WEBVTT

NOTE 5. Early Professions

1
00:00:00.000 --> 00:00:03.440
Early Professions

2
00:00:03.440 --> 00:00:08.440
From childhood, Mises had been driven by a progressive outlook and a strong personal

3
00:00:08.440 --> 00:00:14.440
urge to contribute to the improvement of the world. Scion of an elevated Jewish family

4
00:00:14.440 --> 00:00:21.560
successfully established in post-1867 Vienna, product of a liberal education, he believed

5
00:00:21.560 --> 00:00:28.360
that artists and men of science formed the avant-garde of social progress. Carl E. Schorxer

6
00:00:28.360 --> 00:00:32.920
is famous for his claims that this interest in science and art was a substitute for the

7
00:00:32.920 --> 00:00:37.160
political career that the existing monarchial regimes made impossible.

8
00:00:37.160 --> 00:00:42.660
Schocker's claim relies on the implicit hypothesis that politics is inherently more satisfying

9
00:00:42.660 --> 00:00:48.700
than science or art, a hypothesis that tells us more about Schocker's own value judgments

10
00:00:48.700 --> 00:00:53.200
than about those prevalent among young Germans and Austrians at the time.

11
00:00:53.200 --> 00:00:57.120
Enlightenment through scientific discoveries was paramount for the further development

12
00:00:57.120 --> 00:01:03.360
of Humanity. Mises maintained an unconditional affirmation of truth and intellectual integrity

13
00:01:03.360 --> 00:01:09.520
as supreme values, even though this uncompromising stance hurt his career and other material

14
00:01:09.520 --> 00:01:14.880
interests. As a consequence, he faced the problems of his time in a series of isolated

15
00:01:14.880 --> 00:01:21.120
one-man struggles. Erich von Kühnel-Ledding writes, He never fully belonged to a specific

16
00:01:21.120 --> 00:01:27.440
Camp. He was always a square peg in a round hole. To make matters worse, Mises was consciously

17
00:01:27.440 --> 00:01:33.240
a nobleman, a true gentleman, who rejected all compromise and never concealed his thoughts

18
00:01:33.240 --> 00:01:39.640
or his convictions. If someone or something was plainly stupid, he said so, nor could

19
00:01:39.640 --> 00:01:46.800
he tolerate cowardice or ignorance. This aristocratic Jewish intellectual was an odd man out and

20
00:01:46.800 --> 00:01:52.800
fit into no established pattern. These qualities made a career difficult in Vienna. The inhabitants

21
00:01:52.800 --> 00:01:57.520
of the Austrian capital were famous for their sophisticated taste, humour, and fondness

22
00:01:57.520 --> 00:02:02.800
of the pleasures their city could offer, but they were not known for candour or courage,

23
00:02:02.800 --> 00:02:07.920
and they openly despised those who displayed the qualities they lacked, especially upstarts

24
00:02:07.920 --> 00:02:13.280
from the provinces. A keen connoisseur of the Austrian mind recalls the mentality in

25
00:02:13.280 --> 00:02:19.280
and the City on the Danube. People who had their own views and horribly dictu even championed

26
00:02:19.280 --> 00:02:25.160
these views were not well received. One had to be popular to be welcome, and appreciation

27
00:02:25.160 --> 00:02:31.960
was given not to effort but only to success, not to a man himself, but only to his position.

28
00:02:31.960 --> 00:02:36.880
Clearly, Vienna did not provide a favourable climate for Mises's talents, but he made

29
00:02:36.880 --> 00:02:41.720
good use of them anyway, thanks to immense will-power and his unconditional devotion

30
00:02:41.720 --> 00:02:47.340
and to Truth, which earned him the admiration even of those who resented his brazenness.

31
00:02:47.340 --> 00:02:52.680
It was this fundamental attitude to stick to his convictions at all costs that had made

32
00:02:52.680 --> 00:02:57.720
him receptive to the message of Menger and Boehm-Bawerk. These thinkers had developed

33
00:02:57.720 --> 00:03:03.680
economic theory on fact rather than fancy, and as Mises's own work in the historicist

34
00:03:03.680 --> 00:03:09.800
tradition had shown him, the methodology of the German mainstream economists was sterile.

35
00:03:09.800 --> 00:03:15.500
Ludwig Pauler, the famous critic of the historicists, quoted a satirical magazine that described

36
00:03:15.500 --> 00:03:21.920
economic research as the activity of measuring workers' apartments and stating that they

37
00:03:21.920 --> 00:03:28.260
were too small. When Mises completed his graduate studies in February of 1906 he had likely

38
00:03:28.260 --> 00:03:33.560
made plans to continue scientific research in some form. At that point he was thoroughly

39
00:03:33.560 --> 00:03:38.200
conversant with the Austrian School and with some of the more serious problems left unsolved

40
00:03:38.200 --> 00:03:43.080
in the Existing Literature. He had realized, in particular, that no follower of Carl Menger's

41
00:03:43.080 --> 00:03:47.520
had offered a satisfactory integration of the theory of money into the general framework

42
00:03:47.520 --> 00:03:53.000
of Menger's theory. This had exposed the Austrian theory to some vigorous criticism,

43
00:03:53.000 --> 00:03:57.480
most notably from the German economist Carl Helferich, who claimed that the theory of

44
00:03:57.480 --> 00:04:01.640
money could not be reconciled with Menger's theory of value.

