Introduction by Richard M. Ebeling

Over a twelve-day period, from June 25 to July 6, 1951, the internationally renowned Austrian economist Ludwig von Mises delivered a series of lectures at the Foundation for Economic Education (FEE) at its headquarters in Irvington-on-Hudson, New York. Bettina Bien Greaves, a FEE staff member at that time, took down Mises’s lectures in shorthand, word for word, and then transcribed them into a full manuscript. It has remained unpublished until now.

FEE is proud to finally make these lectures available to a new generation. Mises was almost 70 years old when he spoke the words that are in this text, but they reveal a vitality of mind that is youthful in its clarity and vision of the free market and its critical analysis of freedom’s enemies.

Ludwig von Mises: His Life and Contributions

During the decades before Mises gave these lectures at FEE he had established himself as one of the leading voices of freedom in the Western world.[1]

Ludwig von Mises was born on September 29, 1881, in Lemberg, the capital of the province of Galicia in the old Austro-Hungarian Empire (now known as Lvov in western Ukraine). He graduated from the University of Vienna in 1906 with a doctoral degree in jurisprudence, and a specialization in economics. After briefly working as a law clerk, he was hired by the Vienna Chamber of Commerce, Crafts, and Industry in 1909, and within a few years was promoted to the position of one of the Chamber’s senior economic analysts.

Mises was soon recognized as one of the most insightful and penetrating minds in Austria. In 1912, he published The Theory of Money and Credit, a book that was quickly hailed as a major work on monetary theory and policy, in which he first presented what became known as the Austrian Theory of the Business Cycle. Inflations and depressions were not inherent within a free-market economy, Mises argued, but were caused by government mismanagement of the monetary and banking systems.[2]

His scholarly work was interrupted in 1914, however, with the coming of the First World War. For the next four years, Mises served as an officer in the Austrian Army, most of that time on the eastern front against the Russian Army. He was three times decorated for bravery under fire. After Lenin and the Bolsheviks signed a separate peace with Imperial Germany and Austria-Hungary in March 1918 that withdrew Russia from the war, Mises was appointed the officer in charge of currency control in that part of the Ukraine occupied by the Austrian Army under the terms of the peace treaty, with his headquarters in the port city of Odessa on the Black Sea. During the last several months of the war, before the armistice of November 11, 1918, Mises was stationed in Vienna serving as an economic analyst for the Austrian High Command.

After being mustered out of the army at the end of 1918, he returned to his duties at the Vienna Chamber of Commerce, with the additional responsibility, until 1920, of being in charge of a branch of the League of Nations’ Reparations Commission overseeing the settlement of prewar debt obligations.

In the years immediately following the war, Austria was in a state of chaos. The old Austro-Hungarian Empire broke up, leaving a new, much smaller Republic of Austria. Hyperinflation and aggressive trade barriers by neighboring countries soon reduced much of the Austrian population to near-starvation conditions. In addition, there were several attempts to violently establish a revolutionary socialist regime in Austria, as well as border wars with Czechoslovakia, Hungary, and Yugoslavia.

From his position at the Vienna Chamber of Commerce, Mises fought day and night to ward off the collectivist destruction of his homeland. He was influential in stopping the full nationalization of Austrian industry by the government in 1918–1919. He also played a leading role in bringing the hyperinflation in Austria to a halt in 1922, and then was a guiding voice in reorganizing the Austrian National Bank under a re-established gold standard under League of Nations supervision. He also forcefully made the case for drastically lowering the income and business taxes that were strangling all private-sector activities, and assisted in bringing to an end the government’s foreign-exchange controls that were ruining Austria’s trade with the rest of the world.[3]

Throughout the 1920s and early 1930s, while in his native Austria, Mises was an uncompromising defender of the ideals of individual liberty, limited government, and the free market. Besides his work at the Vienna Chamber of Commerce, he taught a seminar every semester at the University of Vienna on various aspects of economic theory and policy, which attracted not only many of the brightest Austrian students but attendees from the rest of Europe and the United States as well. He also led a “private seminar” that met twice a month from October to June in his Chamber offices, from 1920 to 1934, with many of the best Viennese minds in economics, political science, history, philosophy, and sociology regularly participating.

Mises also founded the Austrian Institute for Business Cycle Research in 1926. He served as acting vice-president, with a young Friedrich A. Hayek appointed as the Institute’s first director.

