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The First and Next 25 Years

October 22, 2007

Tags Austrian Economics Overview

[This talk was delivered on the 25th anniversary of the founding of the Mises Institute, October 13, 2007, in New York City.]

There are only two times when the press is interested in the opinions of economists: when the economy crashes, or when there is a presidential election. And sadly, most of their opinions amount to pretending omniscience or shilling for government power.

It seems remarkable that in the 18th and 19th centuries, to be an economist meant, above all, to be a pain in the neck to the powers that be. An economist was a person who warned that government cannot improve society, and that the attempt to do so only creates more problems.

That is the sort of economist Mises was, and that is the sort of economist that the Mises Institute set out to cultivate 25 years ago, with the success we see today. But the Mises Institute has become much more than that.

The Mises Institute has accomplished not only what it set out to do, that is, to be a support for Mises's ideas; it has sparked a revolution in learning, and is leading the way to a future of liberty.

All those who have played a part deserve our gratitude, our benefactors, scholars, students, and readers the world over.

Ironically, as I learned from Guido Hülsmann, it was Mises himself who had dreamed about what has happened in the last 25 years. Nearing the end of his life, he urged in a memo the establishment of a center for the study and promotion of liberty, with economics at its core. He must have spoken to Margit von Mises about this. Certainly she was enthusiastic when I approached her with the idea of the Mises Institute, here in New York City.

Her husband's memo was the fruit of decades of frustration with the growing role of the state in education, and the complicity of the universities in the corruption of education toward statist ends. A new institution to teach and advance the ideas of liberty was his answer, to make an end run around official propaganda.

Note that this institution was not to be a think tank, in the traditional sense of that term. Think tanks are a product of the age of the political party, a holding tank for politicians out of office and a repository for schemes to secure power for partisans. In this model, which originated in Germany and was perfected in Britain, the think tank was a private ally of the state, prepared to cheer on the leaders, or be the loyal opposition, whichever is called for at the moment.

This was not what Mises had in mind. He wanted an intellectually activist institution that would be devoted to teaching, researching, publishing, preserving, and advancing ideas, and, above all, doing what he believed had to be done: convincing the masses of people of the merits of a fully free society.

Why do we need institutions to advance and support particular ideas? If an idea is good, why should it need an apparatus behind it?

With the advent and advance of the modern state, the freedom to think came under ever more fire. Then the state took over education itself.

After World War I, for example, Mises warned that government schools in multilingual territories pose an intractable cultural problem. Few issues drive people to extremes like the attempt to impose on them a foreign language. This creates conflicts that the state cannot solve. If it teaches in one language, it irritates the people who speak another. The dominant language will become a symbol of dominant political power, which further antagonizes the minority. There is really only one solution to this problem, said Mises: education must be private, if only to preserve peace among groups.

But of course Mises's point can be extended to all issues that concern the human intellect. The party in power is in a position to control the debate, to punish those who refuse to accept the party line, to indoctrinate the young, to whip up a fever on behalf of the regime's projects, and to hire and fire intellectuals. In the case of Communism and Nazism, it meant liquidating political enemies. In the case of democracy, it means denying academic livelihoods, and demonizing those who think differently.

In the United States, our first real crisis occurred because the dominant power wanted to crack down on free speech with the Alien and Sedition Act. The result was the first nullification controversy that nearly led to a breakup of the states, and would have, had Jefferson not been elected in 1800. But the lesson wasn't learned. People were jailed during the Civil War and World War I for expressing points of view the government didn't like, and this tradition has continued to the present day.

The ideas of liberty need room to breathe. They are almost always expressed in opposition to the regime. The future is always uncertain, and liberty is always fragile when the state is on the loose.

Recall that Mises was never given a paid professorship at the University of Vienna, and the reasons are detailed in the new biography by Guido Hülsmann: his liberal politics barred him. But he nonetheless carved out a niche for himself as a volunteer professor. His private seminar in Vienna, which he taught while holding down a high-pressure job at the Chamber of Commerce, wielded vast influence.

