The Story of the Mises InstituteTags History of the Austrian School of Economics
[Prepared for delivery in Hamburg, Germany, upon receiving the Roland Baader Prize.]
Thank you very much for the great honor you have conferred on me. The Roland Baader Prize is named for an outstanding champion of the free market and disciple of Ludwig von Mises. As I am the founder of the Ludwig von Mises Institute, you will not be surprised to learn that I too am a disciple of Mises. I am sure that the members of this audience revere Mises as well, and I’d like to point out another thing we have in common. The Mises Institute is headquartered in Alabama, a state in the American South, and I am speaking to an audience in Germany. My friend Judge John Denson, whom many of you will know from his books on revisionist history, has said that both Germany and the South were conquered and then occupied by the American army.
I’d like to begin by telling you something about how I founded the Mises Institute in 1982 and what we are trying to accomplish. Thirty-five years ago, when I was contemplating the creation of a Ludwig von Mises Institute, the Austrian School of economics, and its Misesian branch in particular, were very much in decline. The number of Misesian economists was so small that all of them knew each other personally, and could probably have fit in Mises’s small living room. This is a world that young people today, who find Austrian economics all over the place, can hardly imagine.
I wanted to do what I could to promote the Austrian School in general and the life and work of Mises in particular. Mises was a hero both as a scholar and as a man, and it was a shame that neither aspect of his life was being properly acknowledged.
I first approached Mises’s widow, Margit, who was what Murray Rothbard called a “one-woman Mises industry.” After her husband’s death, she made sure his works stayed in print and continued to be translated into other languages. She agreed to be involved and to share her counsel as long as I pledged to dedicate the rest of my life to the Institute. I have kept that pledge. Margit von Mises became our first chairman. How lucky we were to have as her successor, the great libertarian businessman Burt Blumert, who was also a wise advisor from the beginning.
When I told Murray Rothbard about the proposed institute, he clapped his hands with glee. He said he would do whatever was necessary to support it. He became our academic vice-president and inspiration.
Ron Paul agreed to become our distinguished counsellor, and was also a huge help in assembling our early funding, as well as an inspiration.
Murray would later say, “Without the founding of the Mises Institute, I am convinced the whole Misesian program would have collapsed.” Of course, we can’t know how things would have turned out had we made different choices. I simply wanted to do what I could, with the help of dear friends like Murray and Burt, to support the Austrian School during some very dark times, and I was prepared to let the chips fall where they may.
When I look back on all we’ve accomplished over the past 35 years, I can hardly believe it. Naturally we’ve promoted and kept in print works of Mises, the Nobel Prize-winning works of F.A. Hayek, and the indispensable catalogue of Murray Rothbard. Beyond that, we’ve made available to the world, free of charge, an enormous library of the most brilliant and important works ever written on Austrian economics and libertarian theory.
On our campus, the library and archives – based on the massive collections of Rothbard and Bob LeFevre’s Freedom School – are incomparable. We have lecture halls, classrooms, student and faculty offices, student housing, a bookstore, and much more, all thanks to our magnificent donors.
Then there’s the entire run of the Quarterly Journal of Austrian Economics (which the Institute publishes), its predecessor, the Review of Austrian Economics, Murray Rothbard’s Journal of Libertarian Studies, and the publications that he edited during the especially dark days of the 1960s and 1970s. Add to that many thousands of articles on every subject under the sun and thousands of hours of free audio and video from our seminars and other events, and you have a program of self-education that at one time would have required access to university libraries and a huge investment of time and money.
At the Mises Institute, we aim to introduce students to the thought of Mises and his great student Murray Rothbard, and I would like to tell you something about each of these great heroes of liberty.
How blessed are we that we have not a criminal like Marx nor a monster, like Keynes to follow, but Ludwig von Mises, a hero as well as a genius.
Mises was not only a dazzling economist and champion of liberty, but no Communist, nor Nazi, nor central banker could pressure him into doing the wrong thing.