45
00:04:01.640 --> 00:04:05.720
Mises dedicated the next five years of his life to filling the gap with a systematic

46
00:04:05.720 --> 00:04:10.760
treatise on money that he planned to submit to the University of Vienna as his Habilitation

47
00:04:10.760 --> 00:04:16.160
thesis. The Habilitation degree was granted on the basis of a comprehensive scholarly

48
00:04:16.160 --> 00:04:20.800
work that not only covered a large field of knowledge and demonstrated the author's ability

49
00:04:20.800 --> 00:04:26.000
to shed light on the phenomena under consideration, but also made significant contributions to

50
00:04:26.000 --> 00:04:31.240
present knowledge. The idea was that the authorities of the science recognized the

51
00:04:31.240 --> 00:04:45.080
in the University System on a par with more senior candidates.

52
00:04:45.080 --> 00:04:49.920
But first a book had to be written, and the necessary research to be done. In those days

53
00:04:49.920 --> 00:04:55.640
such an enterprise required unusual private financial means or unusual energy. There were

54
00:04:55.640 --> 00:05:00.500
no university positions for these young scholars to earn a living while they pursued a long-term

55
00:05:00.500 --> 00:05:06.220
Research Project. They were private scholars, but only loose university affiliations. They

56
00:05:06.220 --> 00:05:12.220
could hope for academic employment only after the successful completion of a hab. thesis.

57
00:05:12.220 --> 00:05:18.700
Meanwhile they had to survive a prolonged period of professional and material insecurity.

58
00:05:18.700 --> 00:05:23.220
If they could not rely on their family, or did not wish to do so, they had to earn their

59
00:05:23.220 --> 00:05:29.540
living in some other occupation while pursuing scholarship at night. This was science the

60
00:05:29.540 --> 00:05:35.760
the Hard Way, and it was Mises' way from March 1906 until December 1911 when he finally

61
00:05:35.760 --> 00:05:42.460
sent his completed manuscript to the publisher. He took the hard times lightly. He was a young

62
00:05:42.460 --> 00:05:47.880
man full of energy and enthusiasm for his science. Would he have despaired if he had

63
00:05:47.880 --> 00:05:53.660
known that this was how his life would be for almost thirty years? He had later admitted

64
00:05:53.660 --> 00:05:57.800
that it was hopeless for him to obtain one of the few positions at a German or Austrian

65
00:05:57.800 --> 00:06:02.960
and University. At one point, he observed sarcastically, I was ill-suited to teach the

66
00:06:02.960 --> 00:06:08.560
royal Prussian police science. But even in his youth, he had to realize that he would

67
00:06:08.560 --> 00:06:14.480
have to make his way without public support. Austria had produced many geniuses only to

68
00:06:14.480 --> 00:06:20.200
confine them to the lives of independent scholars. Pioneers like Mendel and Kumpelowicz never

69
00:06:20.200 --> 00:06:25.280
held university positions. The Austrian government dismissed from teaching Bolzano and Brentano

70
00:06:25.280 --> 00:06:32.400
So it isolated Mach and did not at all care for Husserl, Breuer and Freud. It appreciated

71
00:06:32.400 --> 00:06:36.880
Boehm-Bawerk as a capable official, not as an economist.

72
00:06:36.880 --> 00:06:42.420
However, these failed careers did not deter Mises or thousands of like-minded young men

73
00:06:42.420 --> 00:06:47.660
from following their examples. Posterity would honor them, they were sure, just as the present

74
00:06:47.660 --> 00:06:53.460
society honored the heroes of the past. Books, monuments and street names were dedicated

75
00:06:53.460 --> 00:07:03.100
The result of their sacrifices was an explosion of creative energies in virtually all fields

76
00:07:03.100 --> 00:07:08.260
of human endeavour that made Vienna's glory in the decades before the National Socialists

77
00:07:08.260 --> 00:07:13.380
rose to power. The intellectual explosion in Vienna was already visible when young Mises

78
00:07:13.380 --> 00:07:19.320
prepared for the life of a private scholar, ready to earn his living in some liberal profession.

79
00:07:19.320 --> 00:07:26.400
Pursuits would be his real life, the one that would give significance to all other activities.

80
00:07:26.400 --> 00:07:32.120
His professional life would be secondary, a day job to pay the bills, and thus he began,

81
00:07:32.120 --> 00:07:38.240
on March 15, 1906, a paid internship with the fiscal administration of Lower Austria

82
00:07:38.240 --> 00:07:41.460
in its Vienna district headquarters.

