Happy birthday, Ludwig!

As a Happy Birthday tribute to Ludwig von Mises (born Sept. 29, 1881), here’s what you need to know about his life … and what you need to know from his iconic treatise on economics, Human Action.

The underappreciated economist

Ludwig von Mises is today celebrated as one of the founding fathers of the Austrian School of Economics in the 20th century. Born in 1881 in Lviv, situated in present-day Ukraine but then part of the Austro-Hungarian Empire, his life can be divided into three distinct chronological periods, each marked by significant events and contributions.

1. During the Vienna period, from his family’s relocation in 1887 until 1934, Ludwig von Mises pursued his academic and professional endeavors. He obtained his doctorate in law and economics, actively participated in the academic community at the University of Vienna, and held positions with the Austrian Chamber of Commerce. (Read his thoughts on education in his quote HERE.)
2. The second period of Ludwig von Mises’s life occurred during and after his move to Geneva, Switzerland, from 1934 to 1940. There, he served as a faculty member at the Graduate Institute of International Studies. Interestingly, his wife described this period as the happiest time in their lives.
3. The third and final period of Ludwig von Mises’s life began with his move to New York in 1940 and extended until his passing in 1973. During this time, he held a low-paid position at New York University. A few years after his move, he began organizing seminars in economics, a pivotal contribution that established him as one of the central figures in the development of the libertarian movement.

Here are some more aspects of Mises’s lasting legacy:

“…Mises influenced an entire generation of free-market economists and liberal social thinkers, including Fritz Machlup (who pioneered the economics of the information society), Gottfried Haberler (who wrote influential works on international trade, opportunity costs, exchange rates, and productive efficiency), Israel Kirzner (famed for his work on entrepreneurship), Murray Rothbard (author of the libertarian classic Man, Economy, and State), and many more. There are institutes named after him in both America and Europe. His books are used in colleges and universities across the world. And his iconoclastic ideas continue to spread.”

Furthermore, an institute carrying his name was established in 1982, in Auburn Alabama. The Mises Institute represents a non-profit organization to promote teaching and research in the Austrian School of Economics, individual freedom, honest history, and international peace, in the tradition of Ludwig von Mises and Murray N. Rothbard.  

Learn more about the legends of Austrian Economics:

The most important insights from Mises’s work

Mises’s most important work is Human Action, published in 1949, where he managed to integrate economics and individualism into an impressive and massive book. The most important insights from his work can be categorized into 5 notes.

• First of all, Mises denounced mainstream economics, which had, and still has, a tendency to adopt natural science methodology. On the contrary, he positioned economics as a deductive science, which aims to understand the changing forces that keep markets in motion, and part of a greater science, called praxeology. The mathematical approach to economics, according to Mises, fails to understand and reveal the essence of economics, since the main subjects are humans, the individuals, and their actions — which cannot be easily predicted.

• Secondly, Mises founded a new science: praxeology. Most fundamentally, it is the science of human action, while human action is treated as essential for economics. The basic axiom in the Austrian School of Economics, and thus in economics in general, is that humans act and their actions are purposive, implying that they are directed toward certain goals. The process of attaining a goal presupposes deploying different means. The means are the main subjects of economics — or should be.

• Thirdly, the premise of methodological individualism is thoroughly applied in Mises’s discourse and economic analysis. According to this premise, humans or individuals are and should remain the main subjects of wider social analysis, and humans and their actions should be the focus of economics. 

• The fourth insight from his work is the economic calculation problem. This problem has been primarily related to the impossibility of economic calculation under a centrally planned economy or socialist regime. It is based on the role of prices in an economy. The prices are not solely numbers randomly provided in a society, but they represent the value judgment of consumers, and they inevitably carry information about the scarcity of the resources in the economy. Without market-generated prices, there would not be a dissemination of information in the production processes, and thus, a rational allocation of the scarce resources would be impossible. 

• The fifth major insight is dedicated to the ideas of liberalism. According to Mises, liberalism and liberal societies are crucial for nurturing peace and stimulating the progress of the human race. They essentially represent a social system that puts individual liberty and human choice at the center of social life; an economic system based on private property, freedom of exchange, and governmental non-interference; and a philosophical system that positions each human as a goal in itself.

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