The LSE Connection

The problem of war reparations was the number one issue on the international agenda for the first few years after the war, and remained very prominent until the early 1930s. Initially, the same French and British politicians who had led their countries during the war dominated the negotiations. Steeped in wartime rhetoric, their emotional election campaigns had committed them to hard-line policies against the vanquished. Under such circumstances little progress could be made in regard to Austrian finance and the reparations question. As a result, the second Austrian government under Karl Renner lost the election in June 1920 and a new government under Michael Mayr took over, without significantly greater success in foreign policy. Things improved slowly after December 1920, when the leadership at the negotiations was shifted to economic experts. But these men too were unable to reach a workable compromise because of public pressure in England and especially in France. No lasting results were achieved at conferences in Brussels, Paris, London, Cannes, Genoa, Paris again, and London again.

It is likely that Mises took part in at least some of these conferences. He was after all an executive of the Bureau for Claims Settlements and his position with the Kammer made him an unofficial spokesman for Austrian business and banking. He was an eloquent expert on financial and monetary matters, and his sober voice carried weight with the money men abroad.⁵⁵ It was probably here that Mises first met some of the eminent economists from western Europe with whom he would cooperate closely in the following years: Charles Rist from Paris and Theodore Gregory, William Beveridge (later Lord Beveridge), and others from the London School of Economics (LSE).⁵⁶ The LSE connection developed slowly and steadily during the 1920s, especially through Mises's impact on the young Lionel Robbins (1898–1984).⁵⁷

Like most young intellectuals of his era, Robbins was a socialist. Nurtured by school readings of Shaw, Wells, and Ruskin, he had become a member of the National Guilds League after World War I and collaborated in the “Labour Campaign for the Nationalisation of the Drink Trade.” But these experiences with the real-world labor movement disillusioned the young idealist. He began to read the classical liberal economists and from 1920 to 1923 studied economics at LSE, a creation of the leaders of the guild movement, Sidney and Beatrice Webb.

Because Sidney Webb cherished academic freedom—unlike his wife or their friend, George Bernard Shaw⁵⁸—LSE was spared the fate of becoming the academic mouthpiece of the Fabians. During the 1920s, the school counted a number of excellent economists in its ranks, most notably Edwin Cannan, but also Theodore Gregory and later Robbins himself.

Gregory had Robbins and his other students read the great contemporary economists in America and on the Continent, many of whom he knew personally. Robbins was therefore familiar with the works of Gustav Cassel, Irving Fisher, and Frank A. Fetter. Later he turned to the Austrians, and he probably read Socialism in the original German soon after its publication in 1922. He later recalled that the book had a decisive impact on him and solidified his departure from his former socialist ideals.⁵⁹

Two other teachers at LSE, Hugh Dalton and Graham Wallas, reinforced in Robbins the resonance of the utilitarian perspective on political questions that emanated from Mises's work. Wallas in particular was a great teacher and authority on the writings of Jeremy Bentham and the Philosophical Radicals. He constantly emphasized rationalism as the correct approach in politics, especially when it came to choosing political means.

And like his young peers in Vienna, Robbins deepened his classroom knowledge through daily discussions with a group of highly gifted friends such as Jacques Kahane, Arnold Plant, and Georg Tugendhat.⁶⁰ These men would form the core of British Austrianism in the following years.

Mises probably met Robbins for the first time in the fall of 1924. In October of that year, he wrote to Gustav Fischer that he had received a “very serious offer” for an English translation of the second part of Gemeinwirtschaft from a “Mr. Robins,” a tutor of economics in Oxford. “Robins” turned out to be Robbins, and he came highly recommended.⁶¹ He had just accepted a temporary position at Oxford University (until 1929, he would alternate between positions at Oxford and LSE). During the next few years, he worked on a translation of Gemeinwirtschaft (Socialism) and later initiated a translation of Mises's Theorie des Geldes und der Umlaufsmittel (Theory of Money and Credit). These projects slowed significantly after 1926, when Robbins was charged with various administrative duties at LSE, to the point that he brought in a co-translator. But his interest in Austrian economics, and especially in the work of Mises, grew constantly. At the beginning of the 1930s, the contacts between Vienna and London had matured to such an extent that Mises and his students were frequent guest lecturers at LSE. The blossoming of Austrian economics in Britain culminated when F.A. Hayek eventually became professor of economics at the London School of Economics in the fall of 1931.