CHAPTER 19 Other Members of the Younger Austrian School

This chapter introduces other members of the young Austrian School who achieved their Habilitation. The order is determined by the year of their respective degrees. In addition, further students whose work was published are presented in summarized form. The account will concentrate on the years up to 1938, which marks the end of the School in Austria.

Richard Reisch (1866–1938)¹

Reisch studied law in Vienna and Innsbruck, and after his Ph.D. in 1889, went into finance administration. In 1910 he was promoted to head of department. Later he became director of the Boden-Credit-Anstalt and subsequently acted as undersecretary of the Staatsamt für Finanzen (1919–1920) and as president of the Österreichische Nationalbank (1922— 1932). In the course of his work he was able to distinguish himself as a resolute advocate of a rigorously balanced budget. In 1906, Reisch received his Habilitation in finance law and until 1928 taught accounting at the University of Vienna. In addition, he was co-publisher of the compilation edition Wirtschaftstheorie der Gegenwart (1927–1932) (“Economic Theory of the Presence”) and of the Zeitschrift für Nationalökonomie (1930–1937) (“Journal of Economics”). He himself published several articles on questions of payment transactions and monetary policy.

Hans Mayer (1879–1955)²

Born and raised in Vienna, Mayer received his Ph.D. in law in 1907 and worked in the Austrian finance administration until 1911 (this included a year of study in Heidelberg). Mayer never achieved his Habilitation. His personnel file contains the following short memo: “Prior to completing Habilitation at the university due to unpublished manuscripts (theory of price formation)/Appointed untenured professor at the University of Freiburg” (cf. UA, Personalblatt Mayer). After leaving Freiburg he went to the Deutsche Technische Hochschule in Prague. When the war was over he worked as director of the financial planning section in the Austrian army administration in Vienna. In 1921 he took up a position as professor in Graz and in 1923 he was appointed successor to Friedrich von Wieser in Vienna.

Mayer was constantly involved in trench warfare with his opponent, Othmar Spann; his relationship with Mises was also strained. Despite his small number of academic contributions—Mayer hardly wrote more than a handful of essays and some articles in the fourth edition of the Handwörterbuch der Staatswissenschaften (“Concise Dictionary of Political Sciences”) — he was made dean of the faculty in 1927–1928 and received offers from Frankfurt (1927), Bonn (1932) and Kiel (1933). He already moved into the highest earnings bracket in middle age (ibid.).

Friedrich Wieser had used every opportunity to cultivate Hans Mayer. He was an influential mentor and developed a kind of father–son relationship with him. After Wieser’s death, Mayer moved into the house left to him by Wieser in Vienna’s nineteenth district (cf. Lehmann et al. 1924, vol. 1, p. 1468; and 1937, vol. 1, p. 812). The tall, slim, strawberry blond beau (cf. Winkler 1949, p. 39) with the winning appearance was unable to fulfill academic expectations. He remained a loner who kept a notable distance between himself and most other members of the Austrian School.

By and large, judgments about Mayer are unfavorable and not free of personal resentments (cf. Craver 1986, pp. 7–9, Mises 1978/2009, pp. 77–83). From the émigrés’ point of view, Mayer’s career embodied the dark side of the country they had been forced to leave: the favoritism, the cautious commitment, the smug complacency, and the blatant opportunism—all of which made it possible for him to swear an oath of loyalty to a total of five different regimes.

Richard von Strigl (1891–1942)³

Richard von Strigl, who came from a Bohemian family to which the civil service was not unknown, obtained the doctorate of law in Vienna in 1914. In 1922, during the course of his professional work in ancillary institutions of the Arbeiterkammer (Chamber of Workers), he achieved his Habilitation with a methodological paper that appeared in an expanded edition as Die ökonomischen Kategorien und die Organisation der Wirtschaft (1923). Apart from lecturing at the University of Vienna, he also taught at the Hochschule für Welthandel (“College for World Trade,” today “University of Economics and Business”).

As a long-term participant in the Mises-Seminar and as one of the few students of the Austrian School who had achieved the Habilitation, Strigl was held in high esteem in the post war years—as a person and professionally (cf. Hayek 1944/1968, p. 284). He refined the Austrian money and business cycle theory in Kapital und Produktion (1934) (Capital and Production, 2000), which described how changes in the value of money inevitably lead to false allocations. Like all of his writings, his textbook, Einführung in die Grundlagen der Nationalökonomie (1937) (“Introduction to the Basics of Economics”), is characterized by its factual, clear, and intelligible style. Educated in the classics, cultivated and originating from a family with liberal traditions, Strigl remained in the country after the annexation and died of a brain tumor in 1942.

