The Last Knight of Liberalism

Chapter 12. Winds of War

1 During the 1920s and 1930s, many testimonies and analyses appeared in France, Britain, and the United States that condemned the treaty as a prolongation of the hostilities by other means, and thus as a heavy burden on future peace in Europe. See for example the account by the French diplomat Alcide Ebray, La Paix malpropre (Versailles)—pour la reconciliation par la vérité (Milano: Unitas, 1924); see also the testimony of the British diplomatic journalist Sisley Huddleston, In My Time (New York: Dutton & Co., 1938). Useful general discussions of the consequences of Versailles and Saint-Germain by contemporary witnesses are in John Maynard Keynes, The Economic Consequences of the Peace (New York: Harcourt, Brace and Howe, 1920); Sisley Huddleston, War Unless (London: Victor Gollancz, 1933); idem, Popular Diplomacy and War (Rindge, N.H.: Richard Smith, 1954); Christian Eckert, “Friedensverträge. II. Vom staatswissenschaftlichen Standpunkte,” Handwörterbuch der Staatswissenschaften, 4th ed. (Jena: Gustav Fischer, 1927), vol. 4, in particular pp. 509–12; Felix Ermacora, Der unbewältigte Friede—St. Germain und die Folgen (Vienna and Munich: Amaltha, 1989); and Jacques Bainville, Les conséquences politiques de la paix (Paris: Fayard, 1920).

2 Schutzstelle für österreichisches Vermögen im Auslande.

3 See the reports in Friedensrecht 1, no. 11 (June 20, 1922). This journal was the official publication of the Bureau.

4Friedensrecht 4, no. 2 (February 1925).

5Neue Freie Presse (November 18, 1924), p. 12.

6 F.A. Hayek, “Einleitung,” introduction to Ludwig von Mises, Erinnerungen (Stuttgart: Gustav Fischer, 1978,) p. xii.

7 The Laura Spelman Rockefeller Fund had followed a 1922 suggestion by Beardsley Ruml to move into the field of the social sciences. In 1923 the Fund started investing in social research with an explicit long-term “scientistic” orientation. In the same year, the Social Science Research Council was established, also on the initiative of Ruml. See Raymond Blaine Fosdick, The Story of the Rockefeller Foundation (New York: Harper, 1952), p. 193ff.

8 On the boat to New York he started translating Pierson’s article on the value problem in socialist societies. The translation was probably ready in August and Hayek submitted it to Weiss, who at the time was the editor of the Zeitschrift. See Hayek to Mises, letter of August 1923; Mises Archive 79: 15f.

9 “I also usually have work on the side. At present I am at the National Bureau for Economic Research collecting material for Professor Mitchell’s study of the Business Cycle.” Hayek to Mises, letter dated January 12, 1924; Mises Archive 81: 23.

10 Hayek, “Einleitung,” p. xi.

11 F.A. Hayek, Hayek on Hayek: An Autobiographical Dialogue (Chicago: Chicago University Press, 1994), p. 67.

12 Mises to Hayek, letter dated February 8, 1924; Mises Archive 81: 24. Mises here thanks Hayek for sending a report on his time in New York and talks about the position in the Kammer library.

13 See records in the files of the Vienna Chamber of Commerce.

14 See for example the documents concerning a May 24, 1921 meeting on the premises of the Bank to discuss exchange rate policies. Among the participants were Spitzmüller, Wieser, Schumpeter, Schwiedland, Schiff, and Mises. See Mises Archive 74: 3ff.

15 Ludwig von Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” Schriften des Vereins für Sozialpolitik 164, no. 2 (1923): 19f.; my translation. Mises pointed out that it was not possible to “compensate the owners of claims denominated in marks for losses they have suffered from 1914 to 1923” because the “present owners of the claims are not always identical with those who have suffered the loss. The bulk of the fungible claims and a considerable part of all other claims have changed hands over the years.”

16 From Mises’s second comment at the 1924 meeting of the Verein für Sozialpolitik; see Mises Archive 22: 80ff. Spitzmüller remained faithful to his line even many years after the event. In March 1929, he gave two lectures on the policy of the Austrian central bank. He attacked the stance taken by the bank and by the industry, and in his second lecture also dealt several times with Mises whom he criticized for an alleged lack of consistency. See Mises Archive 80: 81.

17 Mises reacted to a statement to this effect of Spitzmüller’s in a comment made at the 1924 meeting of the Verein für Sozialpolitik; see Mises Archive 22: 80ff. See also the identical statement by E. Weidenhoffer, secretary of the Hauptverband der Industrie Österreichs in Styria, which he made in a March 1924 letter to Mises; Mises Archive 80: 81.

