# Mises and the Next Generation **URL:** **By** Don C. Lavoie **Published:** September 1, 1981 --- “Such is the stuff intellectual revolutions are made of.” There is an old cliché that great men of ideas seldom live to enjoy the fruits of their fame and influence, but in the case of Ludwig von Mises, it must have been still more frustrating—he began his career with a splash, as one of the most prominent young students of a world-renowned economist, Eugen von Böhm-Bawerk, only to watch his influence wane steadily throughout his very productive career. His first book, _The Theory of Money and Credit_ (1912) was for years considered in Europe to be the standard work on monetary theory, and his famous challenge to socialists, “Economic Calculation in the Socialist Commonwealth” (1920), launched what must still be considered the most lively and important debate ever to grace the field of comparative economics. But then he found himself vainly resisting the overwhelming trends of the tumultuous thirties, he was uprooted by World War II to this country, and, by the forties, he had virtually no influence on his contemporaries. Most frustrating of all must have been the fact that his arguments had never been refuted, nor even seriously challenged; they were simply dismissed. It is not difficult to understand his bitterness when he wrote, “I have come to realize that my theories explain the degeneration of a great civilization; they do not prevent it. I set out to be a reformer, but only became the historian of decline.” In an age of infatuation with the application of sophisticated mathematical techniques to economic theory, there seemed to be no room for such an early and vociferous critic of this trend as Mises. With the triumph of Keynesian macroeconomics, abstract equilibrium modeling, and econometric number-crunching, Mises and his Austrian school found themselves all but excluded from any influence in the profession. Anyone who had compared the journal articles of the last quarter-century with those of the previous 75 years would understand how drastic a change has gripped the economics profession, and how whole schools of thought could have been swept aside in the profession’s rush to flex its newfound mathematical “muscles.” Most economists ignored Mises’s warnings that their exclusive concentration on states of equilibrium could blind them to examining the process of equilibration, and that their macro models and statistical averages could obscure their view of the individual choices that underlie social phenomena. It is as astonishing as it is ironic that, in the brief span of eight years between Mises’s death and the hundredth anniversary of his birth, we have seen his influence not only stop its tragic decline, but increase to a degree far higher than it ever has been in this country. Before the mid-seventies, it seemed as if the only people who took Mises seriously were a few of those crusty hard-money advocates outside of academia, and a handful of dedicated scholars like F. A. Hayek, Ludwig Lachmann, Israel Kirzner, and Murray Rothbard, who had never been seduced by mathematical technique. Suddenly at a conference at South Royalton, Vermont, and at a series of conferences since, there appeared dozens of bright young scholars, familiar with and serious about Mises’s work. Within four years of Mises’s death, twelve major conferences on Austrian economics had already been held, several books had been published in an excellent new series called _Studies in Economic Theory_ (now continued through New York University Press), and young Austrian theorists could be found doing graduate work at such prestigious institutions of higher learning as Harvard, UCLA, Stanford, and the University of Chicago. The awarding of the Nobel prize to Hayek further accelerated the resurgence of interest in Austrian theory, and Austrian conferences were beginning to boast the attendance of scores of bright young professors and graduate students eager to extend Mises’s work. At New York University, where Mises had taught in his last years, two of these top young professors were added to a faculty that already included two of Mises’s most respected students, Israel Kirzner and Fritz Machlup, as well as the esteemed Austrian capital theorist, Ludwig Lachmann. _The Austrian Economics Newsletter_, begun in 1977, has, after eight issues, still failed to keep up with the impressive number of Austrian articles, books, and conferences that have appeared since. Additional programs in Austrian economics have been launched at Rutgers University and more recently at George Mason University, while scores of seminars and conferences promoting Mises’s approach have been run by such think tanks as the Institute for Humane Studies, Liberty Fund, and the Cato Institute. There is no more important forum in academia (and no tougher one to break into) than the professional associations and the refereed journals. In economics such institutions as the American Economics Association and the Southern Economic Association essentially define the profession’s view of itself and of the science, and there is no denying the fact that their journals are, as yet, quite innocent of any significant Misesian influence. But even in this, the most difficult arena, Austrian economics has already started to have an impact. In the fall of 1978, the Atlantic Economic Association devoted an entire issue of its journal to Carl Menger, the founder of the Austrian school, while special panels examining the central Austrian notion of entrepreneurship were held at both the Southern and American Economic Associations’ meetings. The latest meetings of the AEA featured not only a panel on Mises, but also an entire opening session significantly entitled “Recent Developments in Economic Theory: Austrian Economics.” The lead article in the July issue of the _Southern Economic Journal_ is an attempt (not very successful) to reconcile Austrian economics with mainstream neoclassical economics, and a forthcoming issue of the AEA’s _Journal of Economic Literature_ will feature a major essay on the modern Austrian school. The edifice of the single, unified neoclassical/Keynesian orthodoxy is already in shambles under challenges from Supply-siders, Rational Expectationists, Monetarists, Marxians, Neo-Keynesians, et al. The rise of competing schools or “paradigms” promising alternatives to “textbook economics” is already an accomplished fact. As a recent special issue of _The Public Interest_ made clear, there is a serious crisis in modern economics that is begging for the emergence of a radically different perspective. And as Kirzner’s contribution to that issue suggests, the modern Austrian school now stands ready to take up this challenge. Perhaps the most encouraging characteristic of these modern Austrian scholars is their mastery of the highly technical mathematical economics of the profession. They are not content to repeat the terse arguments of their mentors but offer fresh and specific explanations of how and why the usefulness of mathematics in economics, though not a “null set,” is far less than contemporary economists seem to realize. And they are at the same time beginning to demonstrate the explanatory power of the Austrian perspective by extending the frontiers of economics to the new problems of the 1980s. The economics profession has for some time contended that with the “tools” of higher mathematics the contemporary economist can rise above the crude squabbles of the older non-mathematical forms of economic discourse; that it could end controversy in the discipline by force of the undebatable rigor of formal mathematics. But today the precision, the decisiveness, and the relevance of much of this “higher” economics are beginning to come under attack. Students are beginning to wonder whether it really helps our understanding of inflation and unemployment to master Laplace transforms, matrix algebra, differential equations, or linear programming. Is it not possible that these fancy techniques can no longer plausibly be considered to be tools of the economist, but have become our masters? Is it not conceivable that the exclusive reliance on those problems that lend themselves to these techniques, to these “muscles,” has made the profession not stronger, but muscle-bound? Have we the courage to admit that we have let our preoccupation with technique transform the most advanced and important of the social sciences into an exercise in sterility, into a truly dismal science? But there is nothing dismal about a book like Mises’s magnum opus, _Human Action_. Austrian economics is not just true; it is also exciting, sweepingly profound, and enormously encouraging about the possibilities open to a free society. It is not a settled body of doctrine but a living process of inquiry into the functioning of the market order. It not only explains the decline of the economies of the modern world, it points the way to a dramatic increase in prosperity. And it is beginning, at last, to mount a sizable following in the academic community. Such is the stuff intellectual revolutions are made of. Don Lavoie is the editor of _The Austrian Economics Newsletter_ and teaches economics at George Mason University in Fairfax, Virginia. He is a frequent contributor to _The Libertarian Review_.