83
00:07:41.460 --> 00:07:46.160
The most important source of data on Mises's early professional development is a letter

84
00:07:46.160 --> 00:07:52.240
of Application and Curriculum Vitae that he wrote to the Chamber of Commerce in 1909.

85
00:07:52.240 --> 00:07:56.680
This letter is today kept in the files containing the Machlup-Mises correspondence at the Hoover

86
00:07:56.680 --> 00:07:59.320
Institution.

87
00:07:59.320 --> 00:08:04.140
Difficult start in professional life This was the traditional choice of the sons

88
00:08:04.140 --> 00:08:09.740
of civil servant families. It had been the first station in Boehm-Bawerk's career,

89
00:08:09.740 --> 00:08:14.360
and thus it was a promising start for Mises too. A career within the civil service was

90
00:08:14.360 --> 00:08:19.600
was a highly coveted outlet for law graduates, opening prestigious opportunities within the

91
00:08:19.600 --> 00:08:24.460
executive branch of government. The civil service was considered to be the nobilium

92
00:08:24.460 --> 00:08:29.360
officium par excellence while top executive positions with private firms were valued

93
00:08:29.360 --> 00:08:35.200
far less highly. The office was then under the direction of Alexander Freiherr von Spitzmüller,

94
00:08:35.200 --> 00:08:40.000
who later moved to a top executive position at the Gredianstalt and eventually became

95
00:08:40.000 --> 00:08:45.560
and the last president of the Austro-Hungarian Bank, the Empire Central Bank.

96
00:08:45.560 --> 00:08:55.680
His 1909 curriculum vitae describes his position as that of a Konzeptspraktikant at the KK Finanzbezirksdirektion in Vienna.

97
00:08:55.680 --> 00:09:06.320
Mises's congratulatory letter on Spitzmiller's 70th birthday in 1932 speaks of a Finanzlandesdirektion, head financial office of the regional government.

98
00:09:06.320 --> 00:09:12.220
It is ironic that Mises would become the most outspoken and influential critic of the policies

99
00:09:12.220 --> 00:09:18.880
of the Austro-Hungarian Bank under Spitzmiller's governorship. Patience and loyal service combined,

100
00:09:18.880 --> 00:09:22.980
with a dose of clever networking, would have put Mises in a position to follow in this

101
00:09:22.980 --> 00:09:27.660
great man's footsteps and, given his interest in the theory of money and banking, gain a

102
00:09:27.660 --> 00:09:34.100
high position within the central bank. But Mises soon discovered that this was a mistake,

103
00:09:34.100 --> 00:09:39.140
The paralyzing formal procedures, the mental pettiness, and the personal dependence on

104
00:09:39.140 --> 00:09:44.860
one's superiors came to him as a shock. He might have been thinking back on this experience

105
00:09:44.860 --> 00:09:51.020
when he later wrote on the nature and significance of bureaucracy. Government jobs offer no opportunity

106
00:09:51.020 --> 00:09:57.640
for the display of personal talents and gifts. Regimentation spells the doom for initiative.

107
00:09:57.640 --> 00:10:03.700
The young man has no illusions about his future. He knows what is in store for him. He will

108
00:10:03.700 --> 00:10:33.700
He will get a job with one of the innumerable bureaus. He will be a cog in a huge machine, the working of which is more or less mechanical. The routine of a bureaucratic technique will cripple his mind and tie his hands. He will enjoy security. But this security will be rather of the kind that the convict enjoys within the prison walls. He will never be free to make decisions and to shape his own fate. He will forever be a man taken care of by other people.

109
00:10:33.700 --> 00:10:50.100
Mises was not going to shudder and bury himself. By the fall of the same year, he asked to

110
00:10:50.100 --> 00:10:55.500
be honorably released, and his request was granted. This decision must have caused great

111
00:10:55.500 --> 00:11:00.220
consternation among his family and friends. How could he give up one of the most coveted

112
00:11:00.220 --> 00:11:04.860
positions for young men of his background. How can someone enjoying the privilege of

113
00:11:04.860 --> 00:11:12.540
serving His Majesty quit this service voluntarily? asked Heinrich Treichel in fast ein Jahrhundert.

114
00:11:12.540 --> 00:11:16.860
The question was addressed to Treichel's father, Alfred, a friend of Mises's, who

115
00:11:16.860 --> 00:11:23.500
had made exactly the same decision a few years earlier. Mises's choice was indeed remarkable

116
00:11:23.500 --> 00:11:29.460
and a vivid testimony of the personality of the young man. Ludwig was not the nice guy

117
00:11:29.460 --> 00:11:41.540
the Civil Service utterly dreadful. He was full of ambition and independent judgment.

118
00:11:41.540 --> 00:11:47.940
He had far more confidence in his own abilities than in the protection and prestige according

119
00:11:47.940 --> 00:11:53.820
to his Majesty's faithful servants. After his resignation he decided to prepare for

120
00:11:53.820 --> 00:11:59.820
for a career as a private lawyer. Admission to the bar required that the candidate familiarise

121
00:11:59.820 --> 00:12:05.980
himself with the Austrian court system through a two-year internship at the main courts.