Born in 1871 in the city of Lemberg, then part of the Austro-Hungarian empire, he moved with his family to Vienna as a young man. Mises’s father was a high executive in the Austro-Hungarian railways.
The grammar schools and gymnasiums he attended—super high schools in our terms—still have his records. He was recognized as extraordinary from the first.
Mises excelled as a student at the University of Vienna, earning a doctorate in economics and law. He wrote a book on housing policy before encountering Menger’s Principles and becoming an Austrian economist.
Mises clerked for judges and practiced law before getting a job as an economist at the professional housing association. While there, he demonstrated that high real estate taxes were hindering new construction, a serious problem in housing-short Vienna. Through his papers and lectures, that is, the pure power of his mind, he brought about a cut in taxes, leading to more investment in housing, exactly as he had predicted.
Mises was denied a paid position at the university, despite publishing his astounding Theory of Money and Credit. Before the founding of the Fed, he demonstrated that such a central bank would harm business and people to aid the government and its cronies, as well as bring on the business cycle of artificial booms followed by busts.
Mises was an army officer during the war, and we are privileged to have his medals at the Institute. At first, Mises was an economic advisor to the general staff. Then he was sent to the most dangerous duty in the war and almost killed. Guido Hülsmann, author of the great Mises biography, discovered that the power of Mises’s free-market analysis led to his corrupt and statist opponents hoping to kill him. There was a lot of money at stake. Still, the wounded Mises was decorated for bravery under fire, and as a great leader of men under brutal attack.
After the war, Mises secured a position as an economic advisor to the government for the Vienna Chamber of Commerce. He had been blocked from a position at the university by powerful socialists, and instead worked as a privatdozent and later a prestigious associate professor at the university, both unpaid positions. Unpaid or not, he used it to teach students and host his famous private seminar, which attracted top intellectuals from all over Europe. They remembered it as the most intense, rigorous, and fun experience of their academic lives.
Though working in effect two full-time jobs, Mises threw himself into his work as an economic advisor to call for a fully redeemable gold standard. The central bank was furious. It turned out that the then-current system allowed officials to have a secret slush fund for themselves and friendly economic journalists. The vice president of the central bank even hinted at a bribe for Mises if only he would be more accommodating to compromise. Of course, then and throughout his life, he never would.
The power of Mises’s influence as an economic advisor was shown in two more important ways. Austria threatened to follow Germany into hyperinflation. Almost singlehandedly his persuasion prevented a repeat in his country, if not of all inflation, of the speed and depth of the German catastrophe.
After the war, a coalition government, in part Marxist, came to power in Austria. Otto Bauer, a leader of the Austrian Social Democratic party and foreign minister, intended to introduce Bolshevism in Austria, but he listened to his old school chum Mises, something Bauer resented bitterly in later years.
Evening after evening, Mises persuaded Bauer and his equally Marxist wife that Bolshevism would mean mass starvation. Bauer was convinced.
All this time, Mises was also trying to do his scholarly work. And he did, while also paying full attention to his day job. In what would normally be his leisure time, for example, he wrote first his world historic article and then his book on Socialism. Just after the establishment of Bolshevism in Russia, he proved that with no private property in the means of production, socialism would be a chaotic and poverty-producing disaster. No planning board could substitute for property and market. Tragically for the world, it took decades before socialists would admit, after his death, “Mises was right.”
But the evil of statism also grew from another direction, and Mises was the first to see what was in store for Austria with the National Socialists. Many colleagues credited him with saving their lives, because they left in time. In 1934, Mises secured the first and only paid professorship of his life, at the International Graduate School in Geneva. It was a happy time for Mises, who lectured in accentless French and wrote in German. But by 1940, it was getting very uncomfortable in Switzerland.
Already in 1938, the invading Nazis had ransacked his Vienna apartment, and stolen his library and papers. Mises and his wife Margit—later first chairman of the Mises Institute—decided to go to America.