His international stature as a champion of classical liberalism continued to grow during this period, as well, through a series of books that challenged the rising tide of socialism and the interventionist-welfare state. In 1919, Mises published Nation, State and Economy, in which he traced out the causes of the First World War in the nationalist, imperialist, and socialist ideas of the preceding decades.[4] But it was in a 1920 article on “Economic Calculation in the Socialist Commonwealth”[5] and his 1922 book on Socialism: An Economic and Sociological Analysis that his reputation as the leading opponent of collectivism in the twentieth century was firmly established.[6] Mises demonstrated that with the nationalization of the means of production, and the resulting abolition of money, market competition, and the price system, socialism would lead to economic chaos and not to social prosperity. Thus, besides the tyranny that socialism would create due to the government’s domination over all aspects of human life, it was also inherently unworkable as an economic system.

This was followed in 1927 with his defense of all facets of individual freedom in his book on Liberalism, by which he meant classical liberalism and the market economy. He presented a clear and persuasive case for individual liberty, private property, free markets, and limited government.[7] Finally, in 1929, Mises published a collection of essays offering a Critique of Interventionism, in which he showed that government piecemeal regulations over prices and production inevitably lead to distortions and imbalances that threaten the effective functioning of a free and competitive market society.[8] In addition, he penned a series of essays on the philosophy of science and the nature of man and the social order that appeared in 1933 under the title Epistemological Problems of Economics.[9]

Mises had clearly understood during this time that Hitler’s National Socialism would lead Germany down the road to destruction. In fact, in the mid-1920s, he had already warned that too many Germans were hoping for the coming of the tyrant who would rule over and plan their lives.[10] When the Nazis came to power in Germany in 1933, Mises understood that the future of his native Austria was now threatened. As a classical liberal and a Jew, Mises also knew that a Nazi takeover would probably mean his arrest and death. So, in 1934 he accepted a position as professor of international economic relations at the Graduate Institute of International Studies in Geneva, Switzerland, a position that he held until he came to the United States in the summer of 1940.[11]

It was during those six years in Switzerland that Mises wrote his greatest work, the German-language edition of which was published in Geneva in 1940,[12] and which then appeared in 1949 in a revised English-language version as Human Action: A Treatise on Economics.[13] In a volume of almost 900 pages, Mises summarized the ideas and reflections of a lifetime on the issues of man, society, and government; on the nature and workings of the competitive market process and the impossibilities of socialist central planning and the interventionist state; and on the central role and importance of a sound monetary system for all market activities, and the harmful effects from government’s manipulation of money and credit.

In the summer of 1940, as the German Army was overrunning France, Mises and his wife, Margit, left neutral Switzerland and made their way through southern France and across Spain to Lisbon, Portugal, from where they then sailed to the United States. Living in New York City, he received research grants from the Rockefeller Foundation in the early 1940s that enabled him to do a number of studies on postwar economic and political reconstruction, as well as write several books.[14] In 1945, he was appointed to a visiting professorship at New York University, a position that he held until his retirement in 1969 at the age of 87.

During his years in America, Mises continued his prolific writing career, publishing Bureaucracy (1944),[15]Omnipotent Government (1944),[16]Planned Chaos (1947),[17]Planning for Freedom (1952),[18]The Anti-Capitalistic Mentality (1956),[19]Theory and History (1957),[20]The Ultimate Foundation of Economic Science (1962),[21] and The Historical Setting of the Austrian School of Economics (1969).[22] There also appeared, posthumously, his memoirs, Notes and Recollections (1978),[23] and Interventionism: An Economic Analysis (1998),[24] both originally written in 1940. And many of his other articles and essays have been collected in two anthologies.[25]

Mises also attracted around him a new generation of young Americans dedicated to the ideal of liberty and economic freedom, and who were encouraged and assisted by Mises in their intellectual activities. He passed away on October 10, 1973, at the age of 92.

Ludwig von Mises and FEE

There was a long relationship between Ludwig von Mises and the Foundation for Economic Education. The late Leonard E. Read, the founder and first president of FEE, met Mises in the early 1940s. Read told the story of their meeting in an essay he wrote in honor of Mises’s 90th birthday:

Professor Ludwig von Mises arrived in America during 1940. My acquaintance with him began a year or two later when he addressed a luncheon meeting of the Los Angeles Chamber of Commerce of which I was General Manager. That evening he dined at my home with renowned economists Dr. Benjamin M. Anderson and Professor Thomas Nixon Carver, and several businessmen such as W. C. Mullendore, all first-rate thinkers in political economy. What I would give for a recording of that memorable discussion!