122
00:12:05.980 --> 00:12:12.300
From October 1906 to September 1908, Mises interned at the Court for Civil Affairs, the

123
00:12:12.300 --> 00:12:17.180
Trade Court, the Penal Court, the Executive Court, and the District Court of the City

124
00:12:17.180 --> 00:12:23.420
of Vienna. The atmosphere in these institutions was not much different from what he had experienced

125
00:12:23.420 --> 00:12:28.720
in Fiscal Administration, but at least there was a prospect of leaving the system one day

126
00:12:28.720 --> 00:12:35.500
to become his own man. In those years Ludwig must have been the black sheep of the family.

127
00:12:35.500 --> 00:12:41.500
Was he unfit for the real world? Did he not know how to compromise? His brother Richard

128
00:12:41.500 --> 00:12:46.740
was the white sheep. He had graduated in the same year as Ludwig, then moved as an assistant

129
00:12:46.740 --> 00:12:53.820
Professor to the University of Brünn, today Brno, and in 1909, at the age of 26, he would

130
00:12:53.820 --> 00:12:58.940
land a professorship at the University of Strasbourg. This was a career path Ludwig

131
00:12:58.940 --> 00:13:04.500
would have welcomed, but the real world imposed different choices on him. In the fall of 1908,

132
00:13:04.500 --> 00:13:10.620
with the end of his two-year internship approaching, Mises looked for suitable employment in Vienna.

133
00:13:10.620 --> 00:13:15.360
He was hired by the prestigious law firm of Robert Pelzer and started working in its office

134
00:13:15.360 --> 00:13:27.800
The new position was a vast improvement on the suffocating mental narrowness of courtroom

135
00:13:27.800 --> 00:13:34.040
routine. Still, the firm was not a real escape from the bureaucratic atmosphere of the courts.

136
00:13:34.040 --> 00:13:36.960
Mises kept looking for other options.

137
00:13:36.960 --> 00:13:41.940
The Parallel Life During these years, Mises' scholarly enterprises

138
00:13:41.940 --> 00:13:47.700
compensated for the dismal courtroom routine. The first result of his research on monetary

139
00:13:47.700 --> 00:13:52.740
theory and policy was a published paper on the motives underlying Austrian foreign exchange

140
00:13:52.740 --> 00:13:57.980
controls. The article appeared in Boehm-Bawerk's Zeitschrift für Volkswirtschaft, Sozialpolitik

141
00:13:57.980 --> 00:14:02.940
und Verwaltung and dealt with the ways in which interest groups promoted price and production

142
00:14:02.940 --> 00:14:09.500
controls. He followed up in 1908 with a survey of recent literature on money and banking.

143
00:14:09.500 --> 00:14:14.360
It was a welcome addition to his intellectual life when, in October 1907, he was offered

144
00:14:14.360 --> 00:14:20.260
a position teaching economics to the senior class of the trade academy for girls. While

145
00:14:20.260 --> 00:14:25.000
the traditionally male gymnasium offered a broad classical education to prepare a young

146
00:14:25.000 --> 00:14:30.100
elite for university studies and the assumption of high responsibilities within the civil

147
00:14:30.100 --> 00:14:36.480
service, girls' schools had a stronger orientation to concrete professional concerns. Only recently

148
00:14:36.480 --> 00:14:42.320
Many had goals been admitted to the Matura exams and the ensuing university studies.

149
00:14:42.320 --> 00:14:47.160
These exams were organized exclusively by the gymnasium, however, so the goals prepared

150
00:14:47.160 --> 00:14:52.840
for them in special senior classes, Abiturientenklassen, at their own schools, and on the day of the

151
00:14:52.840 --> 00:14:57.240
exam went to the nearest gymnasium to take the tests.

152
00:14:57.240 --> 00:15:01.000
Mises taught economics and public finance, and Austrian government.

153
00:15:01.000 --> 00:15:05.480
New to teaching, he must have applied the classic pedagogy he had inherited from Menger

154
00:15:05.480 --> 00:15:10.200
and Boehm-Bawerk. He would begin with a brief preview of the tenets to be explained, then

155
00:15:10.200 --> 00:15:14.880
turn to an elaboration of his subject and eventually conclude by repeating some of the

156
00:15:14.880 --> 00:15:20.640
more important tenets. Erich Streisler states that Menger applied exactly this technique

157
00:15:20.640 --> 00:15:26.400
in his lectures to Crown Prince Rudolf. As early as 1907 he would have taught educated

158
00:15:26.400 --> 00:15:31.000
young ladies under the vibrant inspiration of Boehm-Bawerk's example, whose seminar

159
00:15:31.000 --> 00:15:37.080
and why he continued to attend. Boehm-Bawerk inspired Mises throughout his life of teaching.

