Tuesday, August 3, 2010

How Ludwig von Mises Saved Fritz Machlup's Life

By Richard Ebeling

[During some recent email exchanges, an economist wrote to me that it was a myth that Ludwig von Mises was shunned by the academic community. He suggested to me that Mises preferred doing research at the National Bureau of Economic Research rather than take a position in academia.

To get a broader perspective on the picture, I turned to top Misesian scholar, Richard Ebeling. Ebeling's insights did not disappoint and really add a much fuller perspective on Mises, including Mises influence in advising economist Fritz Machlup not to return to Europe. But most important, although Ebeling as an accurate scholar must report that Mises did receive some offers at second-tier colleges, it must be asked , "Where were the Harvard's Yale's and Columbia's when it came to offering Mises a position, perhaps the greatest economist of all time?" Further, for Machlup to consider Mises a "problem child" is a bit out of bounds. If I had simply written The Theory of Money and Credit, never mind Human Action, Socialism and the list goes on, I think I would be pretty demanding as to where I taught.  Thus, although Ebeling is accurate in technically saying that Mises did receive some offers, it's as if a top heart surgeon was given only a small black medical bag and offered a position in small town America to treat anyone that came in, from those that simply have headaches to those that had ear infections. Remember, as Mises writes, he was for all practical purposes the economist of  Austria, when he served as economist at the Austrian Chamber of Commerce.

As for the view that Mises was respected in the academic community. Pete Boettke is one of the top promoter's of this view. Yet, he can most often be associated with the importance of elitist schools. Here he approvingly links to a post by Greg Mankiw where Mankiw argues that the ranking of a school is most important. I guess ranking is important for everyone except Ludwig von Mises. For Boettke, if Mises gets an offer at a second ranked school, this precludes him from being considered shunned by the academic community. We hear no gripes from Boettke of Mises not getting offers from the elite schools, when in every other case Boettke bitches about something that was not done at an elitist school.  

I commend Ebeling for pointing out that Mises did get some second tier offers, but I think these second tier offers are not enough to say it is a myth that Mises was not completely shunned by the academic community. Ebeling is technically correct, but when perhaps the greatest economist of all time doesn't get to pick and choose where he wants to teach, and only gets second-tier offers after the pestering of a friend, then something is wrong in academia. -RW]

There seem to be two mythologies about Ludwig von Mises during his years in the United States.

One is the more traditional mythology -- of Mises the isolated, hated, and unemployable lone defender of laissez-faire in an American ocean of socialists and Keynesians.

And there, now, seems to be a new mythology: Mises the academically respected economist, who was merely an "outlier" under the Bell Curve of political views in America, and who was taken seriously and had an influence on the mainstream economics profession.

Both, in my view, are wrong.

For many years I heard about and accepted the first of these mythologies. But after going through Fritz Machlup's papers at the Hoover Institution out at Stanford University, I realized that this was far from an accurate picture.

It is very true that Mises was viewed as "out-of-step" with the prevailing planning mentality of most intellectuals, both outside and inside of American academia, when he arrived in the United States in 1940.

And it is true that he was rejected relatively out of hand at some institutions of higher learning. For example, Henry Hazlitt (at this time the senior economic editorial writer for "The New York Times") had attempted to arrange at least a temporary teaching position for Mises at the New School for Social Research in New York City.

When Hazlitt broached the subject with Alvin Johnson, the director of the New School, Johnson said that he would speak with some of the faculty about a possible position, and get back to him. When Johnson did get back to Hazlitt, Johnson told him that the faculty considered Mises too ideologically unacceptable to have him teaching at the New School.

(I heard this story from Henry Hazlitt, himself, and I think this is part of the origin of mythology number one.)

This, indeed, was adding insult to injury, because according to Lionel Robbins' autobiography, in the spring of 1933 Robbins and William Beverage (director of the London School of Economics) were in Vienna and met Mises at a cafe. Mises arrived carrying a copy of that day's newspaper in which it was reported that the new Nazi regime in Germany was firing both anti-Nazi and Jewish professors from German universities. Mises wondered if anything could be done to assist these persecuted academics in finding teaching positions outside of Nazi Germany.