The final question was posed at midnight: “Professor Mises, I agree with you that we are headed for troublous times. Now, let us suppose you were the dictator of these United States. What would you do?”

Quick as a flash came the reply, “I would abdicate!” Here we have the renunciation side of wisdom: man knowing he should not lord it over his fellows and rejecting even the thought.

Few among us are wise enough to know how little we know. . . . A rare individual weighs his finite knowledge on the scale of infinite truth, and his awareness of his limitation tells him never to lord it over others. Such a person would renounce any position of authoritarian rulership he might be proffered or, if accidentally finding himself in such a position, would abdicate—forthwith! . . .

Professor Mises knows that he does not or cannot rule; thus, he abdicates from even the idea of rulership. Knowing what phase of life to renounce is one side of wisdom.[26]

From FEE’s founding in 1946, Ludwig von Mises served as a senior adviser, lecturer, writer, and part-time staff member for the Foundation. It was through Mises’s influence and that of free-market economist and journalist Henry Hazlitt (one of FEE’s original trustees) that the Foundation has always had a special “Austrian School” orientation to its economic analysis of free markets and collectivism.[27]

It was also through the assistance of Leonard Read and a few others among Mises’s friends that funding was arranged to underwrite his teaching position at NYU, until his retirement in 1969. And following his departure from NYU, Leonard Read brought Mises onto FEE’s staff for the remainder of his life.

Mises’s wife, Margit, described his appreciation of FEE and the opportunity to lecture at the Foundation:

In October 1946, Lu was made a regular member of the FEE staff, and in later years he promised to give a series of lectures in Irvington every year. The spiritual and intellectual atmosphere there was completely to his taste.

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One of the regular tasks of the Foundation was to arrange seminars for teachers, journalists and students. Lu enjoyed speaking there. He knew the participants were carefully questioned about their education and interests and were eager to hear him. It was interesting to note how many women attended these seminars.

Before the classes started, Lu regularly made the rounds. First, he had a little talk with Read; then he went to see Edmund Opitz, for whom he had a special appreciation; then he visited with W. Marshall Curtiss and Paul Poirot. Paul usually had to discuss an article he was about to publish in The Freeman, FEE’s monthly magazine. Finally, Lu went into Bettina Bien’s office. As a rule, Bettina had a pile of his books ready for him to autograph or letters to sign, which were typed for him in his office. On his way down to the lecture hall—all these offices, with the exception of that of Dr. Opitz, were on the second floor—he had a friendly word for every one of the employees.

His lectures were calculated for a special Irvington audience. He was able to evaluate his listeners immediately by asking one or the other question. . . . Though the content of his lectures in Irvington was lighter, his mode of delivery was the same as at New York University. The interest was great and so was the demand for Lu’s books, which Leonard Read always kept in print and ready for distribution.[28]

Mises’s last public lecture was delivered at FEE on March 26, 1971. As Margit von Mises explained: “He always loved lecturing in Irvington, and he continued doing so as long as he felt able.”[29]

When Mises passed away, Leonard Read delivered a brief eulogy at the memorial service for him on October 16, 1973. He said, in part:

The proudest tribute mankind can pay to one it would most honor is to call him Teacher. The man who releases an idea which helps men understand themselves and the universe puts mankind forever in his debt. . . . Ludwig von Mises is truly—and I use this in the present tense—a Teacher. More than two generations have studied under him and countless thousands of others have learned from his books. Books and students are the enduring monuments of a Teacher and these monuments are his. . . . We have learned more from Ludwig Mises than economics. We have come to know an exemplar of scholarship, a veritable giant of erudition, steadfastness, and dedication. Truly one of the great Teachers of all time! And so, all of us salute you, Ludwig Mises, as you depart this mortal life and join the immortals.[30]

The FEE Lectures of 1951

For those readers who are already familiar with some of Mises’s works, his 1951 lectures at FEE will offer them a slightly different style to his analysis. Here is Mises the teacher. The form of exposition that Bettina Bien Greaves has captured in her detailed shorthand of his lectures is more colloquial, and full of many historical examples and references. The reader is able to feel, at least a bit, what Mises was like face to face in the classroom, and not simply the Olympian theorist in his great tomes.

One of Mises’s students who studied with him at New York University once said that “Every lecture was a mind-stretching experience.” Another student declared that “I have never known a man as erudite as was Dr. Mises. He was extraordinarily learned in every field of knowledge. In discussing economics he would bring in examples from history to illustrate the points he was making”[31] His FEE lectures from 1951 give a taste of this side of Mises as a scholar-teacher.

