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469

Book Review

Mises: The LasTKnighTof LiberaLisM

Jrg guido Hlsmannauburn, alabama: ludwigvon mises institute, 2007, 1,143 pp.

Jess Huertade soto

M ises: The Last Knight of Liberalism is much mre than a bigraphyf the twentieth centurys great Austrian ecnmist. It is amnumental wrk which traces Ludwig vn Misess life and theevlutin f his ecnmic thught and places them in the prperhistorical and cultural context. The book conrms many previously

well-knwn ideas abut this eminent authr, while it als prvidesthe reader with new, and ften surprising, infrmatin and data.The eruditin in this bigraphy is bth fresh and impressive,since the book not only oers a much better understanding ofMises, but als must be cnsidered, n its wn merits, t be neof the most signicant interpretative contributions on the Austrianschl t date. Readers have gained a bigraphy f the life andintellectual develpment f Mises which far surpasses any f the

Jess Huerta de Soto ([email protected]) is Professor of Political Economy,Universidad Rey Juan Carlos, Madrid.

VoL. 15 | No. 4 | 469479

WINTER 2012

The

Quarterly

Journalf

austrian

economics

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470 The Quarterly Jurnal f Austrian Ecnmics 15, N. 4 (2012)

thers written up t nw n great ecnmists, even therists f thestature f Hayek, Friedman, and Keynes himself. Mrever, thewrk has established Jrg Guid Hlsmanns reputatin as ne fthe fremst cntemprary Austrian ecnmists. In additin, withits publicatin in 2007, the Ludwig vn Mises Institute chalked upanother success in its eort to make the major works of contem-prary Austrian ecnmists available t the public.

While it would be impossible in a review like this one to do justicet a bk like Guid Hlsmanns, I will nw attempt t draw a brief

utline f bth its essential features and the mst nvel infrmatinand tpics it cntains. I will als cmment n thse pints I feelmay be mst dubtful r debatable, and I will cnclude with a fewremarks cncerning the style and frm f this imprtant wrk.

THE ESSENTIAL CONTENT OF THE MISES BIOGRAPHY

Perhaps Hlsmanns most signicant contribution in terms of

clarifying Misess methdlgical stance is having shwn thatthe dierences between Mengers Aristotelianism and MisessKantianism are clearly mre rhetrical than substantive (seeparticularly pp. 42 and 127). The traditinal Austrian apprach isbasically praxelgical as ppsed t the naive psychlgism fWalras, Gssen, and Jevns (especially when it cmes t viewingutility mre as a psychlgical feeling than as the cncrete frmf actins which express preferences). In additin, the realism fAustrian theretical suppsitins has frm the beginning charac-

terized the ecnmic analysis f the Austrian schl (p. 135).Furthermore, Hlsmann points out profound dierences

between tw Austrian lines f thught: ne which riginatedwith Menger and wuld cntinue with Bhm-Bawerk and Mises;and another which would clearly branch o starting with Wieser,whse cncept f natural value, his idea that it culd be directlycalculated in terms f utility, and his view f prductin as separatefrm distributin (see pp. 380 and fllwing) cllide head-nwith the mst traditinal Austrian analysis. Als, Hlsmann

emphasizes that perhaps Misess chief cntributin, frm whichone can deduce his main oerings with respect to the theory of theimpssibility f scialism, r his analysis n mney and the cycle,lies in his cncept f ecnmic calculatin (p. 401), which nly

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471Book Review:Mises: The Last Knight of Liberalism

becmes pssible fr the actr in the cntext f a market ecnmywith free exchanges and the use f mney, a cntext in which thereemerges a cnstellatin f prices that permit actrs t direct theiraction for the future, to discover prot opportunities in a creativemanner, and to coordinate the maladjustments which continuallyarise in the system.

Hlsmann makes sme very interesting bservatins abutMisess stance against a gld standard that perates with afractinal-reserve banking system (p. 517); abut Misess criticism

f cmpetitin law r antitrust legislatin (p. 546); and abutMisess pertinent critical analysis f the American plicy adptedt cnfrnt the Great Depressin, a plicy which, frm the time fHoover, involved raising tari barriers and taxes (p. 627).

Mrever, Hlsmann highlights sme incnsistencies in Misessthinking. Examples include Misess excessive respect fr the Englishclassical schl in general and Ricard in particular (p. 555), whichcould be justied in the sphere of economic policy prescriptions,

but nt in that f ecnmic analysis; the unwarranted cncessinMises makes in his psitive assessment f the age-ld expansin fduciary media, an appraisal which slips into some passages ofTheTheory of Money and Credit, where Mises criticizes German authrswh supprt a 100-percent reserve requirement, like Tellkampfand thers (p. 213, ftntes 53 and 54); and Misess mnplythery, which remains based n cncepts which, like elasticity, arefreign t the traditinal Austrian analysis f dynamic prcesses(pp. 436437).