18 See the newspaper report in Mises Archive 107: 24.

19 Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” pp. 6f.; translated as “Stabilization of the Monetary Unit—From the Viewpoint of Theory,” On the Manipulation of Money and Credit, Percy L. Greaves, trans. (New York: Free Market Books, 1978), pp. 8f.

20 This concerned in particular the Austrian directors, who were predominantly statist and inflationist. The Hungarian directors were generally advocates of the gold standard. Mises made this point in a 1924 Verein für Sozialpolitik debate with Spitzmüller. See Mises Archive 22: 80ff.

21 Mises Archive 74: 31. The editor of the Neue Freie Presse, Moritz Dub, thanked Mises especially for the latter piece in which he had quoted from a speech by Carl Menger, who was himself a former editor of the NFP.

22 Mises’s letter to Moriz Dub, June 24, 1922, Mises Archive 74: 37. Moriz (or Moritz) Dub was the economics editor of the Neue Freie Presse and author of several popular books on economic problems. In the postwar period, he published two works on the “catastrophic boom” induced by inflation of the money supply. See Moriz Dub, Katastrophenhausse und Geldentwertung (Stuttgart: Enke, 1920); idem, Die weitere Entwicklung der Katastrophenhausse in Oesterreich mit Streiflichtern auf Deutschland (Stuttgart: Enke, 1922).

23 Mises Archive 17: 53, 53b, 55.

24 Mises Archive 17: 55, 55b.

25 Mises Archive 17: 3f.

26 Mises Archive 17: 5. The record seems to be incomplete.

27 Mises Archive 20: 7ff. The record seems to be incomplete. There are no records for 1922–1923.

28 Hayek, Hayek on Hayek, p. 66.

29 Hayek to Mises, letter dated August 17, 1923; in Mises Archive 79: 15.

30 Mises, Erinnerungen, p. 64; my translation.

31 Eric Voegelin, Autobiographical Reflections, vol. 34 of the Collected Works of Eric Voegelin (Baton Rouge: Louisiana State University Press, 1989), pp. 2f.

32 Spann’s anti-Semitism was notorious. His full professorship in 1919 signaled a somewhat broader anti-Semitic movement that began infecting university life in the early years of the Republic, turning the University of Vienna into a battlefield for Mises and other liberal Jews. Kelsen proved to be one of the last Jews to obtain a full professorship, which he attained in 1918. See ibid., p. 6.

33 See the discussion of this question in Ludwig von Mises, Epistemohgical Problems of Economics (Auburn, Ala.: Ludwig von Mises Institute, [1933] 2003), pp. 42–50.

34 F.A. Hayek, “Friedrich Freiherr von Wieser,” Jahrbuch für Nationalökonomie und Statistik 125 (3rd series vol. 70 [1926]): 526.

35 The book appeared again in the prestigious series Grundriss der Sozialökonomik (Outline of Social Economics). The series was published in twelve volumes from 1914 to 1930. Especially the first volumes, some of which have appeared in two editions (prewar and postwar) and which deal with the history of economic science and with general economic theory, still have lasting value. Especially noteworthy is the first volume, Wirtschaft und Wirtschaftswissenschaft (1914, 1924) which contains the following essays: Karl Bücher, “Volkswirtschaftliche Entwicklungsstufen;” Joseph Schumpeter, “Epochen der Dogmen und Methodengeschichte;” Eugen von Philippovich, “Entwicklungsgang der wirtschafts- und sozialpolitischen Systeme und Ideale. I. Die Entwicklung bis zum Kriege;” Eduard Heimann, “Entwicklungsgang der wirtschafts- und sozialpolitischen Systeme und Ideale. I. Die jüngste Entwicklung.” Equally remarkable is volume three, which contains Friedrich von Wieser’s Theorie der gesellschaftlichen Wirtschaft (1914, 1924) and volume four, which features Max Weber’s famous Wirtschaft und Gesetischaft (1922).

36 Werner Neudeck points out that Mayer was simply higher up in a pecking order that gave much weight to seniority. Mayer had already been a paid professor (Ordinarius) in Prague and Graz, whereas Mises had only an unpaid position (Extraordinarius) in Vienna. See Werner Neudeck, “Der Einfluss von Ludwig von Mises auf die Österreichische akademische Tradition gestern und heute,” Wirtschaftspolitische Blätter 28, no. 4 (1981): 26.