There over coffee at a Vienna cafe the three of them worked out the outline of a plan that became the basis of a network of universities in Great Britain and the United States that came to offer refuge to intellectuals and academics escaping from persecution (or worse) under the Nazis.

The New School for Social Research was one of those institutions. Yet, when Mises, himself, needed such a "helping hand" upon his arrival in America from Nazi-occupied Europe he was rejected for being ideologically unacceptable.

Enter Fritz Machlup.

Machlup had come to the United States in 1933 under a traveling grant from the Rockefeller Foundation that had been arranged for him by Mises. (Mises was on very good terms with several of the European representatives of the Rockefeller Foundation, and had arranged such grants for many others, some of whom used it as a vehicle to find employment outside of a German-speaking world under the growing shadow of Nazism.) Mises told Machlup to stay in America, if he could, since classical liberals and Jews (like both Mises and Machlup) had no future in a European world dominated by National Socialism. Machlup ended up landing a teaching position at University of Buffalo in New York, and he considered that Mises most likely had saved his life by prodding him to immigrate to America.

Machlup's papers and correspondence shows him to have been a "hero" on behalf of many exiled academics. Dozens upon dozens of letters were written by him trying to find positions for such scholars in America in the late 1930s and early 1940s.

He would write that so-and-so is reaching the end of his financial rope, and to save him the embarrassment and humiliation of accepting charity, could not even a temporary position be found for him, so he could earn a living teaching and keep his self-respect? After all, in Germany or Austria, so-and-so was a leading contributor to this or that area of economic or social theory and policy, and would be a valuable addition to any university's or college's faculty.

Machlup worked just as diligently for his friend and mentor, Ludwig von Mises. (When Machlup published his first book, on "The Gold-Exchange Standard," in 1925, and which had been his dissertation under Mises' supervision, in Mises' copy of the book Machlup wrote the dedication, "To my spiritual father." This copy of the book is in the Mises Library at Hillsdale College.)

Machlup helped arrange a visiting position for Mises at Berkeley at the University of California. But Mises did not want to go to California. As far as he was concerned, New York was the intellectual center of the United States, and that is where he wanted to stay. Mises' connections at the Rockefeller Foundation was the entree for getting research grants for the first four years of his time in the United States with an affiliation with the National Bureau for Economic Research (NBER).

Machlup arranged guest lectures at a fairly wide variety of universities for Mises, including (as I recall) at Cornell University, University of Wisconsin, University of Illinois, and at least a dozen more. All of them could have resulted in a visiting or permanent teaching position for Mises. But, Mises kept insisting that the possible pay was too low for a person of his stature, or the location was too far from New York, or the people in the economics department were not of the right caliber, or . . . .

In one of his letters to Hayek, Machlup said in exasperation that Mises was his "problem child," for whom no position was acceptable. Only in 1945, were some of Mises' friends able to arrange the "visiting professorship" in the Graduate School of Business Administration at the New York University that he finally accepted. (This was through the influence of Lawrence Fertig, a prominent free market journalist who was connected with the NYU board of trustees.) And his salary, including the cost for him to have office space at NYU, was paid for by the William Volker Foundation virtually until Mises' retirement as a "visiting professor" in 1969.

So, the first myth, that Mises was shunned by the entire academic community in America, and therefore blocked from any teaching position at a respectable institution of higher learning, is greatly exaggerated. He could have probably landed a reasonably respectable position at any number of universities around the United States. He just did not want to be any place except where he wanted to be.

But the second mythology, that Mises was a respected member of the American academic community, is equally exaggerated. There was some favorable reviews of Mises' books in the 1940s. Henry Simons of the University of Chicago wrote a positive (though partly critical) review of "Omnipotent Government." And old Frank A. Fetter wrote a positive review of "Bureaucracy" (Fetter's last published piece before he died). And Hayek and free market German economist, Walter Sulzbach, (also in exile in America) wrote very favorable reviews of "Nationalokonomie" (the German-language version of "Human Action").