Franz Xaver Weiss (1885—?)⁴

This native-born Viennese with Jewish roots completed a doctoral degree in law in his home town in 1909. After writing an article entitled Die moderne Tendenz in der Lehre vom Geldwert (1910) (“Modern Trends in the Teaching of the Value of Money”), he started working in the Wiener Kaufmannschaft (Viennese Merchants’ Society), and in his spare time worked on Böhm-Bawerk’s theory of interest. Weiss wrote some articles for the third edition of the Handwörterbuch der Staatswissenschaften (“Concise Dictionary of Political Sciences”), was editor of the Zeitschrift für Volkswirtschaft und Sozialpolitik (“Journal of Economics and Social Policy”) from 1921 to 1925, and published shorter writings of Böhm-Bawerk, whom he admired (1924 and 1926). In his Habilitation he renewed and expanded the critique of David Ricardo (Weiss 1925), which led to his being offered an appointment at the Deutsche Technische Hochschule in Prague; in addition, he lectured at the Deutsche Universität Prag (cf. Lüdtke 1931, p. 376). In the 1920s and 1930s he published several papers about the theory of value, ground rent (Weiss 1928), and the problem of value (Mises and Spiethoff 1933, vol. 2: pp. 45–57, 91, 127–131). Weiss disputed the view, held by Mises, that liberalism and the subjectivist theory of value naturally belonged together (cf. ibid., pp. 51–54, 131–132). It is not possible to determine the year of his death, but he is said to have survived Nazi rule in Bohemia by going underground (cf. Wlaschek 2003, p. 204).

Alexander Mahr (1896–1972)⁵

From Poppitz near Znaim in today’s Moravia, Mahr graduated in Vienna with a Ph.D. in German, Scandinavian Studies, and History in 1921. He took an additional doctoral degree in political sciences, becoming a Dr. rer. pol. in 1925. He subsequently received a scholarship from the Rockefeller Foundation and was able to achieve his Habilitation shortly after his return in 1930. But as a student of Mayer—critical of Böhm-Bawerk, as Mises and Hayek pointed out when looking at his early work on price, interest, and monetary theory, and foreign exchange policy— Mahr remained an outsider. He was one of the few representatives of the Austrian School who participated neither in the Mises-Privatseminar nor in the Geistkreis. Mahr remained in Austria after 1938 and worked in the central office for statistics until he took over Mayer’s chair in 1950. At the end of the war, Mahr attempted, as a “genuine advocate of the fundamental ideas of the Austrian or Viennese School” (Weber 1966, p. 3), to come to a compromise with mathematical economics and the Keynesian paradigm (cf. Mahr 1948 and 1959).

Oskar Morgenstern (1902–1977)⁶

Originating from Görlitz in Saxony, Morgernstern studied political science in Vienna, where he became Mayer’s assistant when only a student. He took his doctoral degree in 1925. After several years of studying abroad, he worked with Hayek in the Österreichische Institut für Konjunkturforschung and two years later became his successor. With Wirtschaftsprognose: Eine Untersuchung ihrer Voraussetzungen und Möglichkeiten (“Economic Forecasting: a Study of its Prerequisites and Possibilities”) he achieved the Habilitation in 1929 and lectured in Vienna up until 1938.

Morgenstern soon belonged to the inner circle of the Austrian School by virtue of his intellectual brilliance and remarkable energy. As university lecturer, director of the Institut für Konjunkturforschung, editor of the Zeitschrift für Nationalökonomie (“Journal of Economics”), board member of the Nationalökonomische Gesellschaft, advisor to the Österreichische Nationalbank (The Central Bank of Austria), and the ministry of trade, participant at the Mises-Privatseminar and initiator and author of regular columns on economic policy, he was active in almost every field.