For the readers who are relatively unfamiliar with Mises writings, these lectures offer an excellent starting point. Indeed, in many ways the lectures present an encapsulated version of most of the themes that Mises devoted his life to formulating, a summary of many of the central themes to be found in Human Action. He explains the nature of man as a purposeful actor who gives meaning to his actions in the context of ends chosen and means selected to achieve his goals. It is the intentionality of man that makes the human sciences inherently different from the subject matter of the natural sciences. This also enables Mises to demonstrate why Karl Marx’s theory of dialectical materialism and historical determinism is fundamentally myth and fantasy.

Instead, he shows the actual workings of the market process through which economic freedom provides the incentives and the personal liberty for individuals to work, save, and invest. He explains how it is the consumer-driven demand for goods and services that provides the stimulus and profit opportunities for entrepreneurs to creatively arrange and guide production in ways that serve the wants and desires of the buying public.

He also demonstrates that the market process is dependent upon and would be impossible without the emergence of a medium of exchange—money—through which all the myriad of goods and resources can be reduced to a common denominator in the form of money prices. Economic calculation in the form of market prices provides the method through which entrepreneurs are able to estimate potential profits and possible losses from alternative lines and methods of production. Through this process, waste and misuse of scarce resources are kept to a minimum, so that as many of the most highly valued goods and services desired by consumers may be brought to market.

This also leads Mises to explain why socialist central planning means the end of all economic rationality. With the abolition of markets and prices under socialism, the central planners are clueless about how to efficiently apply the resources, capital, and labor under their control. Hence, socialism in practice means planned chaos.

At the same time, Mises shows why government mismanagement of the monetary and banking system brings about inflations and depressions. By distorting the price signals of the marketplace—including interest rates—government-generated inflations bring about a misdirection of resources and labor and a malinvestment of capital, which finally must lead to a depression.

Through these lectures, the reader will see why Ludwig von Mises was one of the most effective proponents of freedom and free enterprise in the twentieth century. And why his contributions will remain as one of the great legacies in the cause of liberty in the many decades to come.

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[1] On Mises’s life and contributions to economics and the philosophy of freedom, see Richard M. Ebeling, Austrian Economics and the Political Economy of Freedom (Northampton, Mass.: Edward Elgar, 2003), Ch. 3, “A Rational Economist in an Irrational Age: Ludwig von Mises,” pp. 61–99; and Richard M. Ebeling, “Planning for Freedom: Ludwig von Mises as Political Economist and Policy Analyst” in Richard M. Ebeling, ed., Competition or Compulsion: The Market Economy versus the New Social Engineering (Hillsdale, Mich.: Hillsdale College Press, 2001), pp. 1–85; see also Murray N. Rothbard, Ludwig von Mises: Scholar, Creator, Hero (Auburn, Ala.: Ludwig von Mises Institute, 1988), and Israel M. Kirzner, Ludwig von Mises (Wilmington, Del.: ISI Books, 2001).

[2] Ludwig von Mises, The Theory of Money and Credit (Indianapolis: Liberty Classics [1912; revised eds., 1924, 1953] 1980); and also by Mises, “Monetary Stabilization and Cyclical Policy” [1928] reprinted in Israel M. Kirzner, ed., Austrian Economics: A Sampling in the History of a Tradition, Vol. 3: The Age of Mises and Hayek (London: William Pickering, 1994), pp. 33–111.

[3] On Mises’s work as an economic policy analyst and advocate of the free market in Austria in the years between the two World Wars, see Richard M. Ebeling, “The Economist as the Historian of Decline: Ludwig von Mises and Austria Between the Two World Wars” in Richard M. Ebeling, ed., Globalization: Will Freedom or World Government Dominate the International Marketplace? (Hillsdale, Mich.: Hillsdale College Press, 2002), pp. 1–68. Many of Mises’s articles and policy papers during this period are now available; see Richard M. Ebeling, ed., Selected Writings of Ludwig von Mises, Vol. 2: Between the Two World Wars: Monetary Disorder, Interventionism, Socialism and the Great Depression (Indianapolis: Liberty Fund, 2002).

[4] Ludwig von Mises, Nation, State and Economy: Contributions to the Politics and History of Our Time (New York: New York University Press [1919] 1983).