37 “The simplicity of argument and great accessibility of Cassel’s book ensured its success. It was translated into many languages and was probably the most widely-read textbook on economics in the interwar period.” Mark Blaug, Great Economists before Keynes: An Introduction to the Lives and Works of One Hundred Great Economists of the Past (Cambridge: Cambridge University Press, 1986), p. 42.

38 Schumpeter and Cassel are self-declared Walrasians. On Wieser’s Walrasianism, see Mises, Erinnerungen, p. 21; George Stigler, Production and Distribution Theories: The Formative Period (New York: Macmillan, 1949), p. 158; Hans-Hermann Hoppe and Joseph T. Salerno, “Friedrich von Wieser und die moderne Österreichische Schule der Nationalökonomie,” Herbert Hax, ed., Friedrich von Wiesers “ Über den Ursprung und die Hauptgesetze des wirthschaftlichen Werthes,” in Vademecum zu einem Klassiker der österreichischen Schule (Düsseldorf: Handel und Finanzen, 1999); Bruce Caldwell, “Wieser, Hayek, and Equilibrium Theory,” Journal des Economistes et des Etudes Humaines 12, no. 1 (2002); Joseph T. Salerno, “Friedrich von Wieser and F.A. Hayek: The General Equilibrium Tradition in Austrian Economics,” Journal des Economistes et des Etudes Humaines 12, no. 2&3 (2002).

39 The Handwörterbuch also revealed the pecking order in business cycle theory. Here the lengthy entry came from the pen of Arthur Spiethoff, a Schmollerite to the core who opposed all monetary theories of the trade cycle. See Arthur Spiethoff, “Krisen,” Handwörterbuch der Staatswissenschaften, 4th ed. (Jena: Gustav Fischer, 1925), vol. 6.

40 Joseph A. Schumpeter, “Das Sozialprodukt und die Rechenpfennige,” Archiv für Sozialwissenschaften und Sozialpolitik 44 (1917).

41 In his contribution to the festschrift that celebrated Wieser’s seventy-fifth birthday in 1926, Mises picked the subject of “the role of money in the realm of economic goods.” Here he attacked the dominant Wieserian income theory of money, arguing that money in general and gold in particular was an economic good—not mere tokens for other “real” goods—and that marginal value theory could therefore be applied directly to money, rather than merely indirectly through the value of some underlying real goods. The piece was published only six years later. Friedrich von Wieser had died in 1926 and the editor of the festschrift, Hans Mayer, then chose to publish a comprehensive overview of contemporary economic science in four volumes. Mises’s contribution appeared as “Die Stellung des Geldes im Kreise der wirtschaftlichen Güter,” Hans Mayer, ed., Die Wirtschaftstheorie der Gegenwart (Vienna: Springer, 1932), vol. 2, pp. 309–18; translated as “The Role of Money in the Realm of Economic Goods,” Money, Method, and the Market Process: Essays by Ludwig von Mises, Richard Ebeling, ed. (Boston: Kluwer, 1990).

42 Hayek, Hayek on Hayek, p. 66. The Wieserian approach had found its way into Spann’s thought, see Shigeki Tomo, “The Year 1922: A Watershed for Mises and Hayek” (Auburn, Ala.: Ludwig von Mises Institute working paper, September 2003). Similarly, the idea of imputation was familiar to legal theorists. Hans Kelsen had pioneered the pure theory of law, which imputed every single norm back to a fundamental norm. See in particular Hans Kelsen, Hauptprobleme der Staatsrechtslehre (Tübingen: Mohr, 1911). In the early 1920s, he had reiterated this thesis in works relating to the problem of sovereignty. See Kelsen, Das Problem der Souveränität und die Theorie des Völkerrechts (Tübingen: Mohr, 1920); idem, Der soziologische und der juristische Staatsbegriff (Tübingen: Mohr, 1922).

43 F.A. Hayek, “Bemerkungen zum Zurechnungsproblem,” Jahrbuch für Nationalökonomie und Statistik 124 (3rd series vol. 69 [1926]): 3; translated as “Some Remarks on the Problem of Imputation,” Money, Capital, and Fluctuations: Early Essays, Roy McCloughry, ed. (Chicago: University of Chicago Press, 1984), p. 35.

44 Hayek, “Bemerkungen zum Zurechnungsproblem,” p. 6; trans., p. 39.

45 This argument would remain a staple of Hayekian thought. See for example Hayek, “Competition as a Discovery Procedure,” Quarterly Journal of Austrian Economics 5, no. 3 ([1968] 2002).