160
00:15:37.080 --> 00:15:41.720
All of Mises's students would praise him for his earnest and engaged style, for the

161
00:15:41.720 --> 00:15:46.520
respect he displayed toward his students, and for the unfailing encouragement he provided

162
00:15:46.520 --> 00:15:52.400
at the slightest signs of interest and productivity on their part. The first students to profit

163
00:15:52.400 --> 00:15:57.020
from these extraordinary qualities were girls from Vienna's better families, students of

164
00:15:57.020 --> 00:16:07.260
In 1908, Mises became a member of the Zentralstelle für Wohnungsreform, Center for Housing Reform,

165
00:16:07.260 --> 00:16:12.820
an association of politicians and intellectuals, striving for an improvement in Vienna's housing

166
00:16:12.820 --> 00:16:17.560
conditions. He greatly enjoyed his activity within the Center, where he met excellent

167
00:16:17.560 --> 00:16:23.900
economists such as the brothers Karl and Ewald Pribram, Emil Pirels, Rudolf Mahres, Paul

168
00:16:23.900 --> 00:16:29.740
Paul Schwartz, Emil von Fürth and Robert Mayer. When Mayer became Minister of Finance,

169
00:16:29.740 --> 00:16:34.000
Mises was asked to write a policy paper on housing taxes, which was high on the agenda

170
00:16:34.000 --> 00:16:39.580
of the Austrian Parliament. In his memorandum, Mises argued that the taxes levied on existing

171
00:16:39.580 --> 00:16:44.420
buildings were less of a problem than the heavy taxation of joint stock companies which

172
00:16:44.420 --> 00:16:49.340
deterred big capital from investment in real estate. To his great satisfaction, the Centre

173
00:16:49.340 --> 00:16:54.860
for Housing Reform, fully endorsed his report. At about the same time, Mises was involved

174
00:16:54.860 --> 00:16:59.740
in setting up a group for the discussion of problems of economic theory and the fundamental

175
00:16:59.740 --> 00:17:04.740
questions of other social sciences. The other leaders of this group, the brothers Karl and

176
00:17:04.740 --> 00:17:10.900
Ewel Pribram, Emil Peerls and Elze Kronbach, were also members of the Boehm-Bawerk seminar.

177
00:17:10.900 --> 00:17:14.980
The weekly sessions with their great teacher were far too brief to allow thorough debate

178
00:17:14.980 --> 00:17:20.540
of the problems that came up, so they decided to create an additional forum. The first formal

179
00:17:20.540 --> 00:17:26.260
meeting took place on March 12, 1908, and from then on, the group met at regular intervals

180
00:17:26.260 --> 00:17:31.660
and soon attracted more members. Filipowicz, who headed the Centre for Housing Reform,

181
00:17:31.660 --> 00:17:36.540
allowed the group to use the Centre's beautiful premises for its meetings. After World War

182
00:17:36.540 --> 00:17:42.620
I, this group would become the Nationalökonomische Gesellschaft, the most important German-language

183
00:17:42.620 --> 00:17:47.400
Forum for the discussion of economic theory. It is likely that the group was already hosting

184
00:17:47.400 --> 00:17:54.420
foreign scholars, such as the young Dr. William Rapard, who stayed in Vienna for the 1908-1909

185
00:17:54.420 --> 00:18:00.020
academic year and who some 25 years later would hire Mises to teach international economic

186
00:18:00.020 --> 00:18:03.780
relations in Geneva. Meanwhile, Mises continued to make progress

187
00:18:03.780 --> 00:18:08.740
in his study of money and banking. He was working on two papers that he probably presented

188
00:18:08.740 --> 00:18:13.980
in Boehm-Bawerk seminar, and which he submitted to foreign journals. The first one, which

189
00:18:13.980 --> 00:18:18.060
was published in the British Economic Journal, gave a sympathetic presentation of the foreign

190
00:18:18.060 --> 00:18:23.940
exchange policy of the Austro-Hungarian Bank, the Central Bank. Edgeworth, the editor of

191
00:18:23.940 --> 00:18:28.300
the journal, had asked Filipovits to write this paper, but Filipovits had no time and

192
00:18:28.300 --> 00:18:33.780
proposed Mises. The other paper elaborated on the same subject, dealing more critically

193
00:18:33.780 --> 00:18:39.720
legally with legal aspects of the bank's policy to redeem its notes in gold.

194
00:18:39.720 --> 00:18:44.820
Legally Austria-Hungary was on a paper money standard, but Mises argued that a de facto

195
00:18:44.820 --> 00:18:49.120
gold standard had been established through the bank's redemption policy, which by that

196
00:18:49.120 --> 00:18:54.680
time it had followed for some years. He concluded that a legal obligation of the bank to redeem

197
00:18:54.680 --> 00:19:01.020
its notes would not represent a new burden or danger, but would be a mere formality.