Hlsmann als makes sme intriguing remarks abut therelatinship between Mises and the Cathlic Church. Hlsmannexplains that Mises was brn in a cmmunity that was predmi-nantly Cathlic and Plish (p. 8), then typical characteristics f thatpart f the Austr-Hungarian empire which was Ukraine (pp. 6 and8). Nevertheless, it is true that thrughut his academic life, Misesspinin f the Cathlic Church became less and less negative, apint which can be established by checking his cmments n thetpic in The Theory of Money and Credit, frm 1912, and in Human

Action, which appeared in 1940. In fact, Mises des nt rule ut thepssibility that the Cathlic Church may evlve tward liberalism,and he even became ecnmic advisr t Mnsignr Seipel, whmhe almst cnsidered a true saint (pp. 442443 and 484).

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Als ntewrthy is Hlsmanns analysis f Misess psitinn demcracy. Fr Mises, demcracy as a plitical system is nlyviable within a scial and cultural cntext f respect fr the prin-ciples f classical liberalism. The paradxical result f this stanceis that, if the liberal premise hlds, there is practically n need frthe interventin f the state (which is reduced t the minimumnecessary to properly dene and defend property rights, p. 413).I wuld add that under such circumstances, an anarch-capitalistsystem wuld be fully viable and wuld als remve the danger

that arises frm the essentially unstable nature f the demcraticsystem, since frm the start pliticians wuld be prevented frmexpliting their capacity t use public spending t buy vtes, grantsubsidies, and crrupt the true spirit f liberalism.

HLSMANNS RESEARCH EFFORT AND HIS

PRIMARY DISCOVERIES AND NOVEL PERSPECTIVES

Hlsmann brings t his wrk many new perspectives anddiscoveries. These contributions reveal an intense research eortand thusands f hurs f study devted t delving int riginaldocuments and into les and libraries all over the world, in searchf any detail related t the life f Mises. Hlsmanns bk teachesus smething n every page and can even surprise us with newswe did nt knw befre. This makes reading it an enrmuspleasure, especially fr thse f us wh have devted ur lives tstudy and research in the eld of Austrian economics. As is logical,

I cannt mentin here each and every ne f the discveries andnvel perspectives Hlsmann includes in his wrk, thugh I willpint ut a few f thse that mst caught my attentin.

Fr example, I wuld begin by referring t all the news Hlsmanngives us abut the family, birth, and intellectual evlutin f theyung Mises during the early years f his life and up t his yungadulthd. Particularly interesting t me was the fact that Misessuncle, Hermann, wrked in the insurance sectr (pp. 10 and 15),and als that Bhm-Bawerk, during ne f his stints as Minister f

Finance, established for the rst time in Austria a personal incometax, with a marginal rate f 5 percent (p. 143). It was als intriguingto see how, in his rst articles, i.e., when he had not yet had thechance t deepen his ecnmic studies, the yung Mises arrived

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at errneus cnclusins, like the pinin that unins can raise thewages fall wrkers permanently (p. 150, n. 84).

Hlsmann examines and makes sme pertinent bservatinsabut the academic turmil in Vienna beginning in the year 1906(pp. 179 and following). Moreover, Hlsmann claries that TheTheory of Money and Credit, the rst important work Mises wrote,was actually meant to respond to Helerichs challenge to Austrianecnmists cncerning the suppsed impssibility f applying thethery f marginal utility t mney (p. 177). Als quite interesting

is the account of the successive jobs Mises had from the time henished his university studies; these jobs are described beginningon page 179 of the book. Thus we nd that Mises began workingas a civil servant in Viennas scal administration and immediatelyafterward worked in dierent law rms for a period of two or threeyears, befre he started teaching at the Trade Academy fr girls inVienna in 1907.

It is curius that Hlsmann, in his scarce references t Arthur,Misess father, makes n mentin f the fact that he studied at thePlytechnic Institute f Zurich (p. 17), a pint repeated in numerusbigraphical sketches f Mises. It is amusing t read Hlsmannsaccunt f Misess initial silly statist remarks (p. 96). Als, thefriendship which, frm a yung age, Mises prfessed fr Kelsen(p. 41) is smewhat startling. In time, the latter wuld becme nef the leading psitivist law therists and wuld hence adpt amethdlgical stance directly ppsite t that f Mises himself.(Mrever, Kelsen wuld be ne f the very few witnesses t thewedding f Mises and Margit many years later.)