46 Hayek, “Bemerkungen zum Zurechnungsproblem,” p. 18; trans., p. 53.

47 Étienne Bonnot, Abbé de Condillac, Commerce and Government: Considered in Their Mutual Relationship (Cheltenham, U.K.: Edward Elgar, 1997), pp. 261f.:

When trade is perfectly free, the quantity and the need are apparent in all the markets. Then goods put themselves at their true price, and plenty spreads equally everywhere.... But when one has once taken all freedom from trade, it is no longer possible to judge, either if there is really an imbalance between the quantity and the need, or what it is.

See also Hermann Heinrich Gossen, Entwickelung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für menschliches Handeln (Braunschweig: Vieweg & Sohn, 1854), pp. 90ff., 231; Adolph Thiers, De la propriété (Paris: Paulin, Lheureux & Cie, 1848).

48 See F.A. Hayek, Individualism and Economic Order (Chicago: University of Chicago Press, 1948).

49 Hayek, “Einleitung,” pp. xivf. The Mayer line ended with his student Wilhelm Weber, who became “the first important teacher of Keynesianism in Austria.” Werner Neudeck, “Der Einfluss von Ludwig von Mises auf die Österreichische akademische Tradition gestern und heute,” Wirtschaftspolitische Blätter28, no. 4 (1981): 32. Neudeck asserts that Mises was the last economist who managed to establish an internationally recognized school in Austria (see ibid., p. 31).

50 “Strictly speaking, only Fritz Machlup was originally a disciple of Mises” (Hayek, “Einleitung,” p. xii). On Machlup see Jacob Dreyer, Breadth and Depth in Economics: Fritz Machlup—The Man and His Ideas (Lexington, Mass.: Lexington Books, 1978).

51 Gerhard Jagschitz, Die Jugend des Bundeskanzlers Dr. Engelbert Dollfuss (University of Vienna: Doctoral dissertation, 1967), pp. 144f. and passim. The main organizational vehicle in the campaign was the Katholisch-Deutscher Akademikerausschuss.

52 Kenneth Boulding quoted in Gottfried von Haberler, “Fritz Machlup: In Memoriam,” Cato Journal 3, no. 1 (1983): 14.

53 Fritz Machlup, Der Golddevisenstandard (Halberstadt, 1925); idem, Börsenkredit, Industriekredit und Kapitalbildung (Vienna: Springer, 1931).

54 Dr. Machlup-Wolf is an excellent economist.... The second book (Börsenkredit, Industriekredit und Kapitalbildung) is really a master piece” (Mises to Kittredge, letter dated March 31, 1933; Mises Archive 67: 5. This was a letter of recommendation for the Rockefeller Foundation.) Mises concluded:

There is no doubt that Machlup is in all respects the worthiest man for a Rockefeller fellowship. This is not merely my opinion who was his teacher for many years, but everybody’s. Last year he lectured at the London School of Economics and Political Science and had a great success.

55 In those years, Mises was asked to co-author two entries for the new 12th edition of the Encyclopaedia Britannica (this edition was in fact a two-volume supplement to the 11th edition). See Mises’s contributions in “Austrian Empire,” Encyclopaedia Britannica, 12th ed. (1921), vol. 30, pp. 323–24; “Republic of Austria,” ibid., pp. 348–49.

56 In November 1922, Mises said he had “talked to an English professor” about a translation of his book Die Gemeinwirtschaft into English (see Mises to Zimmermann, letter dated November 22, 1922; Mises Archive 75: 20). This was probably Gregory, who was the only Englishman among the recipients of a complimentary copy (see the list in Mises Archive 75: 8). Documented contacts to William Beveridge date back to the summer of 1924, when Mises had him (and Gregory) sent complimentary copies of the second edition of his Theorie des Geldes und der Umlaufsmittel (see correspondence between Mises and his publisher Duncker & Humblot, dated June 24, 1924 in Mises Archive 78: 28, 35). In early November 1924, Mises traveled to London and talked with Robbins about the translation of Gemeinwirtschaft (75: 11). He then had him sent a complimentary copy of Gemeinwirtschaft, probably as a Christmas gift (see 57: 51). By this time, his command of English was fairly good, as evidenced by his comments on the translation that Robbins (and later also Schwartz) made of parts of Gemeinwirtschaft (83: 23ff., 4ff.). Still in his meetings with Gregory and Robbins, Mises probably spoke German. Gregory was an excellent speaker of the language, and Robbins could follow a conversation in German even though he was not himself fluent in it.