198
00:19:01.020 --> 00:19:05.100
Before he even published the paper, he received an unexpected invitation from a high-ranking

199
00:19:05.100 --> 00:19:09.900
officer of the central bank. Mr. Waldmeier offered material that could be useful for

200
00:19:09.900 --> 00:19:15.140
the study, but asked that, in exchange, Mises submit the paper to the bank for approval

201
00:19:15.140 --> 00:19:20.740
before publication. Mises declined. After its publication in Schmoller's Jahrbuch,

202
00:19:20.740 --> 00:19:25.940
the paper prompted a polemical exchange between Mises and two critics, Otto Neurath, another

203
00:19:25.940 --> 00:19:54.460
The Legal Obligation to Redeem its Notes would have curtailed a secret fund out of which

204
00:19:54.460 --> 00:19:59.880
which the bank paid bribes and other illicit salaries. The beneficiaries were therefore

205
00:19:59.880 --> 00:20:04.640
interested in maintaining the notion that legal note redemption was inadvisable for

206
00:20:04.640 --> 00:20:11.040
monetary policy. How was Mises to take this revelation? Should he unmask his opponents

207
00:20:11.040 --> 00:20:17.180
and uncover their corrupt scheme? After much thought he decided to do nothing of the sort.

208
00:20:17.180 --> 00:20:21.840
His mission as an economist was to unmask fallacious economic arguments. If he also

209
00:20:21.840 --> 00:20:27.620
To discuss the corruption of his opponents, the mission would lose focus. He later summarized

210
00:20:27.620 --> 00:20:33.360
his new personal maxim as follows. An economist must face his opponents with the fictitious

211
00:20:33.360 --> 00:20:39.000
assumption that they are guided by objective considerations only. It is irrelevant whether

212
00:20:39.000 --> 00:20:44.320
the advocate of a fallacious opinion acts in good or bad faith. It matters only whether

213
00:20:44.320 --> 00:20:49.640
the stated opinion is correct or fallacious. It is the task of other people to reveal corruption

214
00:20:49.640 --> 00:20:52.480
and inform the public about it. He added,

215
00:20:52.480 --> 00:20:58.520
Throughout my life I have held to these principles. I knew a great deal, if not all, about the

216
00:20:58.520 --> 00:21:03.720
corruption of interventionists and socialists with which I had to cope. But I never made

217
00:21:03.720 --> 00:21:07.760
use of this knowledge, which was not always properly understood by others. It was often

218
00:21:07.760 --> 00:21:13.080
held against me that I politely rejected offers to supply me with proof admissible in courts

219
00:21:13.080 --> 00:21:18.200
of law of embezzlement and frauds by my opponents.

220
00:21:18.200 --> 00:21:24.880
Cama. Daily work for the Pelser law firm was somewhat less rewarding than his early scholarship.

221
00:21:24.880 --> 00:21:28.940
Mises kept an eye out for more convenient career opportunities, and one came sooner

222
00:21:28.940 --> 00:21:33.760
than expected. His friend, Victor Gretz, who was employed as an economic counsellor at

223
00:21:33.760 --> 00:21:39.320
the local Chamber of Commerce, proposed Mises as his successor. Gretz had worked a few years

224
00:21:39.320 --> 00:21:44.500
for the executive office of the Niederösterreichische Handels- und Gewerbekammer, Lower Austrian

225
00:21:44.500 --> 00:21:48.580
and the Austrian Chamber of Commerce and Industry, hereafter Commer.

226
00:21:48.580 --> 00:21:52.700
Along with some other young economists, such as Alfred Treichel, he had been hired when

227
00:21:52.700 --> 00:21:57.000
the Commer made the strategic decision to strengthen its executive office to increase

228
00:21:57.000 --> 00:22:02.540
its leverage on Austrian economic policy. This decision of the Vienna Chamber of Commerce

229
00:22:02.540 --> 00:22:06.940
seems to have been paralleled at many other places in Germany and Austria-Hungary since

230
00:22:06.940 --> 00:22:13.460
the late 1890s. The new strategy of the Commer was a reaction both to the expansion of government

231
00:22:13.460 --> 00:22:18.340
Interventionism in the first decade of the 20th century, and to the simultaneous elimination

232
00:22:18.340 --> 00:22:23.880
of the Cummer from the Austrian Parliament. Until 1907, the sixty Austrian Chambers of

233
00:22:23.880 --> 00:22:28.220
Commerce had been directly represented in the Austrian Parliaments, according to the

234
00:22:28.220 --> 00:22:33.580
older parliamentary model, where representation referred to predefined interest groups such

235
00:22:33.580 --> 00:22:40.260
as the nobility, the clergy, the city dwellers, but also commerce and industry. Then the introduction

236
00:22:40.260 --> 00:22:45.900
of Universal Suffrage supplanted the old system, and the Vienna Cummer, which had traditionally

237
00:22:45.900 --> 00:22:50.060
been the hub of the whole network of chambers of commerce throughout the country, suddenly

238
00:22:50.060 --> 00:22:53.940
found itself without any direct political influence.

