Vienna Circles

Mises's main occupation was still that of a Kammer secretary, in which capacity he profited from the government's attempt to democratize Austria.

The egalitarian wave reached the Kammer during the year 1919 and was eventually voted into law on February 25, 1920. The Kammer was now renamed the Lower Austrian Chamber of Trade, Commerce, and Industry, and all members now had equal voting rights, irrespective of their tax bill. The internal organization of the Kammer's Executive Office was also changed. The new law stipulated a stronger emphasis on giving the different branches of the economy a more equal representation within the Executive Office—even a level of autonomy within its confines. A new Department of Transport was set up and also a new Department of Banking and Credit. Mises became the executive responsible for questions of money and credit. In his new function, he exercised leadership far beyond the borders of Vienna and Lower Austria due to the privileged status of the Vienna Kammer.⁵³

He also remained a professor of economics both at the University of Vienna and—briefly—at the Exportakademie.⁵⁴ He resumed the regular discussions of economic theory that he had organized before the war. These meetings attracted the small number of economists in Austria and Germany sharing a genuine interest in theoretical problems of the social sciences. Mises's group, the nucleus of what would soon after become the more formal Nationalökonomische Gesellschaft, enjoyed a virtual monopoly on Vienna's top theorists—especially because Wieser, who was still the most renowned theorist in Vienna, was not interested in this kind of exchange of ideas, and so attracted no such group about himself or his precepts. The Mises circle thus became a crystallization point for the dispersed and isolated theorists in the German-speaking world. Their attitude toward the Vienna group is beautifully summed up by Schumpeter who, having to cancel an appearance at one of the group's meetings, said he had dearly wished “to speak to our circle and graze in congenial company on a theoretical meadow.”⁵⁵

The most time-consuming of Mises's intellectual endeavors were the seminars he taught at the University of Vienna, but the activity also gave him relief from the tiresome workdays at the Kammer and from hopeless political affairs. He loved being a professor. He loved intelligence and intelligent debate. No amount of political turmoil could deter him from offering his second university seminar as professor of economics, in the winter of 1918–1919. When the first session started, the seminar members were the subjects of a monarchy. When the discussion resumed after a fortnight, they were citizens of a republic. The students must have been impressed by the presence of Dr. Ernst Seidler, who had been one of imperial Austria's last prime ministers. Seidler probably knew Mises from common prewar chamber of commerce activities.⁵⁶

Mises's plan for the seminar was to highlight the importance of the theory of value for the analysis of market phenomena and to stimulate discussions of the major competing theories of value: the subjective theory of value, Marx's theory of value, value in mathematical economics, and Franz Oppenheimer's objective theory of value. He sought to entrust the presentation of each of these doctrines to one of its adherents. The seminar also featured discussion sessions on the measurement of value and on the differences between classical and modern economics.⁵⁷ Rather than taking into account only the most recent articles published in the most prestigious journals, Mises used the seminar to introduce the students to important classical authors. He also encouraged them to do outside research and write articles on particular topics, and offered his assistance with these tasks. He urged them to read broadly without any specific goal or particular agenda—a principle he advocated all his life. He tried to be helpful in various ways, from lending books out of his personal library to finding suitable employment for his students after graduation.

Despite the war and its aftermath, Vienna had remained a great center of learning. Besides the Austrian School of economics, which continued to thrive under Wieser, Mises, and Mayer, there were Austrian or Vienna schools of theoretical physics and philosophy (Moritz Schlick), of law (Kelsen), psychoanalysis (Freud, Adler), history (Dopsch and young Otto Brunner), and art history (Max Dvorak and Josef Strzygowski). But while Mises's classes at the university were a great opportunity for students to become acquainted with theoretical economics, the lectures and exercises were necessarily limited to an elementary level.⁵⁸ Mises therefore sought to establish a private seminar for the discussion of more advanced problems. Many such private circles existed in Vienna, and their characters differed widely depending on those involved. Some pioneers of various disciplines had instituted private seminars to train their followers in small-group sessions; this was the case, for example, with Sigmund Freud, who had already started a group before World War I, and also for the postwar circle of Hans Kelsen. Other private scholarly circles did not feature a central figure—for example, the student circle that Mises had set up with the Pribram brothers and Emil Perels in 1908 and which would eventually become the Nationalökonomische Gesellschaft, or the Geistkreis, a student group that Herbert von Fürth and F.A. von Hayek founded in the early 1920s. Some scholars had membership in several circles at once. For example, Felix Kaufmann, a student of Hans Kelsen's and later an assistant professor under him, was a member of the law-oriented Kelsen seminar, the social-science-centered Mises seminar, and the philosophical Vienna Circle. Mises too took part in several groups: in spring and summer of 1919, he was a member both of the Nationalökonomische Gesellschaft and of a seminar discussing the writings of Marx.⁵⁹ It was probably here that Mises confirmed his less than favorable impression of the socialist intelligentsia. Here he learned that the Party Marxists consisted of two groups: (1) those who had never studied Marx, and who knew only a few popular passages from his books; and (2) those who with all the literature in the world had read as self-taught men nothing except the works of Marx. Max Adler, for instance, belonged to the former group; his Marxian knowledge was limited to the few pages in which Marx developed the “superstructure theory.” To the latter group belonged especially the East Europeans, who were the ardent ideological leaders of Marxism.⁶⁰