But when he realized that growing National Socialist power meant that Vienna was becoming dangerous for him, he was able to flee to Geneva, where an institution in a neutral country cared for him, gave him space and freedom to work, and protected him from the state. The result was the German-language edition of Human Action, a book that is a classic of the modern age. Then the war meant he had to leave again, this time to America, where sympathetic business owners and philanthropists supported him.

So there is a very real sense in which Mises's own experiences underscore the need for politically independent institutions that guard and preserve the right to think creatively, particularly when that thought leads in directions of which the regime disapproves.

In today's highly politicized society, independence from the state is ever more important. That is precisely what the Mises Institute provides, and on many levels: for faculty and students, and everyone interested in Austrian economics and the scholarship of libertarianism.

When the Mises Institute was founded in 1982, Mises had been dead nine years. His widow Margit was working hard to keep his books in print, and I had assisted in this work as an editor at Arlington House Publishers, with Theory and History, among other works. I met Mises only once, but I recall every moment as if watching a film frame by frame.

When I approached Margit, there was more interest in Austrian economics than at the time of her husband's death, but there was a deficiency that had been noted by Murray Rothbard: Mises's own contributions were being overlooked, even swept aside. He was treated as a worthy champion of free enterprise, but his scientific work and his sweeping sociological outlook were being neglected.

So the first job of the Mises Institute was to provide a home for Mises's ideas, for great books and also for his best and most productive students — whether they were physically with us on location or not. The most notable among them was, of course, Murray Rothbard, who agreed to join the fledgling effort as academic vice president. The founding of the Mises Institute lifted his spirits, and he gave the work of the Mises Institute wings to fly.

Rothbard's own scholarly career had followed a path that was eerily similar to Mises's. He had all the credentials. He had written pioneering works. He had made huge strides in pushing forward both economic and political thought. And for this, he was repaid by academia with a low-paid position at an academic backwater — though Rothbard never complained. He had good students in New York, but none that he could work with on a formal basis into graduate school.

These were also difficult times for Rothbard politically. He was a brilliant libertarian, which meant that he was neither a Reaganite nor a Carterite. He had doubts about supply-side economics. He was not a backer of war. In fact, he dissented from the war party that otherwise liked some of his economic work. He favored both tax cuts and spending cuts, which certainly made him an outlier, someone respected by young students but shunned by mainstream venues.

He had done well in developing a salon out of his living room. And he had achieved some renown by publishing with non-establishment book houses. But what he needed was some institutional backing that was not working for a particular political party. The institute gave Rothbard this very thing. First there was our new edition of Mises's again-neglected work Theory and History, to which Rothbard contributed the introduction. Then there was a new journal for him to edit, which became the basis of the Misesian revival in academia.

As the institute began to develop a base of financial support — and there is nothing I could say here, especially to the supporters in this room, that could possibly exaggerate the central role of this generosity — there were ever more advances. Finally, there came the classroom setting, and what later became known as the Mises University.

How I well recall the days when Murray headed the faculty. There he was rushing from class to class, teaching with his legendary exuberance, talking to all students between classes, and then staying up late at night, surrounded by the hard core. He would teach until 2, 3, and even 4 o'clock in the morning. The students would arrive again the next morning for classes at 8 o'clock. The staff was there with him too, and by week's end, we all looked like death warmed over — except Murray, of course, who was still going strong.

As I think back to those days, several major events stand out. I recall looking at Murray's Review of Austrian Economics just after it came off the press. I recall the faces of all the young students. And I recall getting the news that a free-market champion had endowed a chair of economics at the University of Nevada, Las Vegas, and friends of the institute wanted Murray to hold it. He would have a well-paying job at a good school. He would have students that he could cultivate. He would be secure and free to teach and write. It was a remarkable thing. He would be spared the fate of Mises and Hayek, who never held paid professorships in America. We were surrounded by the evidence now: the work of the institute could make a difference.

Over the last 25 years, all these programs have blossomed beyond our wildest dreams. We've had the great pleasure of working with remarkable scholars like F.A. Hayek, Henry Hazlitt, Hans Sennholz, and so many more. We've worked closely with the greatest statesman of our epoch: Ron Paul, whose generosity was essential to our early success. We've benefited from the generosity of benefactors like the late Parthenia de Muralt, O.P. Alford III, Lawrence Fertig, Henry Hazlitt, and Margaret Rowley.

