Ludwig von Mises (1881–1973)

Who They Were

Ludwig von Mises (1881-1973) was an Austrian-born economist and a leading figure of the Austrian school, the tradition founded by Carl Menger in 1871 and carried forward through Eugen von Bohm-Bawerk to Mises and then Friedrich Hayek. Mises taught Hayek in Vienna, and the two are the school's best-known twentieth-century figures. Working in the classical-liberal tradition, Mises was a forceful defender of free markets and private property and a critic of central planning. He left Europe as fascism advanced and eventually settled in the United States, where he continued to teach and write, influencing a later generation of free-market economists and helping keep the Austrian tradition alive through the mid-twentieth century.

Key Contributions

Mises's most influential single contribution is the economic-calculation argument. In the 1920s he argued that rational economic calculation is impossible under comprehensive socialism, because without markets there are no prices for capital goods, and without such prices planners cannot compare the relative value of alternative uses of resources. This launched the decades-long 'socialist calculation debate.' His student Friedrich Hayek later extended the case with the knowledge argument, set out in The Use of Knowledge in Society (1945), stressing that the information needed to run an economy is dispersed among millions of people and cannot be centralised. Mises also worked broadly on money, the business cycle and the methodology of economics, defending a deductive approach he called praxeology. Together with Hayek he made the Austrian school a lasting counterweight to both Marxist and Keynesian economics.

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