57 On Lionel Robbins see in particular his Autobiography of an Economist (London: Macmillan, 1971); D.P. O’Brien, Lionel Robbins (London: Macmillan, 1988).

58 Robbins, Autobiography of an Economist, pp. 73–74.

59 Ibid., p. 106. In those days, LSE students had to prove their ability to translate from two foreign languages after their first year of study.

60 Tugendhat was probably the same person who took part in Mises’s first private seminar in the winter semester of 1919–1920. In this case there was a strong early personal connection between the circles in London and Vienna.

61 Mises to Fischer, letter dated October 7, 1924; Mises Archive 75: 49.

62 Himself a monarchist, his great achievement was to reconcile Austrian Catholicism with the republic and thus to spare Austria the fate of other countries, such as France, Italy, and Spain, where after the establishment of the republic the political Right split into conservative monarchists and republican democrats. See Heinrich Dimmel, “Ignaz Seipel,” Tausend Jahre Österreich, Walter Pollack, ed. (Vienna: Verlag Jugend und Volk, 1974), vol. 3, pp. 299ff.

63 For an ex-post analysis of this dependence, see the statements of Spitzmüller and others in Verhandlungen des Vereins für Sozialpolitik in Zürich 1928. Schriften des Vereins für Sozialpolitik 175 (1929).

64 For details see Franz Baltzarek, “Ludwig von Mises und die österreichische Wirtschaftspolitik der Zwischenkriegszeit,” Wirtschaftspolitische Blätter 28, no. 4 (1981): 132; Mises, Erinnerungen, pp. 50–54.

65 Mises to Mellish, letter dated January 25, 1962; Grove City Archive: “M” files. See also Mises, Erinnerungen, p. 51. Seipel’s economic and political views were of course shaped to a large extent by prevailing Catholic moral views on social organization, in particular by Pope Leo XIII’s encyclical Rerum novarum (1891). He was also known as a sharp critic of racial anti-Semitism; in his eyes the Austrian Jews were a national minority and should enjoy all minority rights. See his article “Minoritätenschutz und Judenfrage nach dem christlichsozialen Programm,” Volkswohl 10, no. 2 (February 1919).

66 The former director, Mises’s friend Emil Perels, moved on to another position. He was appointed director of the Kreditimtitut für öffentliche Arbeiten (Credit Institute for Public Works).

67 Eckert, “Friedensverträge. II. Vom staatswissenschaftlichen Standpunkte,” pp. 512ff.

68 Mises, Erinnerungen, pp. 54, 62.

69 R.G. Hawtrey, Monetary Reconstruction, 2nd ed. (London: Longmans, Green & Co., 1926), chap. 6.

70 Some Austrians then claimed the new international system had been invented by their finance minister, Steinbach, in 1897. In fact, however, the system was devised by David Ricardo in “Proposals for an Economical and Secure Currency,” Works and Correspondence, Piero Sraffa, ed. (Cambridge: Cambridge University Press, 1951–1973), vol. 4.

71 Mises, Geldwertstabilisierung und Konjunkturpolitik (Jena: Gustav Fischer, 1928).

72 Mises Archive 74: 25.

73 The government had a tobacco monopoly and one for salt, but the receipts were meager. See Mises’s statement in Mises Archive 57: 16.

74 From the end of August till the end of December 1922, the number of unemployed receiving government assistance in the city of Vienna alone rose from 24,000 to 58,000. On February 24, 1923, there were 112,000 unemployed in Vienna and the surrounding districts, of whom 98,000 received government assistance. See Mises’s undated letter to an unknown recipient in Mises Archive 57: 16. This document summarizes Mises’s view on economic conditions in Austria in early 1923. Mises wrote it in reply to an unknown Anglo-Saxon friend, who had visited Vienna some time earlier. Throughout 1923, unemployment was at 110,000. It would further increase over the following years, reaching some 200,000 by 1929. See Redaktionskomitee der Wirtschaftskommission, Bericht über die Ursachen der wirtschaftlichen Schwierigkeiten Österreichs (Vienna: Österreichische Staatsdruckerei, 1930), p. 25.

75 Murray N. Rothbard, America’s Great Depression, 5th ed. (Auburn, Ala.: Ludwig von Mises Institute, 2000); Benjamin Anderson, Economics and the Public Welfare (Indianapolis: Liberty Press, 1979), esp. chap. 18. See also the figures in Milton Friedman and Anna J. Schwartz, Monetary History of the United States (Princeton, N.J.: Princeton University Press, 1963), pp. 710ff.