We've seen so many new scholars appear and dazzle us with their writings, lectures, and contributions. The Mises University has educated nearly every Austrian working today, the world over. Our publications programs expanded to films and audiobooks. Our library, rooted in the collections of Murray Rothbard and Robert LeFevre, has extended in a thousand directions with the goal of preserving what other libraries carelessly or maliciously toss aside. We don't just keep these for our own scholars and students. We have put hundreds of books online. Vast amounts of amazing material, which hadn't seen the light of day for decades, is now a click away.

And if you happen to be on a college campus and see some kids walking around with tee shirts with images of Mises, Menger, Rothbard, or Bastiat, you can know that the source is the Mises Institute.

We still have a small staff, but we all work like crazy doing what we love: making available the scholarship of liberty in the Misesian tradition, and encouraging its study and advancement. We want to bring back into print the whole of the Austrian and libertarian library. Just this year, that includes the books of Hazlitt, Heilperin, Chodorov, Fetter, Garrett, Hutt, Machlup, Nock, Flynn, and many others.

In fact, the Mises Institute has become the mainspring of old liberal theory the world over.

And yet that reality has raised a question that we might be tempted to dismiss but one I think we should engage. The question is this: by doing what we do, are we not somehow skewing the marketplace of ideas, tilting the great intellectual debate in our favor? And is it right to enter into the rarified world of academia with an agenda that is scientific, moral, and political? In short, if liberty is such a good idea, and if the Misesian tradition is so hot, why does it need our help?

For centuries, intellectuals of the old liberal bent, as Mises was, had believed that education alone would work toward the benefit of liberty. Jefferson is a classic case in point. As people became more prosperous under liberty, the theory went, they could devote ever more personal resources toward schooling. Children would not need to work but rather could be taught literacy in all important subjects. The most promising students among them would continue their education to eventually become leaders in society at all levels.

In civic life, there was one end sought: the protection, preservation, and promotion of human liberty. The city of man, as embodied in liberty, was to be advanced through the single tool of education. They saw education and liberty as a unified project, one that would not really be separable in theory or fact. They believed that the blessings of liberty would be so apparent that all forms of learning would assist in the grand goal of enhancing the cultural understanding of liberty.

Nor did they imagine the possibility of failure, much less of decivilization. That entire generation was convinced that progress was inevitable through the spread of freedom. Now that freedom had been discovered, there would be no going back.

In retrospect, the generation that absorbed enlightenment ideals was naïve in the extreme. If we look around the world today, we see that education has advanced in every sector. We cannot conceive of a child not attempting to gain admission to college. We tell the youth that the secret to success is to stay in school. As for elementary school and high school, we regard them as so important that they are public goods, to be provided by the state. And just to make sure that everyone gets an education, the law forbids kids from working, a fact which labor unions like and support if only to keep cheap labor out of the market. Access to great books, great minds, the best ideas of all of human history are everywhere.

But has this education assisted in the bolstering of liberty? All data indicate that the more objectively educated people become today, the more likely they are to trust the state as a means of social salvation. You can map this demographically. The higher the level of education, the more the inclination toward socialist thinking. Why is this? Hayek might say that it has something to do with the hubris of intellectuals who believe that they can concoct a better social order in their minds than the one that freedom can create. Mises might draw attention to the resentment on the part of intellectuals, that they are not as valued by society as entrepreneurs or sports stars. Rothbard might point out that intellectuals are drawn to the state as a way of legitimizing their ideas and securing their financial well-being.

Whatever the case, it is a fact that would have astounded people in the 18th century that the more education a person receives, the more they are drawn to social ideals that can only be realized under complete despotism, if then.

A person like Jefferson would have found this inconceivable. Meanwhile, the students who are taught in public school are being socialized in an uncritical attitude toward the state, and are often made victims of political fashion. Rather than read Jefferson or the great books, they are instructed in recycling and phony history designed to bolster political agendas.