239
00:22:53.940 --> 00:22:59.180
Fortunately for the Cummer, however, the hyperactive new parliamentarians were completely ignorant

240
00:22:59.180 --> 00:23:04.500
of economic and legislative matters, incapable of anticipating the impact of the new laws

241
00:23:04.500 --> 00:23:09.900
on the market process. They also lacked the ability to formulate laws in such a way as

242
00:23:09.900 --> 00:23:14.820
has to ensure their proper enforcement through the bureaucracy. The Parliament's incompetence

243
00:23:14.820 --> 00:23:21.620
was obvious and embarrassing, but to the Commer executives it was an opportunity. They started

244
00:23:21.620 --> 00:23:26.060
offering technical assistance to the various committees and bureaus involved in the preparation

245
00:23:26.060 --> 00:23:32.060
of new economic legislation. The services of the Commer coming from the official representatives

246
00:23:32.060 --> 00:23:38.380
of the Austrian business world were readily accepted and quite influential. The Commer's

247
00:23:38.380 --> 00:23:45.220
Office was once again a major player on Austria's economic policy scene. This had positive personal

248
00:23:45.220 --> 00:23:50.440
consequences for the members of the executive office. In early 1909, most of them had been

249
00:23:50.440 --> 00:23:54.960
offered to attractive positions within the higher strata of the government bureaucracy

250
00:23:54.960 --> 00:24:02.140
and in major corporations. Teichu had left the Kama in March of 1909 for one such. Shortly

251
00:24:02.140 --> 00:24:07.220
thereafter, he moved on to become vice-chairman of one of the major banks. After the war,

252
00:24:07.220 --> 00:24:27.020
Mises applied in February 1909, mentioning his scholarly publications and stressing practical

253
00:24:27.020 --> 00:24:32.300
skills such as the command of English and French, as well as Polish and some Italian,

254
00:24:32.300 --> 00:24:37.780
and of stenography according to the Gabersberger System. It is unlikely that the comer received

255
00:24:37.780 --> 00:24:43.180
many applications of this calibre. In fact, most candidates with Mises's qualifications

256
00:24:43.180 --> 00:24:48.640
sought careers in the more prestigious civil service. He was hired on the spot and began

257
00:24:48.640 --> 00:24:55.300
work on the 1st of April. One author claims that he was hired on October 15th, 1909, as

258
00:24:55.300 --> 00:25:01.520
a provisional contipient, an aspiring lawyer who has only recently passed his exams. This

259
00:25:01.520 --> 00:25:07.420
seems to be wrong. In a May 1909 newspaper report, Mises is mentioned as a representative

260
00:25:07.420 --> 00:25:13.080
of the Kummer Bureau. After three years of wandering, Mises had finally found an agreeable

261
00:25:13.080 --> 00:25:18.040
occupation that would support his after-hours scholarship. He remained in this position

262
00:25:18.040 --> 00:25:22.520
for the next 25 years. At this point Mises was still living in the

263
00:25:22.520 --> 00:25:28.580
Friedrichstraße No. 4. Ludwig and his mother moved to another apartment in 1911. The new

264
00:25:28.580 --> 00:25:34.420
His new address was Waldseiler 24, also in the first district. Housing regulations prevented

265
00:25:34.420 --> 00:25:40.460
Ludwig from keeping the apartment when his mother died in 1937. By October 31st of that

266
00:25:40.460 --> 00:25:46.540
year he found new tenants who sublet him one room where he stored his library and personal

267
00:25:46.540 --> 00:25:52.620
documents. He writes, The Commer offered me the only field in which I could work in Austria.

268
00:25:52.620 --> 00:25:59.900
I have created a position for myself. Officially, I was never more than an officer, but amte,

269
00:25:59.900 --> 00:26:06.180
in a commerce executive office. I always had a nominal superior and colleagues, but my

270
00:26:06.180 --> 00:26:12.940
position was incomparably greater than that of any other commerce official, or of any Austrian

271
00:26:12.940 --> 00:26:19.980
who did not preside over one of the big political parties. I was the economist of the country.

272
00:26:19.980 --> 00:26:24.220
The Chambers of Commerce fulfilled three main functions. They provided the political establishment

273
00:26:24.220 --> 00:26:29.740
with a certain level of control over any emerging commercial power. They provided the commercial

274
00:26:29.740 --> 00:26:34.420
establishment with representation in the state apparatus. They helped protect established

275
00:26:34.420 --> 00:26:39.460
commercial interests from new competition. Accordingly, the Vienna Comma had gained its

276
00:26:39.460 --> 00:26:45.600
greatest impact on Austrian politics in the years from 1884 to 1901, when it most visibly

277
00:26:45.600 --> 00:27:07.920
The Austrian industrialist hardliners therefore created a number of other institutions of

278
00:27:07.920 --> 00:27:14.520
a more combative character. In particular the Industriellengruppe founded 1875. After

279
00:27:14.520 --> 00:27:19.160
After the First World War, it merged with other similar organisations into the Hauptverband

280
00:27:19.160 --> 00:27:25.960
der Industrie Österreichs. One of Mises' best friends, Weiss von Wellenstein, led that

281
00:27:25.960 --> 00:27:30.560
organisation. In the wake of this campaign, the Kammer acquired so much regulatory power

282
00:27:30.560 --> 00:27:35.720
that it was increasingly perceived as an arm of the Central State Administration.