They crossed France barely in front of advancing German troops, just making it into neutral Portugal and a ship to New York. Once here, in an academic community offering professorships to all the European Marxists and Keynesians, there was nothing for the “Neanderthal,” “reactionary,” and “caveman” Mises. The intellectual climate of the New Deal was bitterly hostile. Even when the libertarian Volker Fund offered to pay his entire university salary, Mises was shunned for defending freedom and capitalism.
Finally, businessman Lawrence Fertig, later a benefactor of the Mises Institute, was able to persuade NYU, where he was on the board, to allow Mises to be an unpaid, permanent “visiting professor.” Even so, Keynesian deans gave him the worst offices and class hours, and tried to persuade students not to take his courses.
Yet, though in a new country at almost sixty, of whose language he had only a reading and writing knowledge to begin with, Mises was undefeated. He restarted his weekly seminar, attracting such participants as Henry Hazlitt, Ayn Rand, and Murray Rothbard. Important business leaders, journalists, and financiers audited his classes. This drove other professors, said Robert Nozick, wild with envy.
But Mises, never compromising his principles, just moved ahead, uncomplaining, undismayed, and unhindered. And it was in the 1940s that Mises completed his monumental treatise Human Action, in which he reconstructed all of economic analysis on a sound individualistic foundation.
Any of the books I’ve mentioned—and he wrote many more—would be a significant lone achievement for a lifetime. It was one of the great moments of my life to have dinner with Mises and his wife while serving as his editorial assistant. He was eighty-six, and magnificent. I can testify that Rothbard was right: he was trailing clouds of glory from a lost and better civilization: pre-WWI Vienna. In looks, speech, dress, bearing, and manners, he was a great European gentleman.
Because Mises was intransigent on matters of principle, some of his critics have denounced him as “obnoxious”! He might have had reason, but as Rothbard, Hazlitt, Hayek, Fertig, Leonard Read, and so many others confirmed to me, he was kind, funny, and generous, no matter what he was put through. He was especially good with students. Or to a twenty-three-year-old kid helping bring some of his books back into print, as well as to publish a new paper.
One of Roland Baader’s strongest principles was the importance of sound money, and
this he learned from Mises. In his great essay “Monetary Reconstruction,” Mises defied the pseudo-economists of his time and called for a return to a full gold standard. We do not need to expand the money supply as the economy grows. To the contrary, doing so promotes inflation and economic instability.
In these days of political correctness, it’s important to realize that Mises opposed the lunatic left that seeks to root out the institutions on which our civilization rests.
In his classic Socialism, he attacked the radical feminist movement: “3So far as Feminism seeks to adjust the legal position of woman to that of man, so far as it seeks to offer her legal and economic freedom to develop and act in accordance with her inclinations, desires, and economic circumstances—so far it is nothing more than a branch of the great liberal movement, which advocates peaceful and free evolution. When, going beyond this, it attacks the institutions of social life under the impression that it will thus be able to remove the natural barriers, it is a spiritual child of Socialism. For it is a characteristic of Socialism to discover in social institutions the origin of unalterable facts of nature, and to endeavour, by reforming these institutions, to reform nature.”
For Mises, the feminist drive to abolish the family rested on a total misconception of the place of women in society: “The misconception to which the principle of equality before the law is exposed in the field of general social relationships is to be found in the special field of the relations between those sexes. Just as the pseudo-democratic movement endeavours by decrees to efface natural and socially conditioned inequalities, just as it wants to make the strong equal to the weak, the talented to the untalented, and the healthy to the sick, so the radical wing of the women’s movement seeks to make women the equal of men. Though they cannot go so far as to shift half the burden of motherhood on to men, still they would like to abolish marriage and family life so that women may have at least all that liberty which seems compatible with childbearing. Unencumbered by husband and children, woman is to move freely, act freely, and live for herself and the development of her personality.”