But for the most part the reviews by members of the academic community were critical and sometimes rude, accusing Mises of being an ideological extremist, dogmatic, doctrinaire, and a blind apologist of unrepentant capitalism. British economist, John R. Hicks, reviewed "Human Action" for "The Guardian" newspaper in 1949 and attacked it for being "dogmatic" and offering nothing new or original from the professional economist's point-of-view, for example.

As far as the economics profession as a whole was concerned, Mises was this extreme classical liberal who had tried to argue that socialism would not work as an economic system, and who had been refuted by Oscar Lange and other proponents of "market socialism," and by the great "successes" of socialism-in-practice in the Soviet Union. Plus, he was completely closed minded to the "new economics" of enlightened monetary and fiscal policy as developed by Keynes and the Keynesians.

(Both Henry Hazlitt and W. H. Hutt were either ignored or ridiculed for their books criticizing Keynes' ideas in the late 1950s and early 1960s. As far as the economics profession was concerned, they were out-of-date ideological reactionaries following in the footsteps of people like Mises.)

The fact was that up to his death, Mises was, in the George Orwell sense, a "non-person" who had been sent down the intellectual memory hole. Yes, shortly before his death, Mises was honored as a "fellow" of the American Economic Association in one of the issues of the "American Economic Review" (but this was under the prodding of Fritz Machlup, who had influence with the committee giving such recognitions.)

This status of "non-person" was the same one that Hayek

And if Hayek was ignored or unknown in those dark decades following the Second World War, it was ten times worse for Mises.

Alas, it was only a very small and out-of-the-mainstream group of economists and classical liberals (and some conservatives and businessmen) who paid attention to the ideas and on-going contributions of Mises during his remaining active writing years in the late 1950s and into 1960s.

Peter Boettke and Peter Leeson co-edited a two-volume, "The Legacy of Ludwig von Mises," (Edward Elgar, 2006), attempting to bring out the impact and influence that Mises had had on developments in the economics profession in the decades after 1945.

But, in all honesty, many of the articles or chapter excerpts that they include in an attempt to show Mises' influence on mainstream economists is often a stretch and unpersuasive (indeed, they included pieces by people who have nothing to do with Mises or Austrian Economics, and clearly were influenced by neither). If anything, what is demonstrated is the rather small impact that Mises and his contributions had on almost the entire economics profession in the post-World War II period.

It is better to look at the facts in the face, rather than construct mythologies of any type, including these two mythologies about Ludwig von Mises during his years in America.


  1. This commentary that Professor Ebeling has been posting is and has been utterly fascinating! Thanks to Mr. (Dr.?) Wenzel for posting it and to Professor Ebeling for sharing it with us. One question regarding this particular post of Professor Ebeling's. How does this information square up with the account given by Hulsmann in his Mises: The Last Knight of Liberalism? Oh, one more question, is Professor Ebeling still coming out with his biography of Mises? If so, when? Thank you very much.

  2. Concerning the comment by Mr. "Anonymous," I can only say that I have carefully gone through F. A. Hayek's and Fritz Machlup's papers at the Hoover Institution, I had the opportunity over many decades to speak with Hayek, Henry Hazlittt, Gottfried Haberler, Oskar Morgenstern, and Margit von Mises, most of whom had known Mises intimately in both Europe and the United States.

    And these are the pieces that I have put together from these conversations and my readings from archives and other sources.

    As for Mr. Wenzel's introductory comments to my post. Mr. Wenzel is completely correct that Mises was most certainly NOT offered any position at a leading institution of higher learning in the United States of the Yale, or Harvard, or Princeton type.

    This is certainly a huge scandal and blot on the history of American academia. Gottfried Haberler was at Harvard. Oskar Morgenstern was at Princeton, Fritz Machlup was at Johns Hopkins, Hayek was at the London School of Economics and then the University of Chicago. Joseph A. Schumpeter was at Harvard. Austrian philosopher and economist, Alfred Schutz, was at the New School for Social Research.