Morgenstern distanced himself from Mises when Mises began, from 1933 onward, to advocate apriorism openly. His turn toward mathematics further deepened the rift that separated him from Mises. But the situation never escalated, most likely due to Mises’s hastened move to Geneva. Morgenstern lost his teaching license and was removed from office as director of the Institute in the course of the Nazi annexation of Austria in 1938. He subsequently emigrated to the US, settled at Princeton University, and along with the mathematician John von Neumann (1903–1957), published the ground breaking Theory of Games and Economic Behaviour (1944). Morgenstern soon ranked among the American elite of social scientists and worked for renowned think tanks, the Atomic Energy Commission, and the White House. In helping to found the Institut für Höhere Studien (Institute for Advanced Studies) in Vienna in 1963 and taking on a scientific advisory office, he remained tied to his country of origin until his death.

Gottfried Haberler (1900–1995)⁷

The descendant of a minor aristocratic family of civil servants (von Haberler) from Purkersdorf near Vienna, Haberler gained his doctorates in law and political science (1923 and 1925 respectively), whereafter he worked in the chamber of commerce. In 1927 and 1928 he graduated from postdoctoral studies in London and Harvard, respectively. He achieved his Habilitation with Der Sinn der Indexzahlen (1927) (“The Meaning of Index Numbers”) after his return. In addition to his lectures at the University of Vienna, some of which were held jointly with Hayek and Morgenstern, he participated regularly in the Mises-Privatseminar and gave guest lectures at Harvard University (1931–1932) from time to time. He quickly gained international recognition for his research on international trade (Haberler 1930, 1933b and 1936a). In 1934 Haberler received an offer to write a broad compilation of all current business cycle theories that was later included in his main work Prosperity and Depression (1937), and which subsequently brought him into contact with most of the world’s well-known economists. He accepted an appointment at Harvard shortly after its publication.

Haberler was politically undesirable: he was stripped of his teaching certification during his absence immediately after the annexation. In the years that followed, he used his excellent contacts and his organizational talents to help emigrants and exiles in many ways (cf. Feichtinger 2001, pp. 202–203). Haberler gained an excellent reputation in the US, became advisor to the Board of Governors of the American central banking system and was later elected to a series of honorary offices, such as president of the American Economic Association in 1963. He maintained ties with the Austrian School until his death.

Hans Bayer (1903–1965)⁸

Bayer, the son of a Viennese Hofrat,⁹ gained his doctorate in political science in 1924 and became Mayer’s assistant. In 1929 he obtained a doctorate in law at the University of Innsbruck and in the same year achieved his Habilitation in Vienna with a paper concerning the Lausanner Schule und die Österreichische Schule der Nationalökonomie (“Lausanne School and the Austrian School of Economics”). Thereafter he worked as an attorney in the Niederösterreichischer Gewerbeverein (“Lower Austrian Trade Association”), as secretary general of the Hoteliersvereinigung (“Hoteliers’ Association”), and from 1934 as secretary of the Kammer für Arbeiter und Angestellte (“Chamber of Workers and Employees”). In 1937 he became untenured professor in Innsbruck, but immediately after the annexation was given compulsory leave and transferred to the ministry. After the war he returned to Innsbruck as a professor and in 1956 became director of the Sozialakademie¹⁰ of the Dortmund University of Technology.

Bayer began distancing himself from the research agenda of the Austrian School in the early 1930s, worked on questions of economic and labor policy, and came to terms with the corporate state. Although he continued to show sympathy for the Austrian School, he kept his distance on matters of content and followed the Keynesian mainstream (Bayer 1949).

Further authors of the younger Austrian School¹¹

If everything had gone according to plan, Fritz Machlup (Machlup-Wolf) (1902–1983) could have been positioned in the above list of scholars with Habilitationen. This son of a Jewish businessman grew up in Wiener Neustadt. In addition to working in his parents’ cardboard factory, he studied Political Science in Vienna, where he gained his doctoral degree under Mises with Die Goldkernwährung (1925) (“The Gold Bullion Standard”). He participated in the Mises-Privatseminar regularly and in addition to his business activity, wrote reviews, essays, books, and more than 150 newspaper articles. Being an entrepreneur and workaholic, he was also active in the Austrian Cardboard Cartel, and from 1929 to 1933 taught at the Volkshochschule Ottakring.¹²