In order to grasp Mises’s line of argument, we need to keep in mind a key point. Ignoring this point is the major failing of all leftists. Legal equality doesn’t abolish biological differences. Thus, it doesn’t follow from the fact that women don’t earn as much as men, or don’t hold as many powerful positions, that they are victims of discrimination “4.4But the difference between sexual character and sexual destiny can no more be decreed away than other inequalities of mankind. It is not marriage which keeps woman inwardly unfree, but the fact that her sexual character demands surrender to a man and that her love for husband and children consumes her best energies. There is no human law to prevent the woman who looks for happiness in a career from renouncing love and marriage. But those who do not renounce them are not left with sufficient strength to master life as a man may master it. It is the fact that sex possesses her whole personality, and not the facts of marriage and family, which enchains woman. By “abolishing” marriage one would not make woman any freer and happier; one would merely take from her the essential content of her life, and one could offer nothing to replace it.
Tributes to Murray N. Rothbard are often taken up with a listing of his accomplishments. This is because he was so astonishingly prolific that there seems to be many scholars with that name.
As soon as you describe him as an economist, you recall that he wrote some ten large volumes on history. But describe him as a historian and you suddenly recall that he made large contributions to political philosophy. But as soon as you begin talking about his libertarianism, you recall again that he wrote vast amounts of technical economic theory.
It is the same with the venues in which he chose to write. If you look at his scholarly publications list, which is vast and expansive, you can easily forget that he wrote constantly and for 50 years in popular periodicals of every sort, commenting on politics, movies, culture, sports, and anything else in the popular scene.
The problem grows worse when you consider the major parts of his legacy. Let me list just a few:
- He was the economist who provided a bridge from Mises to the modern Austrian school, through his personal influence, articles, and especially through Man, Economy, and State, which appeared in 1963;
- He developed the Misesian system in the areas of welfare economics, production theory, banking, monopoly theory, and tied it all together with a theory of natural rights that drew on medieval and enlightenment thought;
- He was the pioneer of libertarian theory who finally tied the principle of property rights to a consistent non-aggression principle of politics;
- He was the anti-war theorist who insisted that the cause of peace is inseparable from the dream of prosperity;
- He rescued the 19th-century American hard money school from obscurity and wove its contributions into modern banking theory;
- He demonstrated the libertarian origins of the American Revolution with the most extensive account ever of the tax strikes and prominence of libertarian theory during the Colonial Period;
- He explained the ideological upheaval that afflicted the American Right following World War II, showing the clear difference between the Old Right and the New based on the attitude toward war.
This of course only scratches the surface, but if I went on like this, I would use too many words and take up too much time, when what I would really like to discuss is Rothbard’s methods as a researcher, writer, and scholar. I would also like to draw attention to his heroism.
A friend tells the story of a time when he was hanging around Rothbard’s apartment one summer. The conference that was coming up that weekend was mentioned, and Rothbard had forgotten about it. Rothbard rushed to the typewriter and started writing. The words flowed from him as if the entire paper had already been written in his head.
The result was a 60-page paper on monetary history and theory, complete with bibliography and footnotes. The scene was recalled to me the way miracles are described in the Gospels. His jaw was on the floor in amazement.
The anecdote is inspiring but also intimidating for those who labor so hard to accomplish a tiny fraction of this level of productivity. We might look at what he did and become discouraged that we could never equal his productivity in even one small sector, much less take on all of his interests in so many areas of life.
Rothbard’s first step toward writing was to learn as much as possible. He never stopped taking this step for his entire life. There was never a point when he woke up feeling as if he knew all that he needed to know. No matter how much he wrote, he was always careful to read even more.
If you follow his model, you will not regard this as an arduous task, but rather a thrilling journey. A trip through the world of ideas is more exciting and exhilarating than the grandest excursion to the seven wonders of the world, more daring and adventurous than wild game hunting, and far more momentous than any moon shot.
There is another respect in which we can all emulate Murray. He was fearless in speaking the truth. He never let fear of colleagues, fear of the profession, fear of editors or political cultures, stand in the way of his desire to say what was true. This is why he turned to the Austrian tradition even though most economists at the time considered it a dead paradigm. This is why he embraced liberty, and worked to shore up its theoretical and practice rationale, at a time when the rest of the academic world was going the other way.