Cncerning the reference Hlsmann makes t Mengers prede-cessrs, it is very surprising he des nt mentin Cantilln (p. 112),when in fact it is knwn that Hayek received frm Mengers widwa copy of the rst edition of the Essay on the Nature of Commerce inGeneral as payment in kind fr having appraised the library fher late husband. In additin, Hlsmanns assessment f Mengeris perhaps too objectivist (especially on p. 125), and Hlsmannneglects t name the Spaniard Jaime Balmes as Mengers direct

predecessr in the develpment f the thery f marginal utility,tgether with the Frenchman Dupuit (wh is indeed mentinedn p. 128).

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Hlsmann gives a very intriguing descriptin f the beginningof Misess academic life and university contacts. Specically, I wassurprised t learn that Mises initially participated in a discussingrup which ran parallel t Bhm-Bawerks seminar and includedPribram, Philippvich (whm Hlsmann reprts was an interven-tinist Mengerian), and thers. The discussin grup wuld laterbecme the Ecnmic Sciety [Nationalkonomische Gesellschaft],which was to exert so much inuence on the German-speakingecnmic wrld in subsequent decades. It was precisely at the

behest f Philippvich, wh was unable t meet the deadline, thatin 1909 Mises published his rst article in the Economic Journal; thepaper was devted t the freign exchange plicy f the Austr-Hungarian Bank. That same year, having just turned twenty-eight,Mises began t wrk fr the Vienna Chamber f Cmmerce (wherehe wuld be emplyed fr a quarter f a century), and frm thestart he devted himself t attacking the estate tax, farm subsidies,and in general, the increasing government monetary and scalinterventin f the time.

In cntrast t the path f Mises, thrughut the entire bk,Hlsmann highlights the analytical and plitical caprices fSchumpeter. To be specic, he refers to Schumpeters support ofthe Marxist thery f the cncentratin f capital (p. 431) and hisexplicit defense f scializatin (p. 336) and f the incipient theryf market scialism (p. 378), which leads him t advcate taxes ncapital and wealth (p. 350) and t praise Marx (p. 530). Hlsmannmentins Schumpeters revisinist psitin favrably nly whentracing the rigin f ecnmic thught t the schlastic traditin

f the Spanish Glden Age (p. 769).In additin, Hlsmann very clearly explains Weisers unequivcal

stance in favr f the Banking Schl and f the veil-f-mneythery (pp. 226227), errneus dctrines which wuld end upinuencing Schumpeter (p. 250, n. 76) and modern monetary-equi-librium therists, like Selgin and thers (p. 228). During this perid,nt even Mises managed t cmpletely free himself frm Weisersunhealthy inuence, especially regarding the veil-of-money theoryand the supposedly benecial eect which the creation of duciarymedia may have had n certain histrical ccasins (p. 237). In anycase, Hlsmann stresses that after the end f Wrld War I, Miseswas the rst to warn of Churchills grave error in reestablishing

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the parity that existed between the pund and gld in the peridprior to the severe inationary process triggered during the war.In cntrast, and in accrdance with the mst reliable ecnmicthery, Mises defended the reintrductin f the gld standard,but always at the new parity, which after the war was in a de factdevalued state (p. 355).

Hlsmann cites anther slip f Misess n page 402 f the bk.There he refers t Misess naive applicatin f the thery thatthe marginal utilities f capital and labr are equal, a thery he

presents in a simultaneus, static sense in his wrk n Socialism(when in fact, as Mises and Hans Mayer later recgnized, humanactins are always sequential, never synchrnic, and thus the abveequality f weighted marginal utilities is illusry and mits thedynamic prcess and true ecnmic calculatin, which is alwayssequential and diachrnic and takes place frm an entrepreneurialperspective in the market).

