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Mises & Economic Theory - Leonard P. Liggio, Literature of Liberty, Spring 1982, vol. 5, No. 1 [1982]

Edition used:

Literature of Liberty: A Review of Contemporary Liberal Thought was published first by the Cato Institute (1978-1979) and later by the Institute for Humane Studies (1980-1982) under the editorial direction of Leonard P. Liggio.

Part of: Literature of Liberty: A Review of Contemporary Liberal Thought, 20 vols. 19781-982

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


Mises & Economic Theory

Richard M. Ebeling

  • Department of Economics, University College, Cork, Ireland

“Mises' Influence on Modern Economic Thought.” Wirtschafts Politische Blätter (Journal of Political Economy, Vienna) 28, 4 (1981): 15–24. Part of a Festschrift issue on the Centennary of Ludwig von Mises' birth (1881–1981).

Ludwig von Mises' contributions to modern economic science represent pathbreaking, increasingly influential, and creative scholarship within the Austrian School of Economics. “The common thread permeating the entire ‘Misesian’ edifice is a conscious and fundamental adherence and development of the concept of methodological subjectivism.” Within this Austrian perspective, economics is not limited to an analysis of wealth but, more ambitiously, aims at being a comprehensive science of purposeful human action, a logic of choice, and the “science which studies human behavior as a relationship between ends and scarce means which have alternative uses.” Mises' themes—methodological individualism, individual purposeful action, subjective perception of circumstances and costs, and alertness to opportunities—run as unifying threads through his impressive economic theory.

“Over the six decades beginning in 1912 and ending in 1969, the implications of the subjectivist perspective for questions concerning the applicability of economic analysis beyond the boundaries of the ‘marketplace,’ the study and comparison of alternative economic systems, the place of knowledge and expections in disequilibrium processes of adjustment and the role of money and the study of monetary dynamics were all explored by Mises.” With some time-lag, Mises' farranging economic analysis has exerted a profound influence on the very direction of economic research.

A bare listing of Mises' contributions, stemming from the Austrian School's methodological subjectivism and individualism, would include: (1) His expansion of the previously restricted scope of economics to embrace a comprehensive analysis of human action and choice with their implications of dynamic process. This approach influenced the later development of Buchanan and Tullock's theory of “public choice” and Gary S. Becker's “economic approach to human behavior” (which can embrace an analysis of crime, law, bureaucracy, war, and politics). (2) His influence on the London School of Economics (particularly Hayek, Thirlby, and Wiseman) in developing a dynamic, non-static formulation of subjective costs, which called into question the objective, measurable costs presuppositions of interventionist public utility and regulatory policy. (3) His creation in 1920 of the terms of debate on the impossibility of rational economic planning and calculation under socialism. (4) His grand synthesis of monetary theory and trade cycle analysis in Theorie des Geldes, which provided microeconomic foundations for macro-economics; during the 1930s Mises' approach to money and the business cycle (with Hayek's contributions) was an Austrian rival to the emerging Keynsian Revolution. The conceptual and practical failure of the Keynsian experiment from the 1940s through the 1960s has awakened during the past 15 years a renewed interest in the problems of disequilibrium adjustment processes as elaborated within Mises' microeconomic and subjective-individualist framework. (5) His anticipation of “rational expectations” theory and his influence on the so-called “neo-Austrian” expositors of this analysis. (6) His most important influence has been that of preserving the vitality of the Austrian School of Economics during the Keynsian interlude and of fostering the revival of the Austrian tradition in both Europe and the United States. Through Mises' inspiration and scholarship the Austrian School has exercised an increasing appeal because of its impressive coherence as a logically integrated system. Inspired and vitalized by Mises, this tradition continues to grow and offer fresh insights into the entire range of human action.

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IV

Social Science Methodology & Individual Freedom

Methodological questions—such as debates over methodological holism vs. methodological individualism, the distorting influence of ideology, the role of error in scientific progress, the importance of quantification as a measure of truth, and the proper procedures to use in understanding human (as opposed to inorganic) phenomena—are of vital importance in social science and philosophy. These seemingly abstruse and remote questions of method and conceptualization powerfully affect our judgments on the merits of human freedom, individualism, and our moral norms. Our first three summaries show the human, social, and ethical relevance of methodological questions for political science. Next, we see an equally powerful relevance of these questions for the fields of psychology, social theorizing, and (in Foucault's study) interdisciplinary grand theorizing.