76 Mises, Erinnerungen, p. 58; Notes and Recollections (Spring Mills, Penn.: Libertarian Press, 1978), p. 90.

77 From the winter 1929–1930 report of the Industrieller Klub. See Mises Archive 66a: 53ff.

78 Ibid.

79 See Mises, “Die Sanierung der europäischen Staatsfinanzen,” in Mises Archive 40b; 57: 53. The Magyar Cobden-Szövetség (Hungarian Cobden Association) was a group of free-market businessmen, economists, and journalists in Budapest. Before Mises, Sombart, Oppenheimer, Rist, and George Paish had spoken at its meetings. They were all received in the most luxurious conditions (Hotel Ritz) and were probably very well paid as well. One of Mises’s main contacts in Budapest was a certain Felix Schwarz, who was no academic. Schwarz visited regularly with Mises in Vienna and had contacts with the Pester Lloyd, a Budapest journal that frequently ran reviews of Mises’s books (see Mises Archive 78: 34f., 45; 80: 50).

80 Many years later he wrote:

When my money book appeared in the year 1912, all German reviewers rejected it with very unfriendly words. It was only due to the monetary collapse, which destroyed much more than the monetary system that, when the currency catastrophe approached, even the Verein für Sozialpolitik had second thoughts and asked me—rather than Knapp or Bendixen—to write a report on the problems of monetary stabilization, and that the second edition of my book in 1924 had a much better reception. (Mises to Volkmar Muthesius, letter dated May 18, 1959; Grove City Archive: Hahn files)

81 Mises to Adolf Grote, letter dated June 29, 1959; Grove City Archive: Grote file.

82 Albert Hahn, Volkswirtschaftliche Theorie des Bankkredits (Tübingen: Mohr, 1920). Hahn eventually changed his mind under the impact of the German hyperinflation and of criticism, most notably from Hayek and other members of the Austrian School (see the 1930 third edition of his book). Still later, he wrote a piece comparing his 1920 statements with the corresponding passages in John Maynard Keynes’s General Theory of Employment, Interest, and Money (New York and London: Harcourt, Brace, 1936). See Albert Hahn, “Continental European Pre-Keynesianism,” The Economics of Illusion, chap. 16; reprinted in Henry Hazlitt, ed., The Critics of Keynesian Economics, 2nd ed. (Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1995), pp. 287–303.

83 Duncker & Humblot (the Verein’s publisher) to Mises, letter dated February 26, 1923; Mises Archive 78: 6.

84 Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” Schriften des Vereins für Sozialpolitik 164, no. 2 (Munich: Duncker & Humblot, 1923); 4f., 8f.; translated as “Stabilization of the Monetary Unit—From the Viewpoint of Theory,” pp. 6, 11.

85 Anton Burghardt, Soziologie des Geldes und der Inflation (Vienna: Böhlaus, 1977), p. 65. On the German inflation see F.D. Graham, Exchanges, Prices, and Production in Hyperinflation: Germany, 1920–23 (Princeton, N.J.: Princeton University Press, 1930); Costantino Bresciani-Turroni, The Economics of Inflation: A Study of Currency Depreciation in Post-War Germany (London: Allen and Unwin, 1937); Rudolph Stucken, Deutsche Geld- und Kreditpolitik, 1914–1963, 3rd ed. (Tübingen: Mohr, 1964), chaps. 3 and 4.

86 Mises to Duncker & Humblot, letter dated May 25, 1923; Mises Archive 78: 14. The delay was caused by the other contributor to the volume, ex-minister Klein, who was unable to return his proof pages in the agreed time; see Duncker & Humblot’s letter to Mises, dated May 18, 1923 in Mises Archive 78: 12. Publications of the Verein für Socialpolitik were usually meant to have an impact on current policy; see Franz Boese, Geschichte des Vereins für Sozialpolitik, 1872–1932 (Berlin: Duncker & Humblot, 1939), pp. 164, 183f.

87 Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” p. 10; translation p. 13.

88 Ibid., p. 15.

89 Stucken, Deutsche Geld- und Kreditpolitik, 1914–1963, p. 49.

90 Ibid., p. 52.

91 Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” p. 13.

92 Ibid. The expression “100% marginal gold standard” is, I believe, Prof. Philippe Nataf’s.

93 Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” p. 16; my translation.

94 Ibid., p. 33; my translation. The deficiences he alludes to concern the absence of legal limitations on checking accounts and other money substitutes.

95 But the 1953 Mises Plan was substantially the same plan he first presented in 1923. See Mises, Theory of Money and Credit (New Haven, Conn.: Yale University Press, 1953), part 4.