[5] Ludwig von Mises, “Economic Calculation in the Socialist Commonwealth” [1920] reprinted in Israel M. Kirzner, ed., Austrian Economics: A Sampling in the History of a Tradition, Vol. 3: The Age of Mises and Hayek, pp. 3–35.

[6] Ludwig von Mises, Socialism: An Economic and Sociological Analysis (Indianapolis: Liberty Classics [1922; revised eds., 1932, 1951] 1981).

[7] Ludwig von Mises, Liberalism: The Classical Tradition (Irvington-on-Hudson, N.Y.: Foundation for Economic Education [1927] 1995).

[8] Ludwig von Mises, Critique of Interventionism (Irvington-on-Hudson, N.Y.: Foundation for Economic Education [1929] 1996).

[9] Ludwig von Mises, Epistemological Problems of Economics (New York: New York University Press [1933] 1981).

[10] In his 1926 essay, “Social Liberalism,” reprinted in Critique of Interventionism, p. 67, Mises warned that during the time of ideological confusion and political instability in the Germany of the 1920s, “Some are taking refuge in mysticism, others are setting their hopes on the coming of the ‘strong man’—the tyrant who will think for them and care for them.”

[11] On the Graduate Institute of International Studies and its founder, William E. Rappard, see Richard M. Ebeling, “William E. Rappard: An International Man in an Age of Nationalism,” Ideas on Liberty (Jan. 2000), pp. 33–41.

[12] Ludwig von Mises, Nationalökonomie: Theorie des Handelns und Wirtschaftens (Munich: Philosophia Verlag [1940] 1980).

[13] Ludwig von Mises, Human Action: A Treatise on Economics (Irvington-on-Hudson, N.Y.: Foundation for Economic Education [1949; revised eds., 1963, 1966] 1996).

[14] A number of Mises’s essays from this period, 1940–1944, are included in Richard M. Ebeling, ed., Selected Writings of Ludwig von Mises, Vol. 3: The Political Economy of International Reform and Reconstruction (Indianapolis: Liberty Fund, 2000).

[15] Ludwig von Mises, Bureaucracy (New Haven: Yale University Press, 1944).

[16] Ludwig von Mises, Omnipotent Government: The Rise of the Total State and Total War (New Haven: Yale University Press, 1944).

[17] Ludwig von Mises, Planned Chaos (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1947).

[18] Ludwig von Mises, Planning for Freedom (Grove City, Pa.: Libertarian Press [1952; revised ed., 1962, 1980] 1996).

[19] Ludwig von Mises, The Anti-Capitalistic Mentality (Princeton: D. Van Nostrand, 1956).

[20] Ludwig von Mises, Theory and History: An Interpretation of Social and Economic Evolution (Auburn, Ala.: Ludwig von Mises Institute [1957] 1985).

[21] Ludwig von Mises, The Ultimate Foundation of Economic Science: An Essay on Method (Irvington-on-Hudson, N.Y.: Foundation for Economic Education [1962] 2002).

[22] Ludwig von Mises, “The Historical Setting of the Austrian School of Economics” [1969] reprinted in Bettina Bien Greaves, ed., Austrian Economics: An Anthology (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1996), pp. 53–76.

[23] Ludwig von Mises, Notes and Recollections (South Holland, Ill. : Libertarian Press [1940] 1978).

[24] Ludwig von Mises, Interventionism: An Economic Analysis (Irvington-on-Hudson, N.Y.: Foundation for Economic Education [1940] 1998).

[25] See Richard M. Ebeling, ed., Money, Method and the Market Process: Essays by Ludwig von Mises (Norwell, Mass.: Kluwer Academic Press, 1990), and Bettina Bien Greaves, ed., Economic Freedom and Interventionism: An Anthology of Articles and Essays by Ludwig von Mises (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1990).

[26] Leonard E. Read, “To Abdicate or Not” in F. A. Harper, ed., Toward Liberty: Essays in Honor of Ludwig von Mises on the Occasion of His 90th Birthday, September 29, 1971, Vol. 2 (Menlo Park, Calif.: Institute for Humane Studies, 1971), pp. 299–301.

[27] Mary Sennholz, Leonard E. Read: Philosopher of Freedom (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1993), p. 140.

[28] Margit von Mises, My Years with Ludwig von Mises (Cedar Falls, Iowa: Center for Futures Education [1976] 2nd enlarged ed., 1984), pp. 94–95.

[29] Ibid., pp. 177–178.

[30] Leonard Read, Castles in the Air (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1975), pp. 150–151.

[31] Ibid., p. 132.