This fearlessness, courage, and heroism applied even in his political analysis. He was an outspoken opponent of the U.S. nuclear buildup and militarization during the Cold War. His opinion in that regard cost him many publication outlets. It cost him friends. It cost him financial supporters. It hurt his prospects for professional advancement. A surprising number of his articles were written for very small publications, simply because the larger ones were captives of special interests.
But time would eventually reveal that he took the right path. Forty years of pro-Cold War writing on the Right were made irrelevant by events. Rothbard’s work during these years has stood the test of time. He is seen as one of the lone prophets of the collapse of socialism in Russia and Eastern Europe.
The choices he made in life were not designed to advance his career. They were made to advance liberty and truth. For many years, publications were closed to him. He did not teach in a prestigious institution. His income was small. Only very late in life did he begin to get his due as a thinker and teacher. But he never complained. He was grateful for any and every opportunity that came along to write and teach. His legacy is now a living part of the world of ideas. The people who tried to exclude him and write him out of history are mostly forgotten.
Like Mises, and also Roland Baader, Rothbard supported sound money. He opposed fractional reserve banking and favored the gold standard. His work with Ron Paul and the Gold Commission in 1982 was a high point in the struggle for liberty. Murray was the main author of the Commission’s Minority Report, “The Case for Gold.” I can still hear his voice, as he used to say to me “The dollar is a unit of weight, dammit!”
Like Mises, Rothbard had no use for the lunatic left. He challenged so-called “left libertarians” on an issue that will be of special interest to a German audience, immigration. Shortly before his death, Murray Rothbard published an article called “Nations by Consent: Decomposing the Nation State.” He had begun rethinking the assumption that libertarianism committed us to open borders.
He noted, for instance, the large number of ethnic Russians whom Stalin settled in Estonia. This was not done so that Baltic people could enjoy the fruits of diversity. It never is. It was done in an attempt to destroy an existing culture, and in the process to make a people more docile and less likely to cause problems for the Soviet empire.
Murray wondered: does libertarianism require me to support this, much less to celebrate it? Or might there be more to the immigration question after all?
And here Murray posed the problem just as I have: in a fully private-property society, people would have to be invited onto whatever property they traveled through or settled on.
If every piece of land in a country were owned by some person, group, or corporation, this would mean that no person could enter unless invited to enter and allowed to rent or purchase property. A totally privatized country would be as closed as the particular property owners desire. It seems clear, then, that the regime of open borders that exists de facto in the U.S. and Western Europe really amounts to a compulsory opening by the central state, the state in charge of all streets and public land areas, and does not genuinely reflect the wishes of the proprietors.
In the current situation, on the other hand, immigrants have access to public roads, public transportation, public buildings, and so on. Combine this with the state’s other curtailments of private property rights, and the result is artificial demographic shifts that would not occur in a free market. Property owners are forced to associate and do business with individuals they might otherwise avoid.
Roland Baader, like Mises and Rothbard, emphasized the importance of the moral foundations of society. He described the Ten Commandments as the “constitution of society.” You can be sure he would have wanted nothing to do with the libertines and degenerates who today masquerade as “left libertarians.”
I’d like to conclude with some thoughts on the dangers to libertarianism we need to confront. We have been told by some libertarians in recent months that yes, yes, libertarianism is about nonaggression and private property and all that, but that it is really part of a larger project opposed to all forms of oppression, whether state-imposed or not. This has two implications for the thick libertarian. First, opposing the state is not enough; a real libertarian must oppose various other forms of oppression, even though none of them involve physical aggression. Second, libertarianism should be supported because the reduction or abolition of the state will yield the other kinds of outcomes many thick libertarians support: smaller firms, more worker cooperatives, more economic equality, etc.
Let’s evaluate these implications one at a time.
To claim that it is not enough for the libertarian to oppose aggression is to fall into the trap that destroyed classical liberalism the first time, and transformed it into modern liberalism. How, after all, did the classical liberalism of the eighteenth and nineteenth centuries become the state-obsessed liberalism of the twentieth and twenty-first centuries? How did the once-venerable word liberalism become perverted in the first place? Precisely because of thickism. Sure, twentieth-century liberals said, we favor liberty, but since mere negative liberty – that is, restrictions on the state – doesn’t appear to yield a sufficiently egalitarian result, we need more than that. In addition to restrictions on some state activity, we need the expansion of other forms of state activity.