96 Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” p. 17; my translation.

97 Ibid., pp. 34f.

98 Mises, Human Action: A Treatise on Economics (New Haven, Conn.: Yale University Press, 1949), p. 780.

99 Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” p. 30.

100 Ibid., p. 32; my translation.

101 Nicholas Oresme, “A Treatise on the Origin, Nature, Law, and Alterations of Money,” Charles Johnson, ed., The De Moneta of Nicholas Oresme and English Mint Documents (London: Nelson & Sons, 1956).

102 Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” p. 36; my translation.

103 Hawtrey, Monetary Reconstruction, chap. 4.

104 See Mises, Erinnerungen. He probably could have increased his revenue several times, if it is licit to extrapolate pre-WW I data. Indeed, before the war, the leading executives of the Credit-Anstalt (Spitzmüller) and of the Bodenkreditanstalt (Sieghart) had a basic annual income of 50.000 kronen, whereas civil servants of the rank Mises attained in the 1920s (Ministerialrat) earned 12.000 kronen. See Bernard Michel, Banques et banquiers en Autriche au début du 20e siècle (Paris: Presses de la Fondation nationale des sciences politiques, 1976), pp. 324f.

105 See the correspondence between Mises and Duncker & Humblot in Mises Archive 78: 7, 9, 17, 38. Mises had Duncker & Humblot send 14 of the 50 complimentary copies directly to the recipients. He himself distributed the remaining 36 copies (see Mises Archive 78: 28).

106 Mises, Theory of Money and Credit (Indianapolis: Liberty Fund, 1980), p. 34.

107 Mises, “Zur Klassifikation der Geldtheorie” (On the classification of monetary theories), Archiv für Sozialwissenschaft und Sozialpolitik 44 (1917/1918): 198–213.

108 Mises, Theory of Money and Credit, p. 35.

109 See Mises’s manuscript in Mises Archive 78: 32. He had planned to give the new introduction the title “The Place of the Theory of Money and Fiduciary Media Within the System of Theoretical Economics” (see Mises Archive 78: 33), but also abandoned this idea.

110 See the correspondence in Mises Archive 78: 7, 20, 22, 26, 38.

111 Here are the sales figures (see Mises Archive 78: 2, 52): 1924: 839/721, 1925: 420/409, 1926: 144/139, 1927: 78/77, 1928: unknown, 1929: unknown, 1930: 70, 1931: 110. Remaining copies on May 21, 1932: 150. In 1932, Dunckler & Humblot already talked about a third edition of the book, and in light of the sales it is certain that this edition would have been forthcoming. The rise of National Socialism in Germany prevented this project.

112 Herbert Döring, Die Geldtheorien seit Knapp, 2nd ed. (Greifswald: Bamberg, 1922); Melchior Palyi, Der Streit um die Staatliche Theorie des Geldes (Munich: Duncker & Humblot, 1922); G.M. Verrijn Stuart, Inleiding tot de Leer der Waardevastheid van het Geld (The Hague: Mouton, 1919); Walter Eucken, Kritische Betrachtungen zum deutschen Geldproblem (Jena: Gustav Fischer, 1923). The latter work is not mentioned in Mises’s book, but Mises refers to it in correspondence; see Mises Archive 80: 52.

113 Mises Archive 78: 21. In his book, Keynes had adopted the position of Irving Fisher and Gustav Cassel, according to which monetary policy should strive to stabilize the purchasing power of money.

114 Eckert, “Friedensverträge. II. Vom staatswissenschaftlichen Standpunkte,” p. 490.

115 Two years before, at the fiftieth anniversary convention in Eisenach, Mises’s friend Georg Jahn had unsuccessfully agitated for the transformation of the Verein into a pure research association (see Boese, Geschichte des Vereins für Sozialpolitik, 1872–1932, pp. 176ff.). Two motivations seemed to be at work in this attempt. On the one hand, Max Weber’s ideal of a value-free social science had won many followers among the younger generation. On the other hand, the socialist November revolutions of 1918 had produced a political radicalization of its members and of the larger society. This radicalization diminished the status of the middle-of-the-road mainstream, which in the past had been the main agent of political compromise within the Verein and of its application in government policy.

116 Boese, Geschichte des Vereins für Sozialpolitik, 1872–1932, pp. 186ff.

117 See “Verhandlungen des Vereins für Sozialpolitik in Stuttgart 1924,” Schriften des Vereins für Sozialpolitik 170 (1925): 139ff.

