Mises: the Last Knight of Liberalism
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Young MISES I The Last Knight of Liberalism JÖRG GUIDO HÜLSMANN Ludwig von Mises Institute AUBURN, ALABAMA Photos: Bettina Bien Greaves, cover, 1, 8, 9, 18, 20, 32, 40, 76, 77, 98, 99, 210, 255, 324, 404, 446, 447, 473, 519, 521, 522, 562, 563, 567, 610, 681, 758, 787, 809, 817, 825, 829, 835, 836, 847, 851, 882, 889, 890, 923, 934, 945, 986, 988, 1011, 1012, 1014, 1034, 1042, 1050 Archival Repository of the Center for Advanced Research in Phenomenology, University of Memphis, 365 David Jarrett photographs, 946 George Koether photographs, 888, 988 Harvard University Archives, 163 Hazlitt Photo Archive, Mises Institute, 795, 840, 852 Herbert Hoover Presidential Library, RWL #22, 840 Institut für Sozialforschung, 68 John Chamberlain Papers, Syracuse University, 840 Macmillan Publishers, 571, Mises Archive at Grove City College, 833, 989 Mises Institute Photo Archive, 13, 94, 99, 111, 143, 145, 182, 253, 268, 365, 564, 840, 943, 928, 1036 Mont Pèlerin Society, 587, 679, 869, 870, 872 Moscow Archives, Mises, 262, 463 Österreich Lexikon, 83, 328, 366 Rothbard Photo Archive, Mises Institute, 840, 893, 929, 936, 939 Rubbettino Publishers, 476, 631 Ruprecht-Karls-Universität Heidelberg online, 336 University of Vienna, 99, 453 Warren J. Samuels Portrait Collection, Duke University, 99, 102, 109, 139, 118, 155, 424 Wikipedia, 23, 113, 128, 137, 335, 396, 840 All rights reserved. Written permission must be secured from the publisher to use or reproduce any part of this book, except for brief quotations in critical reviews or articles. For information write: Ludwig von Mises Institute, 518 West Magnolia Avenue, Auburn, Alabama 36832; mises.org Copyright © 2007 by the Ludwig von Mises Institute ISBN: 978-1-933550-18-3 Contents Preface . xi Acknowledgments. xv PART IYOUNG LUDWIG . 1 1. Roots . 3 2. School Years . 21 Vienna. 21 Viennese Jews. 27 Akademisches Gymnasium . 33 Austria-Hungary . 46 Socialisms, Austrian Style . 53 Which Career?. 59 3. Alma Mater Rudolphina. 61 The Grünberg Seminar . 66 Military Service and Death of His Father . 74 In the Philippovich Seminar . 77 Birth of an Economist . 87 Years with a Master . 93 PART II THE AUSTRIAN SCHOOL . 99 4. Fin de siècle Economic Science . 101 Carl Menger—Pioneer of “Empirical Theory” . 101 Menger’s Work in the German Context . 115 v vi Mises: The Last Knight of Liberalism Methodenstreit . 117 The Austrian School and the Gossen School . 125 The Breakthrough of the Austrian School . 136 Eugen von Böhm-Bawerk . 141 Friedrich von Wieser. 150 Joseph A. Schumpeter . 162 5. Early Professions. 175 Difficult Start in Professional Life . 179 The Parallel Life . 182 Kammer. 187 Storm Clouds. 193 Vienna Meeting of the Verein für Socialpolitik. 195 Breakthrough at the Kammer . 205 Theory of Money . 207 6. Treatise on Money . 211 The Nature of Money . 215 Integration of Value Theory and the Theory of Money . 223 Wieser’s Theory of Money . 225 Mises’s Theory of the Value of Money. 236 Money is Not Neutral: Cantillon Effects. 240 Exchange Rate Determination: Purchasing Power Theory. 244 Fractional-Reserve Banking and Business Cycles . 249 PART III OFFICER, GENTLEMAN, SCHOLAR . 255 7. The Great War . 257 First Year in Battle. 258 The Home Front. 269 Back to the Front. 278 New Life . 286 A Last Mission . 291 8. Nation, State, and Economy . 299 Migrations, Mixed Populations, and Modern Imperialism . 301 The Utilitarian Method of Social Analysis. 306 Contents vii The Fallacies of German Socialism in War and Peace . 310 Political Economy of Language Communities. 316 9. 1919 . 325 New Battlefields. 327 Postwar Socialism and the Specter of Anarchy . 330 Pro-Government Emergencies . 344 Toward Sound Money . 350 Vienna Circles . 360 10. A Copernican Shift. 369 The Argument . 373 The Intellectual Context. 380 Triumph. 392 The Incomplete Revolution . 399 11. A Treatise on Socialism. 405 Benefits Derived from the Means of Production under Capitalism . 407 The Utilitarian Case for Democracy . 410 Political Economy of the Family . 413 Implications of the Calculation Problem . 418 Moral Hazard—The Other Nemesis of Socialism . 422 The Feeble and Compromising John Stuart Mill . 424 The Law of Association. 426 Monopoly Theory . 431 Christian Ethics versus the Market?. 437 Socialism = Destructionism. 443 PART IV MISES IN HIS PRIME. 447 12. Winds of War. 449 Hayek and the Bureau for Claims Settlements . 451 Fighting Inflation . 455 Seminars. 461 Wieser’s Long Shadow . 464 The LSE Connection . 479 Advent of the Gold-Exchange Standard. 483 viii Mises: The Last Knight of Liberalism Hyperinflation, Currency Competition, and Monetary Reform . 493 Theory of Money and Credit Reconsidered . 505 German Economists Return to Classical Liberalism. 508 Silver Linings on the Horizon . ..