After all, the new liberals said, state oppression isn’t the only form of oppression in the world. There’s poverty, which limits people’s ability to make life choices. There’s private property, whose restrictions limit people’s ability to express themselves. There’s discrimination, which limits people’s opportunities. There’s name-calling, which makes people feel bad. To focus entirely on the state is to miss these very real forms of harm, the new liberals said.
Sound familiar? Is this not precisely what many thick libertarians are now saying? Attacking the state is not enough, we hear. We must attack “patriarchy,” hierarchy, inequality, and so on. Thick libertarians may disagree among themselves as to what additional commitments libertarianism entails, but they are all agreed that libertarianism cannot simply be dedicated to eradicating the initiation of physical force.
If some libertarians wish to hope for or work toward a society that conforms to their ideological preferences, they are of course free to do so. But it is wrong for them – especially given their insistence on a big tent within libertarianism – to impose on other libertarians whatever idiosyncratic spin they happen to have placed on our venerable tradition, to imply that people who do not share these other ideologies can’t be real libertarians, or to suggest that it would be “highly unlikely” that anyone who fails to hold them could really be a libertarian. That these are the same people who complain about “intolerance” is only the most glaring of the ironies.
Thus the danger of thick libertarianism is not simply that vast chunks of the American population will fail to pass its entrance requirements, not keeping up every ten minutes with what MSNBC informs us is acceptable to believe and say. The danger is that thick libertarianism will import its other concerns, which by their own admission do not involve the initiation of physical force, into libertarianism itself, thereby transforming it into something quite different from the straightforward and elegant moral and social system we have been defending for generations.
Now for the second implication, that opposition to the state should be favored because it will yield egalitarian outcomes. (Of course, the abolition of the state will necessarily increase the level of egalitarianism from the point of view of status; the inequality of status between state officials on the one hand, who today may carry out all kinds of moral outrages with the legitimacy of the state to support them, and ordinary people, who are constrained by the traditional moral rules against theft and aggression, on the other, will no longer exist when the state disappears.) But what if it doesn’t? The claim that firms will tend to be smaller on the free market, and that government policy encourages bigness in business, is far too sweeping a statement about far too complex a phenomenon. What if the absence of the state leads to no change in firm size, or in the employer-employee relationship, or in wealth inequality?
At that point, the question would become: to which principle are thick libertarians more committed, nonaggression or egalitarianism? What if they had to choose?
Likewise, the hatred of some classical liberals for the Church motivated them to confiscate Church property and impose restrictions of various kinds on Church activity. When it came down to a choice between their belief in liberty and their personal hatred for the Church, their personal hatred won the day, and their supposedly principled opposition to violence was temporarily suspended.
How people arrive at libertarianism is also immaterial. There are various schools of thought that culminate in the principle of nonaggression. Once there, we may of course debate what precisely constitutes aggression in particular cases, and other foundational questions within the general framework of the impermissibility of aggression. But if the school of thought you belong to takes you only partly toward nonaggression, it is not the case that you have discovered a new or better form of libertarianism. Such a case would mean only that you are partly a libertarian, not a different kind of libertarian.
Whether it’s the claim that self-defense laws are “racist,” that Bitcoin is “racist,” or that libertarians ought to throw off “white privilege” – all of which have been advanced by libertarians claiming to have moved beyond our alleged fixation with the nonaggression principle – the various forms of thick libertarianism are confusing the core teaching of what we believe. None of these concerns have the slightest bit to do with libertarianism.
All of these additional claims are a distraction from the central principle: if you oppose the initiation of physical force, you are a libertarian. I have no doubt that Roland Baader would have agreed. Let us move forward to advance the principles that he learned from Mises, against their detractors, whether “libertarian” or otherwise.