118 Georg Jahn, “Freihandelslehre und Freihandelsbewegung,” Handwörterbuch der Staatswissenschaften, 4th ed. (1927): 369f., vol. 5.

119 By the end of October 1924, he had not signed it. See the copy of the proclamation and the list of its supporters in Grove City Archive: “I” file.

120 Mises spoke from notes consisting of keywords. He later developed these notes into two manuscripts that he sent to the Verein’s manager, Franz Boese, who handled the publication of the proceedings (see Mises Archive 80: 56). The manuscripts with Mises’s comments are contained in Mises Archive 22: 71ff.

121 Mises Archive 80: 55.

122 Criticizing the effectiveness of monetary policy, Mises also seemed to advance an early version of the rational-expectations argument. He stressed that he did not want to argue that future inflation would be prevented by more enlightened monetary authorities. His point was rather that economic enlightenment of the general public would deny inflationary monetary policy any effect. As soon as the public became aware of falling exchange rates, everybody would turn to smuggling, at which point the government could not finance itself by printing banknotes.

123 Mises to Eric Voegelin, letter dated June 12, 1925; Mises Archive: 79: 11:

Next week I will travel to Brussels [to the Chamber of Commerce convention]... and then to London, where I will again look up my English friends. I have great expectations for the visit, even if I can only stay in London for a short time.

124 The conversion rate was 10,000 kronen = 1 schilling. The krone had been introduced in 1892 in substitution for the Gulden banknotes, which however circulated during the next few years. The substitution process was ended by January 1, 1900.

125 For Menger’s writings in the context of the 1892 reform, see Carl Menger, Gesammelte Werke, F.A. Hayek, ed. (Tübingen: Mohr, 1968), vol. 4.

126 The name of the association was Deutscher Hauptverband der Industrie. The meeting took place at the association’s headquarters in Teplitz on March 15, 1924; see Mises Archive 57: 20ff. Mises might have given a similar talk to the Association of Merchants and Industrialists in Berlin (Verein Berliner Kaufleute und Industrieller). See Oscar Heimann to Mises, letter dated December 31, 1923; Mises Archive 57: 1.

127 Mises Archive 57: 24.

128 Mises, “Finanz- und währungspolitische Fragen in der Gegenwart,” Mitteilungen des deutschen Hauptverbandes der Industrie 5 (12): 201–09, Teplitz-Schönau, March 20, 1924.

129 Mises Archive 57: 11.

130 Mises Archive 80: 64. Janovsky later became a Misesian. See his February 3, 1932 letter to Mises, in which he criticizes the currency proposal of a certain Jellinek as not conducive to the aims he has set himself (in Mises Archive 71: 62). In the fall of 1932, Janovsky gave a speech before the Gesellschaft österreichischer Volkswirte. Mises was instrumental in arranging this talk (see Mises Archive 71: 126).

131 Mises, “Die Goldwährung,” Neues Wiener Tagblatt (April 12, 1925). A copy is in Mises Archive: 106: 18.

132 Margit von Mises, My Years With Ludwig von Mises, 2nd ed. (Cedar Falls, Iowa: Center for Futures Education, 1978), p. 13. The book is, as the author correctly points out, the only available testimony on Mises the man from a firsthand source. But its statements are not fully reliable, as two examples show. First, the author lied about her age, claiming to be six years younger than she really was. Even on her gravestone, the birth year is incorrectly given as 1896. Her correct birth year is stated, in her marriage certificate as well as in U.S. immigration paperwork, as 1890 (see the 1941 U.S. “Affidavit of Identity and Nationality;” a copy is in Grove City Archive: Mexico 1942 files). Second, Margit states that she “was the only woman he wanted to marry from the first moment he met her.” While this statement might be true, the following sentence, in which she claims that Ludwig “never changed his feelings or his mind about this decision,” is demonstrably wrong, as we will see in a later chapter. These examples show that Margit von Mises’s biographical recollections must be read with caution. The present work uses her statements only where other evidence does not contradict them.

133 Ibid., pp. 3, 9.

134 Mises, Socialism: An Economic and Sociological Analysis (Indianapolis: Liberty Fund, 1981), pp. 85f. Mises’s treatment of the genius (p. 166) was anticipated by George Bernard Shaw in his “Earning a Living and Creative Work.” Mises did not know this passage from Shaw at the time. Twenty-five years later, a German correspondent pointed out the parallel. See Johannes Bahner to Mises, letter dated June 12, 1947; Grove City Archive: “B” file.

135 Margit von Mises, My Years with Ludwig von Mises, p. 36.