It was another world, a different age. In America, Lysander Spooner still lived, his letter to Grover Cleveland not yet written; in England, Winston Churchill was a mere child of seven, not yet, one assumes, responsible for anyone's death. The marginalist revolution in economics, now firmly rooted in economic theory, was less than a decade old, spreading throughout the world from its focal points in England, Switzerland, and Austria, the words world war appeared only in fiction.
It was one hundred years ago, 1881. And, in September of that year, a child who would someday be one of the world's greatest economic thinkers was born in Lemberg, Austria. Happy centennial, Ludwig von Mises.
The world of today could hardly be more different from the world of a century ago; and in the political and economic arenas, the changes have not been for the better. Mises was born into a world witnessing the decline and decay of liberal radicalism, where Richard Cobden was dead, and Herbert Spencer, John Bright, and William Graham Sumner were aging. If today we are seeing a rekindling of that libertarian thought and spirit, it is in large part because Ludwig von Mises and a few like him carried the torch through the long dark years of our century—through the wars, the depressions, the inflations, the interventions; through the squalor and the misery—quietly fanning the flames of liberty.
Today the embers he kept alive have sparked a fire that is engulfing more and more of those gathered around liberty's banner. But Mises was not a firebrand; he was a scholar, one of first-rank eminence. His original contributions to economic science are many, and I shall mention here only three.
First, there was his application of subjective marginal utility theory to money. For the first time, an explanation of the supply of and demand for money was incorporated into general economic theory. This account which appeared in his Theory of Money and Credit, published in 1912, also contained the first demonstration of his Regression Theorem, proving that money cannot be arbitrarily created by governments out of anything, by fiat, but rather, to be accepted by people as a common medium of exchange, must evolve from a commodity that already possesses an independent value of its own.
Then came his demonstration, in 1922, of the impossibility of rational economic calculation within an isolated socialist commonwealth, which followed from the ultimate necessity of a freely fluctuating price system in any attempt to rationally allocate scarce factors of production to their most valued ends. Fully elaborated in his Socialism, this argument led to the famous controversy of the next two decades and was a seminal influence for F.A. Hayek's writings on the price system as a disseminator of information.
Last, there was Mises's magnum opus, Human Action. This work marked him as a systems builder and elaborated his view of economics as a deductive science of human action, a component of a wider system that he labeled praxeology.
Of course, Mises penned many more books and even more articles, some of which—his Theory and History, for example—are important and original contributions to their fields. We would expect no less of a man of such caliber with an intellectual career spanning six decades.
But the fact is that many of today's libertarian intellectuals remember Mises not so much as an author of scholarly treatises but as a wise and kindly mentor. For Mises was a teacher to many of our century's great economic thinkers, spanning several generations: men like Friedrich Hayek and Gottfried Haberler; Jacques Rueff and Wilhelm Roepke; Murray Rothbard and Israel Kirzner; his New York University seminar, it is said, was even attended by Ayn Rand. He was a teacher's teacher, and he was the best.
Liberalism—what Mises meant by that term—was essentially dead by the time he had reached maturity. Laissez-faire was gradually replaced by the doctrines of the socialists, to whom Mises, in his stiff and proper way, would never grant the title of "economist." But toward the end of his long life, liberalism, in a fragile and tentative way, began a rebirth, as the flame Mises nurtured took hold.
Had he lived to see his centennial, he would have seen a libertarian movement stronger than ever before in this century; stronger, in some ways, than the movement at his birth. It is my belief that were he around for his sesquicentennial in 2031, he would by then see State power and privilege toppled at last, and his dream of a free and prosperous commonwealth—a dream that fired him and that he ignited in others—at long last a reality. No birthday gift would be more appropriate or more deserved.
September 29, 1981. Happy centennial, Ludwig von Mises.
Ross Levatter, a medical student, first encountered economics through von Mises's Theory of Money and Credit.
This article originally appeared in print under the headline "Remembering von Mises".