The enlightenment intellectuals' attitude toward education was oddly defective for three reasons. The first is that the structure of the institution doing the educating matters a great deal. If the institution is owned and managed by the state, we can expect that the ideas it promotes will be favorable to the regime.

This should not be a controversial claim. If, for example, Wal-Mart were running our schools, who would be surprised that criticism of Wal-Mart would be kept to a minimum and that pro-Wal-Mart attitudes would be cultivated among students? We would expect that. It would not shock us. We would just consider the source.

But how rarely do we consider the source when it comes to state-funded education! There is an assumption that people make that education when sponsored by the state will be objective and keep the student's best interest at heart. This assumption makes no sense whatever, but it is nonetheless widely held. We encounter this often in dealing with the issue of elementary and secondary schools. If someone attends a Baptist or Catholic school, people ask how they can stand all that religious indoctrination. But have you ever heard a student in public school questioned as to how they can stand all that statist indoctrination? It's not likely.

The ownership and control of institutions does in fact matter for the quality of education a student receives and what the student will be taught.

The second point overlooked by the enlightenment generation is that ideology is more powerful over human minds than the mere abstraction of ideas in general. Especially today, it is nearly impossible to escape the pervasiveness of ideology. In the guise of biology or earth science, students are routinely fed environmentalist propaganda that blames capitalism for all the world's ills. In the guise of social science, socialist plans for political reconstruction are fobbed off on the unsuspecting.

There is such a thing as pure knowledge but it is increasingly hard to find. What this means is that more knowledge does not necessarily lead to social progress. It could in fact lead to social regress. It depends on the structure of the institution doing the teaching and its ideological perspective.

The third point overlooked in the enlightenment view of knowledge is that those with the strongest motive to influence the future will tend to dominate the debate and thus control the purposes to which education is directed. And in any society, the state seeks to be the leading influence in the culture — and it often succeeds. At some point in the life of every libertarian, we come to realize that vast amounts of what the media report are taken directly from the press releases of government agencies. This is just one of the ways in which the government manages to market itself and its priorities throughout society.

And this point about marketing ideas is a critical one. Let me explain this by way of analogy to the marketplace for goods and services. We've all had friends who claim to have come up with the idea of some product that is currently making a big splash in the marketplace. It's an uninteresting claim because it overlooks a critical fact. The hard work of enterprise is not so much in having an idea but in acting on it. Here is the step that makes the difference that leads to profitability.

An idea must have economic viability, that is to say, it must become an efficient part of the structure of the social allocation of goods and services. The iPhone might have been technologically viable five years ago, but only this summer did it become economically viable. And technical superiority does not necessarily equate to economic superiority. Once the problem of economics is overcome, there is the all-important issue of marketing, which means nothing other than getting the word out to others concerning the availability to the world.

Without economic and marketing considerations, the best ideas in the world will lie dormant. Your next-door neighbor might be sitting on the greatest formula for car wax that has yet to be found. But what does that mean in the real world? Essentially it means nothing until your neighbor discovers a way to turn that formula into the real thing, and further finds a way for others in society to acquire it.

It is precisely the same with ideas. If Mises had merely imagined the ideas in Human Action but never wrote them down, the world would be a very different place. If he had written them down but never sought a publisher, nothing would have come of them. And even after finding a publisher and seeing the physical book appear in 1940 in German, he had an additional problem: his ideas were not yet accessible in English. And so to accomplish this goal, he worked more years to present these ideas to a new postwar world, in a different language.

Why did he do this? Mises understood that ideas are what drive history forward. But ideas alone are not enough. They must be presented in an effective format that can be marketed, so to speak. And then they must be presented in a way that draws people to them.

Mises, in contrast to the enlightenment thinkers, knew that these last two stages of intellectual work could not be overlooked. He saw that the world of ideas is subject to the laws of economics in the same way that the market for goods and services is. There is a strong element of entrepreneurship necessary for ideas to succeed. Mises was so emphatic on this point that he went so far as to place the blame for social collapse on those who failed to fight for and promote good ideas.