Hlsmann prvides us with an excellent study f the emergence

and development of the famous seminar Mises held in his ocialoce of the Vienna Chamber of Commerce, a group whichfrmally began t meet n Nvember 26, 1919 (p. 365). Just asillustrative is the historical analysis of the growing inuence Misesexerted ver his German clleagues frm the Ecnmic Scietyand ver yung ecnmists frm the Verein fr Socialpolitik. Mreand mre members f bth grups, cnvinced mainly by Mises,began t adpt psitins cunter t that f the scialist prfessrsf the histricist schl, and they began t criticize and abandn

many prpsals which (like thse cncerning the regulatin fcrprate scial respnsibility, the refrm f legislatin t aidunins, and the develpment f antitrust legislatin), despite theirlong-standing nature and damaging eects, are still being putfrward tday and presented t the public in general as the mstadvanced paradigm f entrepreneurial and plitical gvernance(p. 198). It actually surprised me to nd that, within the historicistschl, Schmller himself came t regret his excesses t a certainextent (smething Hlsmann mentins n p. 397). In this cntext,

it cmes as n surprise that as early as 1936, the leader f the failedppular French gvernment, Len Blum, prmted a law requiringthe presence f unin delegates t represent the persnnel f allcmpanies that emplyed mre than ten wrkers.

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I shuld give special mentin t Hlsmanns detailed descriptinof the vicissitudes that aected the books and papers Mises left inhis Vienna apartment, belngings which the Nazis seized in 1938and which ended up in secret les in Moscow until they were redis-cvered in 1991 (p. 727). Hlsmann als relates many interestinganecdtes, like the fact that Mises had t pay 50 percent f the cstf publishing his bk, The Theory of Money and Credit, which ntonly was his rst major work on economics, but also earned hima Habilitation t teach as a prfessr at the University f Vienna (p.

212). Bhm-Bawerk wuld later devte tw entire semesters f hiswn seminar t an in-depth analysis and discussin f the theriesMises develps in this bk (p. 209).

Hlsmanns bigraphy has ther engaging features, like hisreference t the fact that the traditin Mises always upheld againstantitrust legislatin (and which his disciples Rthbard and Kirznerwuld later maintain) had already been established by authrsf the stature f Max Weber and Friedrich Naumann. Hlsmannals pints ut that mnetary cnstitutinalism is much lderthan was thught, since Felix Smary defended it as early as 1924.Mrever, in that same year, in his A Tract on Monetary Reform,Keynes prpsed stabilizing the purchasing pwer f mney,which in the cntext f the greatly increasing prductivity theworld was then experiencing, meant a massive injection of money,which in the lng run wuld distrt the entire prductive structureand plant the seeds f the Great Depressin f 1929. Finally, I didnt knw that the salary Mises received during the years he taughtat the Graduate Institute fr Internatinal Studies in Geneva wasultimately paid by the Rckefeller Fundatin (p. 569).

SOME PERHAPS MORE DOUBTFUL OR DEBATABLE

ASPECTS OF HLSMANNS INTERPRETATION

The admiratin this masterpiece f Hlsmanns aruses mustnt bscure the fact that it als cntains certain stances and inter-pretatins which, at the very least, can be cnsidered dubtful. As

is lgical, these aspects d nt at all diminish the great merit fHlsmanns bk, thugh it is necessary t give a brief accunt fthem t spark a healthy debate, which in any case must result in aneven deeper knwledge f the wrk f Mises.

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T begin with, it might be a gd idea t questin the interpre-tatin (which in my pinin is t biased tward the maximizingperspective) Hlsmann gives Misess cntributins, n pages 309and 310 of his biography. I also nd the assessment of the FrenchRevlutin f 1789, n page 319, t laudatry, as well as thebservatins abut unins, n page 316. Mrever, I d nt deementirely suitable the emphasis Hlsmann places n the cnceptf chice, as ppsed t the mre imprtant ideas f actinand change, which truly g t the heart, s t speak, f Austrian

ecnmic analysis (p. 388). A similar cmment culd be expressedabut the radical separatin Hlsmann, fllwing in the ftstepsf ther Austrian therists like Salern and Rthbard, wishes tmake between Mises and Hayek n the tpic f scialist ecnmiccalculatin (p. 404).

Nevertheless, ne f the aspects that evkes the strngestreservations in me is Hlsmanns classication of Hayek as ane-liberal, within a system f categrizatin in which hedivides the principal Austrian authrs int classical liberals(the grup t which Mises himself wuld belng) and ne-liberals (amng whm Hayek wuld be fund). In my pinin,it is much mre fruitful t classify ecnmists as either Austrians(Mises and Hayek) r neclassicals (bth members f the Chicagschl and Keynesians, wh fcus n the analysis f equilibriumand maximizatin). In any case, it is imprtant t pint ut that,thugh Hlsmann makes a clear attempt t separate Hayek frmMises in terms f thery, Hlsmanns wn bk exudes a certain

ambivalence when it cmes t assessing Hayek. Fr example, npage 161, he is called a neclassical, but later, n page 710, heis identied as a neo-liberal economist, in my view unjustly.Hwever, at the end f the bk, n page 1003, Hlsmann isbliged t recgnize that Hayek is a classical liberal, thus penlycntradicting the abve terms.