    And a swarm of socialists and communists and interventionist-welfare statists from war-torn Europe landed many comfortable teaching jobs at noted American universities and colleges.

    But not Ludwig von Mises. I do not (did not mean) to down play or under-emphasize this great injustice.

    Any of the ivy league universities should have coming begging for Mises to join their faculty. And they should have considered themselves honored and privileged if he had chosen to join their institution.

    This alone shows that those who have tried, more recently, to argue that Mises was a respected member of mainstream American academia in the post-World War II period are really not right in their interpretation.

    However, Mises was not totally shunned or ignored, as I suggest in my post. Would it have been a second-tier university that Mises possibly would have taught at if he had been more willing to leave New York? Yes.

    But this shows that while the "higher elevations" of higher education were biased and closed to Ludwig von Mises, he likely could have gotten a respectable teaching position or even "chair" at one of these universities or colleges. And he would not have had to rely on the financial support from a non-profit organization, since the university that he preferred to be at did not want to pay him for services rendered. (That is a great embarrassment in the history of New York University.)

    My purpose, when Mr. Wenzel asked my views on Mises and American academia, was to try to place in better perspective two exaggerated interpretations that really are mythologies.

    Richard Ebeling

  3. In 2006 and last month I told Prof. Ebeling I would get him a link to this panel discussion I recorded back in 1989. Here are:

    Murray Rothbard

    Lew Rockwell

    Richard Ebeling

    Larry Reed

    Joe Bast


    Charles Van Eaton

    discussing the future of freedom in May 1989:

    Part 1;

    Part 2;

    Part 3;

    Part 4.

    Good thing I brought my tripod to the show.

  4. Dr. Ebeling,
    Thank you very much for your reply! I sincerely hope you come out with your biography of Mises! (Same anomymous as the one in the first post.)

  5. I would like to thank Mr. Roddis for very kindly providing the links for this program that had been held at the state convention of the Michigan Libertarian Party in 1989.

    Though, I must confess, it was "scary" to look at this video from 21 years ago and realize how dark my hair was back then, and how much gray has been sneaking in over all this time. My one important consolation is that I still pretty much have the same amount of hair now as I did over two decades ago.

    Richard Ebeling

  6. Prof. Ebeling:

    The presentation was inspiring in 1989 and is still inspiring today.

    Later that evening, Murray Rothbard gave the keynote speech, length 1:20:


    I extracted a five minute clip where Murray gives his take on the Alaska oil spill:


  7. Professor Ebeling,
    Fritz Machlup,in an essay entitled,"Ludwig von Mises: A Scholar Who Would Not Compromise," which was reprinted at Mises.org, suggests that Mises' inability to get a job at a prestigious American University was due to his age. He said, and this is a quote from his essay as printed at Mises org.:

    These black marks against Mises may explain why he never obtained a full professorship in Vienna or in any German university; but would they also explain why none of the prestigious American universities offered him this rank? Mises came to the United States in the autumn of 1940; at that time the academic climate in the largest institutions was not favorable to a man of Mises's "disqualifications." The intellectual and moral climate changed dramatically during the war years, especially with regard to the acceptance of Jewish scholars in academe.

    However, from 1941 to 1945 the universities were not functioning at capacity, they were glad to grant their professors leaves of absence for service in the armed forces or in governmental agencies; some universities used their teaching staff for courses that were part of basic training for the Army and Navy. Only by 1946 did the demand for academic teachers become strong, and old prejudices had been overcome in most departments. Yet, by that time, Mises was 65 years old — no longer eligible for a "normal" appointment. No wonder, then, that a poorly paid visiting professorship was all that was available to this great teacher.

    The black marks to which Machlup refers refer to Mises' support of capitalism at a time when it was not fashionable to do so in academia. I was just wondering if you had any opinion on these thoughts of Machlup's. Thank you very much. (same anonymous as before.)

  8. Regarding my previous post:
    It should be obvious from reading, but just to to be clear, the middle two paragraphs constitute the quotation from Machlup. Thank you very much. (Same anonymous as before.)