What did Ludwig Von Mises do right?

Summary of The public economy

Austria between the world wars

The period between the world wars changed Austria radically. The end of the First World War, which meant the fall of Austria-Hungary, was politically a catastrophe for the once glamorous Danube monarchy. Hungary proclaimed its independence on October 31, 1918. The range of the Habsburg eagle shrank to a fraction of the pre-war period. In addition to Hungary, Czechoslovakia also gained independence. Austria lost parts of Romania, Yugoslavia, Poland and Italy and became a republic. Financially the country was at an end. A journalist described the situation in 1920, two years before Mises his Public economy published, as follows: “Instead of the vital center of 50 million people, Vienna has turned into an abandoned province with a catchment area of ​​just six million. The city is cut off from its coal mines, its sources of food, from its factories, in short: from everything that would receive the vital energy of life. Vienna was enveloped in a tangle of trade restrictions. ”The isolation from foreign trade by customs regulations consumed the country. There was also a high rate of inflation. To many Austrians (and not only to them) socialism appeared to be a viable alternative. But Mises wanted to prevent that at all costs. He was not entirely alone in this: he had colleagues in the 1871 of Carl Menger founded Austrian School of Economics, to which a. also the later Nobel Prize winner Friedrich August von Hayek counted.


After years at the front, Ludwig von Mises returned to Austria in 1917, marked by typhus. Here he served in the War Ministry and had to witness the decline of the old Austrian order. In his book Nation, state and economy he condemned nationalism, which he blamed for the devastating war. Mises believed that peace could only be created by a liberal state order that also gave minorities the right to self-determination. In socialism, which was praised by many contemporaries as the system of the future, Mises precisely did not recognize this. Rather, the decision to take apart the socialist system and to unmask it as a false doctrine matured in him. But that was easier said than done, especially since Mises saw himself surrounded by “people of different faiths”: “You don't have to regard the attempt to lead the masses on the right path as hopeless if you could experience that men like J. M. Keynes, Bertrand Russell, Harold Laski and Albert Einstein were unable to grasp economic problems? I wanted to try everything that the economist can try. I didn't want to get tired of saying what I thought was right. So I decided to write a book about socialism. ”In 1922 the work was done: Mises presented his detailed scientific account of socialism. The core element of the book was a lecture that he had given to the Vienna National Economic Society as early as 1920: The economic calculation in the socialist community.

Impact history

In his book, Mises claims that socialism is "impracticable". In his time, in view of several socialist states that actually existed, that was a very daring thesis. After the First World War, socialists in all European countries were fascinated by the Bolsheviks' seizure of power in Russia, and many tried to emulate them. Mises ’book and his lecture two years earlier kicked off a socialism debate that kept the economic world spellbound until the 1930s. After that, interest weakened somewhat, not because a solution had been found, but because the global economic crisis required the undivided attention of economists. Friedrich August von Hayek described the impact of Mises ’book as follows:“ When the book first appeared in 1922, its influence was overwhelming. Slowly but emphatically, it changed the attitudes of the many young idealists who returned to universities to finish their studies after the war. I know that because I was one of them too. We wanted to create a better world, and that was one of the reasons we studied economics. Socialism was our hope for a more just and better world. And then this book came out. Our hopes were dashed. Mises showed us that we were looking for progress in the wrong direction. "

The leading figures of the socialists and Marxists could not counter Mises' economic accounting argument. The economist had apparently hit her at her sore spot. That is why various rescue attempts have been started in order to free socialism from the stigma of impracticability.