Clsely related t this ambivalence, and pssibly cnfusin,in evaluating Hayek is Wiesers inuence on Hayek, whichHlsmann may exaggerate, and the fact that, despite all the errrs

Wieser himself cmmitted (p. 169), Hlsmann cmpletely neglectst mentin his sund criticism f Schumpeters methdlgy, frhaving invlved the narrwest psitivist methdlgical instru-mentalism, as ppsed t the traditinal genetic-causal apprach

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adpted by the Austrian schl and extlled by Wieser himself.Furthermre, it is a pity that Hlsmann passes up the pprtunityt mentin, fr instance n page 170, that Wiesers main discipleand his successr as chair f the ecnmics department at theUniversity f Vienna, Hans Mayer, was perhaps the Austrianauthr wh expressed the clearest criticism f the functinal theryf price determinatin develped by neclassical ecnmists, acritical view Mises fully shares in Human Action (thugh he failst cite Mayer himself, fr bvius plitical reasns and ut f

persnal enmity).Again, n pages 474476, I feel Hlsmann verstates Wiesers

inuence on Hayek. I believe some exaggeration appears on page637 as well, where Hlsmann claims Hayek advcated the general-equilibrium thery he had received frm Wieser at the LndnSchl f Ecnmics, when actually Hayek, in his entire cnceptinf the market and cmpetitin, ended up stressing nt equilibriumbut the dynamic market prcess and the fact that s-called generalequilibrium cannt pssibly exist and be smehw calculated and

slved. Als highly debatable is the assertin that Hayek saw mneyas neutral (p. 701), and likewise is Hlsmanns statement thatMises tk frm Schumpeter the key idea that entrepreneurshipis the mtr f the ecnmy (p. 771), when in fact the traditin fcentering economic analysis around the gure of the entrepreneuris much lder and can be traced back, thrugh Menger, at least tCantilln himself.

Finally, fr me, perhaps the weakest pint f Hlsmanns wrk

lies in his failure t develp a thery f entrepreneurship. Accrdingto Hlsmann, entrepreneurial prot arises from the acceptance ofuncertainty (and nt frm pure, creative acts f entrepreneurship,p. 772). Furthermore, it seems to me unjust that Hlsmannexcludes Kirzner from the list of American authors inuenced byMisesamng whm he des mentin Rthbard and Schultz (p.945)and also unjust that he does not consider Hayek an Austrianecnmist in the Misesian sense, as he states n page 989.

In any case, and as Maran wuld say, these critical bservatins

are like the little spts that ultimately make a wmans face evenmore beautiful. Hlsmanns book is a denitive masterpiece, whichdue t its depth and eruditin (almst 1200 pages and thusandsf ftntes), is bund t becme the essential reference wrk fr

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anyne wh wishes t learn mre abut the twentieth centurysgreat liberal ecnmist and the teacher f successive generatins fAustrian ecnmists: Ludwig vn Mises. As a result f the abve,and f the lavish cntributin f Austrian ecnmic analysis andthe detailed representatin f the histrical cntext f Misessentire era, traditin, and cultural and intellectual develpment, weshould be immensely grateful for Hlsmanns huge eort and forthe invaluable tl he has bequeathed us fr ur wrk.

POSTSCRIPT

Frm the standpint f frm, the bk here reviewed has twadditinal virtues: its great clarity and the exquisite English inwhich it is written. Mrever, I have detected almst n misprints,in fact nly nine in a ttal f nearly 1200 pages. If nly t shwthe depth t which I have read the wrk, as well as t facilitatethe crrectin f printing errrs in the secnd editin, I list thembelw:

-- on page 5, ftnte 5 states that the Jews were expelled frmSpain in the year 1497, when the event tk place in 1492.

-- on page 61, the paragraph in small fnt shuld be part f themain text.

-- on page 77, secnd line, yur shuld read year.

-- On page 103, footnote 7, it should be claried who Belcredi is.

-- on page 162, ftnte 106, the title f Schumpeters wrk

published in 1908 shuld include Das at the beginning.-- on page 240, ftnte 56, the page number is missing frm the

reference t Patinkins bk.

-- on page 244, ftnte 64, the page numbers are missing frmthe references t Keyness bks.

-- on page 533, there is a cntradictin, since in the main text KarlPribram is cited, while ftnte 20 refers t Alfred Pribram.

-- And on page 709, it states that in 1940 Hayek was fty-oneyears ld, when he was actually nly frty-ne.

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