, who was a high official of the League of Nations, presented himself to the strangers, who hurried back to their car and left. Mises and family had the distinct impression that they had just avoided an attempted kidnapping.

Such events made them think about leaving Europe entirely and emigrating to the United States. They considered this option seriously in the fall of 1938.¹⁰⁰ Personal danger in Switzerland was not the only factor involved. Mises knew that his school was in financial difficulties, and that it was possible his contract would not be extended.