Machlup originally wanted to gain his Habilitation with Börsenkredit, Industriekredit und Kapitalbildung (1931) (The Stock Market, Credit and Capital Formation, 1940), a sound analysis of stock market finance from the point of view of Austrian monetary theory, but professors Spann and Degenfeld-Schonburg informed him that his application would not be considered on account of his Jewish origin. Also, Mayer was not prepared to support one of Mises’s students (cf. Craver 1986, pp. 23–24). Machlup left the country in 1933 and was offered a guest professorship at Harvard University in 1934. One year later he sold the shares of his factory in the Lower Austrian Ybbs valley and immigrated permanently to the US. During the war he stood by many persecuted Austrians and assisted them in leaving the country or escaping. In the US, Machlup carried on with his academic career at various universities. He focused in particular on international currency problems and questions regarding competition and market forms, and laid the foundations for an economic theory of knowledge. In 1966 he was elected president of the American Economic Association.

Fritz Machlup was always described as an extraordinary personality. His agility, intellectual clarity, esprit, and great didactic abilities were an inspiration. One American student, obviously impressed by this ball of energy from Wiener Neustadt, composed a rhyme in his honor, which included the line: “Mach 1, Mach 2, Mach 3—Machlup” (cf. Hülsmann 2007a, p. 478).

Like Machlup, Paul Narcyz Rosenstein-Rodan (1902–1985), also from a Jewish family in Krakow, did not receive his Habilitation due to reasons involving race and faculty policy (cf. Mayer 1952a, p. 267). Rosenstein-Rodan gained his doctorate in law in Vienna and became Mayer’s assistant. At the age of twenty-five he wrote the much acclaimed article on the notion of marginal utility (Rosenstein-Rodan 1927) for the fourth edition of the Handwörterbuch der Staatswissenschaften (“Concise Dictionary of Political Sciences”); it was followed by an equally prominent contribution on the role of time (Rosenstein-Rodan 1930). He triggered an international debate by showing that the role of time was not, as a rule, taken properly into account in the economic concept of “equilibrium” (cf. Pribram 1983, pp. 517–518). In 1931 Rosenstein-Rodan received an appointment to teach at University College in London, whereafter he distinguished himself as a highly esteemed expert on developing countries. His last position was that of associate at the Massachusetts Institute of Technology (MIT).

Ewald Schams (1889–1949) studied in Graz under Schumpeter and worked in Vienna as Sektionsrat (one of the highest ranking civil servants) in the Ministry for Education. In addition, he taught as an unsalaried lecturer at the Technische Hochschule (“University of Technology”) in Vienna and was a regular participant in the Mises-Privatseminar. Schams—who according to Hayek had a “reticent, upright appearance reminiscent of an officer” (Leube 1998, p. 319)—was an outstanding expert of the Lausanne School of Léon Walras; he was accomplished in mathematics and worked on questions of methodology and epistemology in particular. After the annexation he remained in the country and adapted to the Nazi regime. This was also the reason why, at war’s end, he was not able to return to the Technische Hochschule until 1947.

After studying in Freiburg-im-Breisgau in Germany, Martha Stephanie Braun (1898–1990) became, in 1921, one of the first women to gain a doctorate in political science at the University of Vienna. She worked thereafter as a freelance business journalist. As a participant in the Mises-Privatseminar, she continually wrote reviews and articles on banking and monetary economics and questions concerning economic policy. In 1929 she published her Theorie der staatlichen Wirtschaftspolitik (1929) (“Theory of State-run Economic Policy”), the first German-language attempt at a theoretical rationale and definition of economic policy. After the annexation she immigrated to the US, where she anglicized her name to Martha Steffy Browne and held, as her last position, a professorship at Brooklyn College.

Erich Schiff (1901–1992) was born in Vienna, and proved in Kapitalbildung und Kapitalaufzehrung im Konjunkturverlauf (1933) (“Formation and Depletion of Capital in the Course of the Business Cycle”) that the depreciation of money undermines a company’s calculation assumptions and therefore inevitably leads to malinvestment. After holding a post at the Institut für Konjunkturforschung in 1927–1928, he worked as a newspaper editor and attended the Mises-Privatseminar regularly. On account of his Jewish origins he fled to the US in 1938, where he continued to work in economics.