Some of Mises's students from Vienna became famous in the post-World War II era: Friedrich Hayek, Gottfried Haberler, Alfred Schütz, and Fritz Machlup

Mises's own private seminar started on November 26, 1919 with a talk by Elisabeth Ephrussi on Carver's theory of interest. Subsequent speakers included Strigl, Tugendhat, and Sommer.⁶¹ The sessions of the “privatissimum,” as Mises called it, probably took place in his offices in the Kammer. In any case this is where the seminar met in later years, when admission would be limited to participants with a doctoral degree. The degree could be in any science; the purpose of the requirement was only to assure the person's aptitude for scientific research.

He wholeheartedly supported his female students as a matter of course, placing for example Marianne von Herzfeld and Helene Lieser as economists with the Association of Austrian Banks and Bankers. Helene Lieser was the first woman in Austria to obtain a doctorate in government science. She went on to become Secretary of the International Economic Association in Paris. Another female student, Martha Stephanie Braun, who later taught at Brooklyn College and New York University, recalled,

Professor von Mises never restrained any participant in the choice of a topic he or she wanted to discuss.... I have lived in many cities and belonged to many organizations. I am sure there does not exist a second circle where the intensity the interest and the intellectual standard of the discussions is as high as it was in the Mises Seminar.⁶²

Hans Kelsen

In these discussions, Mises openly espoused not only classical-liberal economic policies, but a complete classical-liberal worldview—this at a time when the majority of intellectuals in Vienna and the rest of Europe were socialists. Thus Mises was known as der Liberale—in today's English we would say he was Mr. Libertarian, the living embodiment of classical-liberal ideas.⁶³ Many years later, his former student Fritz Machlup would highlight the role of Mises's convictions for his impact on others:

That Mises could be the center of a school is evidence of his qualities as a teacher. Not that he is a great orator or a brilliant classroom actor, but it is the conviction with which he expounds his ideas which arouses the students' interest, partly by convincing them, partly by provoking their criticism.

And then Machlup went on to point out the flaws of his former teacher:

He is usually too reserved and all buttoned up, so to speak. Someone who meets him for the first time may be repelled by his apparent coldness or some lack of sympathy People who know him better know that he is fully sympathetic. He is a man unwilling to make compromises, even if such compromise might be to his material advantage. He will stick stubbornly to his convictions. Although I feel this is really a merit it sometimes antagonizes people.⁶⁴

Mises did occasionally show his anger addressing a view that he opposed, but apparently he did not let intellectual disagreement turn into personal resentment. He realized that progress must necessarily involve disagreement between the newcomers and the establishment, and thus he encouraged talent regardless of orientation. For example, at the end of the 1920s, Mises recommended mathematical economist Ewald Schams for a Rockefeller Fellowship, praising him as “one of the ablest younger economists of our country.”⁶⁵ He also recommended Paul Lazarsfeld—the director of a small private outfit dedicated to research into economic psychology⁶⁶—who advocated methodological and political views almost the opposite of those cherished by Mises.⁶⁷

The names of some of his Vienna junior research associates have indeed become legendary in the post-World War II period: Hayek, Haberler, Machlup, Schütz, and Morgenstern, to name just a few. Although these men were usually the official students and collaborators of Mayer and Spann, it was in working with Mises that their theoretical work developed and flourished. It is characteristic of their relationship with Mises that they approached him without any submissiveness. Spann, Mayer, and Kelsen seem to have dealt with their students in a very different way.⁶⁸

In those days he also witnessed the ascendancy of his great rival, Othmar Spann, who was appointed as a full professor of economics and gave his inaugural lecture on May 5, 1919.⁶⁹ Spann professed a worldview diametrically opposed to methodological individualism. His method—which he called “universalism”—claimed the importance of starting social analysis with the contemplation of larger wholes, and treating the individual elements of human society as secondary.

Such rivalries and disagreements were commonplace, and were not limited to the university. The intellectual organization of early twentieth-century Vienna was a network of dozens of teachers professing their views to disciples and followers in private settings. The system exemplified the intellectual abundance that results from a free market of ideas. It produced Austro-Marxism, psychoanalysis, legal positivism, logical positivism, and praxeology. But for international reputation and lasting impact, three of these circles stood above the rest: the psychoanalysts, the logical positivists, and the Mises Circle.