In Theory and History, the first book that we published, Mises wrote that all ideas, whether good or bad, originate in the minds of individuals. But these ideas can only take hold if they are accepted by society. There is no guarantee that these ideas will be accepted. People will embrace bad ideas even unto their own self-destruction. But if they choose what is destructive, Mises wrote, "the fault is not theirs alone. It is no less the fault of the pioneers of the good causes in not having succeeded in bringing forward their thoughts in a more convincing form."

He sums up the point with the following claim: "The favorable evolution of human affairs depends ultimately on the ability of the human race to beget not only authors but also heralds and disseminators of beneficial ideas."

Thus did Mises know that it is not enough to hold the right views, though this is an essential step. It is just as important to do everything possible to see that these views are propagated and made compelling in a way that will transform society and politics. And this is why he became an advocate of a new institution that would be dedicated to liberty. This institution, he hoped, would not only be a source of new ideas. It would work to bring them about and realize them within the affairs of the human population.

Is this somehow skewing the marketplace for ideas? The claim is absurd, since the marketplace for ideas is built entirely upon ideas that have been discovered, heralded, and disseminated, and thereby become part of the structure of the world in which we live. In the same way that an entrepreneur cannot be content to merely imagine a shopping mall or a new search engine, but must also see these dreams realized economically and then marketed, in that same way we must not and cannot be content to merely hold sound views. We must work to see them realized.

And yet we are an impatient people, are we not? We want to see the effects of our work play themselves out in our own time, and we see the state expanding and liberty shrinking and we wonder whether or not work in the world of ideas is really worth it. We might consider that were it not for the opposition voices of the Misesians, the state would have had a freer hand, and our despotism would be worse than it is.

We might also consider that there is a time lag between the propagation of an idea and its realization.

Finally, consider that the crumbling of a failed ideology is not always observable; we only know it has happened once the effects are plain to the world. For example, in retrospect we now know that the socialist idea in Russia had been in a continued downfall for some 50 years before the state finally crumbled. And yet only a few years before that crumbling, the Western academics were assuring us that Soviet communism was a permanent feature of the world, and that its wonderful economic system would someday overtake our own.

We are so fortunate to live in times when we do in fact see the evidence of burgeoning all around us, from new technologies to new economic development to the practical decline of the state in managing world affairs. We have seen undeniable evidence of the failure of all-out planning and the amazing beauty created by the market economy. We have seen the complete collapse of the socialist idea. Mises had no such luxury. He saw war, depression, central planning, socialism — national and international — and inflation, and that pretty well sums up the whole of what he saw between his birth and death. And yet he fought on. Why?

Murray Rothbard once wrote an entire paper discussing this very point. He pointed out that Mises's social philosophy reinforced his battle for what is true. He knew that civilization and human existence were at stake. High theory is important but it is not enough. The advocate of the free market must carry the struggle to all levels of society. For Mises, no form of education was beneath his dignity. There was no separating theory from practice. This is why we must be wholly dedicated to liberty, peace, and free markets. We must come out squarely in favor of human life and flourishing. Rothbard concludes that "science may be value-free, but men can never be, and Ludwig von Mises never shirked the responsibilities of being human."

I can tell you, from my long friendship with Murray, that he might as well have been writing about himself. This spirit is with us tonight, in this room, in all we do, and all we will do for the next 25 years, for neither have you shirked your responsibilities.

Thanks to your generosity and help, in this year alone, we have seen an unbelievable increase in all our activities, from publishing to distribution to education. We have a new masterful biography of Mises that reconstructs the history and meaning of his time. We have ever more students and professors. Our ideas are reaching more and more people every day. And yet our work is nowhere near being done. A day must never pass when we cannot point to progress. We have inspiring models, not only in the work but also in the lives of Mises and Rothbard.

History, as always, hangs in the balance. May we all say that we did everything we could do to serve the good of humanity, to never give in to evil, to not merely oppose it in our hearts and minds, but also to proceed ever more boldly against it, and to displace the evil of statism with the blessings of liberty, which is the basis of civilization itself.

From the bottom of my heart, I thank you for your support of this cause. Now, onward to another and more astonishing 25 years.

 


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