Ludwig von Mises was born on September 29, 1881 in the town of Lemberg, located in the former Austria-Hungary. He was the son of a respected and successful engineer.
When von Mises was 19 years old he had already entered the prestigious University of Vienna, studying with Eugen von Böhm-Bahwerk and Eugene von Philippovich. Ludwig von Mises received his doctorate in canon and Roman law when he was 27.
After receiving his advanced degree, von Mises wrote the first of what would be a long list of phenomenal works, The Theory of Money and Credit (1912). In it he successfully argued that money had a price, no different from any other commodity. The theory was based on the economic notion that all things were priced according to supply and demand. Von Mises theorized that money would have the same effect, so its “price” would also rise and fall.
Von Mises was professor of economics in Vienna (1913-1934) and professor of international relations at the Graduate Institute of International Studies in Geneva, Switzerland (1934-1940). In 1945 he was visiting professor of economics at the Graduate School of Business Administration, New York University; he retired in 1969. Between 1909 and 1934 he held various economic advisory positions in the Austrian Economic Chamber.
Von Mises was known throughout his career as an uncompromising advocate of laissez-faire, arguing in Socialism: An Economic and Sociological Analysis (1922) and Human Action: A Treatise on Economics (1949) that a socialist system cannot work because it lacks a true price system.
Von Mises argued that socialism could not sustain an economy, because under socialism there is no market for goods or services. Von Mises projected that without an industrial economy there would be no price system. It is the price system that determines profits and losses.
In the same book, von Mises also theorized that mixed economies would not fare better because of the distortion involved. He also argued that lesser types of intervention, such as minimum wage laws, are equally useless.
Out of Von Mises’ theory of money came a theory of the business cycle, which he developed in detail in 1928. This theory emphasized the role of the banking system in the expansion of the money supply, the consequent artificial reduction of the interest rate and the resulting overinvestment. When the money supply reaches the limit of its capacity for expansion, a depression inevitably follows.
The theory aroused great interest among economists in the early 1930s, but fell out of sight with the advent of the “Keynesian revolution”, which began in 1936. Later in the century, economists reconsidered the role of overinvestment as a factor in trade fluctuations.
Von Mises’ publications include nearly 20 books, as well as numerous articles and other shorter works ranging from economic theory and the history of economic thought to methodology and social and political philosophy. In 1969 he was named a distinguished fellow of the American Economic Association in recognition of his valuable contributions to economics.
Because of von Mises’ critical views on socialism, he remained in exile from the National Socialists in Geneva until his death in 1973. Von Mises’ most respected work was his 900-page Human Action, which was not published until 1949. The book had been written in early 1940; however, due to the effects of the war, it was put on hold.
1) Economic Calculation in the Socialist Commonwealth
Economic Calculation in the Socialist Commonwealth is an article by economist Ludwig von Mises. His critique of economic calculation in a planned economy triggered the debate on economic calculation that has lasted for decades.
The article was first published in German in 1920 under the title Die Wirtschaftsrechnung im sozialistischen Gemeinwesen and was based on a lecture Mises delivered in 1919 in response to a book by Otto Neurath, who argued for the feasibility of central planning.
Mises argued that prices for capital goods could not be obtained in a socialist economy if the government owned the means of production, since all exchanges would be internal transfers, rather than objects of exchange, which would put the price mechanism out of order.
Liberalism is a book containing an economic analysis and a strong critique of socialism.
It was first published in 1927 by publisher Gustav Fischer Verlag in Jena, Germany, in defense of classical liberal ideology based on individual property rights.
Starting from the principle of private property, Mises shows how the other classical liberal freedoms are derived from property rights and argues that liberalism free from government intervention is necessary to promote peace, social harmony and general welfare.
The book was translated into English by a student of Mises, Ralph Raico, but its first English edition in 1962 was titled The Free and Prosperous Commonwealth instead of Liberalism.