Karl Schlesinger (1889–1939) was one of the most outstanding personalities from the wider Austrian School circle, but is almost forgotten as an economist today. He fled from the Hungarian Soviet Republic to Vienna, pursued a career in banking, and ended up working as deputy director of the Anglo-Österreichische Bank and as chairman of the Bankenvereinigung(Banking Federation). Although he was close to the Lausanne School and showed an interest in mathematical economics, he promoted the Austrian School. As an expert on banking and currencies, he published papers on questions regarding monetary theory, currency policies, and banking business, and studied mathematics under Abraham Wald from 1933–1934. His essay Über die Produktionsgleichungen der ökonomischen Wertlehre (1934) (“On the Production Equations of the Economic Value Theory”) was to become a significant foundation of neoclassical equilibrium analysis (cf. K. Menger 1973, pp. 47–48). Karl Schlesinger committed suicide on the day of the annexation.

Leo Illy (Schönfeld) (1888–1952), originally called Schönfeld, was a regular participant in the Mises-Privatseminar. While working as an accountant and auditor after World War I, he published articles on economics as well as the monograph, Grenznutzen und Wirtschaftsrechnung (1924) (“Marginal Utility and National Accounting”), with which he tried to revive the abandoned discussion on marginal utility. He remained in Austria after the annexation, gained a teaching certification after the war at the Universität für Bodenkultur, another at the Hochschule für Welthandel (“College of World Trade”), and finally a Habilitation at the University of Vienna under Hans Mayer. His textbook, Das Gesetz des Grenznutzens (“The Law of Marginal Utility”), published in 1948, was an easily comprehensible and condensed version of the theory of marginal utility.

About one third of the regular attendees of the Mises-Privatseminar or the Geistkreis published only sporadically: Victor Bloch, for example, with his mathematically-oriented contributions on the theory of money markets and interest, and Gertrude Lovassy and Ludwig Bettelheim-Gabillon, who wrote studies on economic history. Articles by Eric Voegelin (1901–1985), Alfred Schütz (1899–1955) and Felix Kaufmann (1895–1949), each in their respective subject areas, became part of economics discourse in one way or another. Historians Friedrich Engel-Janosi (1893–1978) and Alexander Gerschenkron (1904–1978) were predominantly attracted by the interdisciplinary makeup of the two circles and wrote nothing pertinent to economics.¹³

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¹Regarding the biography see ÖBL 1988, vol. 9, pp. 55ff., and DBE, 1988, vol. 8, p. 229.

²Regarding the biography see UA, Personalblatt Hans Mayer; Winkler 1949; Mahr 1956; Mises 1978/2009, pp. 77–83; DBE 1998, vol. 7, p. 7.

³There is scant biographical data: see UA, Personalblatt Richard von Strigl, Hayek 1944/1968, Klein 1992, pp. 168–171 and Hülsmann 2000, pp. vii–xiii

⁴There is very little biographical data. See UA, Personalblatt Franz Xaver Weiss.

⁵Regarding the biography, see DBE 1997, vol. 6, p. 569, and Weber 1973.

⁶See Hagemann 1997, Leonard 2004/2007 and Palgrave, vol. 3.

⁷See DBE 1996, vol. 4, p. 294, and Palgrave, vol. 2, p. 581, with further verification.

⁸See DBE 1997, vol. 4, p. 357, and Klang 1936, pp. 44–46.

⁹Ed.: Title granted to civil servants for long-standing, commendable services.

¹⁰Ed.: Institute at the Dortmund University of Technology whose work consists in training labor representatives.

¹¹Regarding the following biographies, cf. Leube 1998, pp. 311–320 (with the wrong emigration year for Braun and the wrong year of death for Schams); Fischer and Brix 1997, pp. 77–82; regarding Machlup, see DBE 1997, vol. 6, p. 551; regarding Rosenstein-Rodan, see Palgrave, vol. 4, p. 222; regarding Schams and Illy (Schönfeld), see Klein 1992, pp. 30–31, 51, 165–168; regarding Illy (Schönfeld) in particular, see Maye 1953; regarding Schlesinger see DBE 1998, vol. 8, p. 670, each with further verification.

¹²The Volkshochschule was an adult education center primarily attended by blue-collar workers; Ottakring, Vienna’s sixteenth district, was dominanted by blue-collar workers with a strong socialist bent.

¹³The following were also participants of the above-mentioned circles and did not publish: Marianne von Herzfeld, Rudolf von Klein, Walter Fröhlich, Ilse Mintz-Schüller, Rudolf Loebl, Robert Wälder, Emanuel Winternitz, Elly Offenheimer-Spiro, and Adolf Redlich-Redley.