283
00:27:35.720 --> 00:27:41.000
It would be a mistake to think that Mises had quit a bureaucratic life to join a business

284
00:27:41.000 --> 00:27:46.000
Education. His job did include some of the benefits of private institutions, but it also

285
00:27:46.000 --> 00:27:50.840
maintained some of the characteristics of the civil service, both the prestige and the

286
00:27:50.840 --> 00:27:56.160
constraints. The main benefit of his new job was something no government agency could offer

287
00:27:56.160 --> 00:28:01.680
– latitude for the creative employment of individual energies and a personal impact

288
00:28:01.680 --> 00:28:06.880
on public debate. Mises made ample use of these opportunities to reanimate the spirit

289
00:28:06.880 --> 00:28:12.240
of Capitalism, in an institution where it had become a dead letter.

290
00:28:12.240 --> 00:28:16.640
Mises joined the first section of the Commer as an analyst. The official name of his position

291
00:28:16.640 --> 00:28:22.640
was Konzipist. At the very moment, the Austrian tax law was undergoing its first major revision

292
00:28:22.640 --> 00:28:29.400
since Boehm-Bawerk and his team of economists had reformed direct taxation in 1896.

293
00:28:29.400 --> 00:28:35.480
The Boehm-Bawerkian reforms had established a plan for government finance up to 1909.

294
00:28:35.480 --> 00:28:40.520
In 1908 the Ministry of Finance had presented a reform plan that did not change anything

295
00:28:40.520 --> 00:28:45.680
in the structure of taxation, but increased personal and corporate taxes. Mises's main

296
00:28:45.680 --> 00:28:50.600
role within the Commer in the pre-war years was to lead an extended campaign against the

297
00:28:50.600 --> 00:28:57.140
official proposal. Even though he was a newcomer, he soon surpassed all expectations. Early

298
00:28:57.140 --> 00:29:01.620
on he was entrusted with leading the negotiations with the representatives of the Ministry of

299
00:29:01.620 --> 00:29:05.780
Finance, actually obtained a compromise that reconciled the government's endeavour to

300
00:29:05.780 --> 00:29:10.740
increase tax revenue with the interest of the commercial and industrial circles organised

301
00:29:10.740 --> 00:29:16.460
in the Commer. His first mission was to study the impact of the proposed taxation of beer

302
00:29:16.460 --> 00:29:22.020
and other alcoholic beverages. He took part in a mid-May 1909 Commer conference on the

303
00:29:22.020 --> 00:29:27.640
consequences of the increase of the beer tax. The participants criticised the increase with

304
00:29:27.640 --> 00:29:32.360
The Standard Economic Argument, pointing out that it would annihilate marginal business.

305
00:29:32.360 --> 00:29:36.080
But when another Commer meeting was held two months later on the taxation of alcoholic

306
00:29:36.080 --> 00:29:41.760
beverages, the Commer's attitude had undergone a seismic shift. Mises had taken the bull

307
00:29:41.760 --> 00:29:47.080
by the horns and, in the first of many reports he would write in the coming years, raised

308
00:29:47.080 --> 00:29:52.480
not only the familiar issue of marginal business, but also the politically delicate issue of

309
00:29:52.480 --> 00:29:57.040
of the Agricultural Interests, underlying the proposed legislation.

310
00:29:57.040 --> 00:30:01.920
Mises pointed out in great detail the existence of inequitable sales quotas for commercial

311
00:30:01.920 --> 00:30:06.720
and agricultural producers, and of special subsidies for the agricultural production

312
00:30:06.720 --> 00:30:13.800
of alcohol. The meeting denounced these practices, basing all its resolutions on Mises' report.

313
00:30:13.800 --> 00:30:18.680
In a post-war book, he would point out that the conflict between commercial and agricultural

314
00:30:18.680 --> 00:30:31.360
Mises then turned to propose legislation concerning private inheritance and donations, as well

315
00:30:31.360 --> 00:30:36.440
as corporate taxation and corporate law. He reported on the former topic to a plenary

316
00:30:36.440 --> 00:30:42.080
CUMMA meeting in early December 1909. Mises pointed out that the higher taxation and the

317
00:30:42.080 --> 00:30:46.920
complicated procedures of the planned law would hurt business life, and he emphasized

318
00:30:46.920 --> 00:30:51.440
and again that the stipulations of the new law would treat the agrarian population better

319
00:30:51.440 --> 00:30:57.600
than urban circles in commerce and industry. But he also brought more far-reaching considerations

320
00:30:57.600 --> 00:31:02.520
into play, noticing that the legislation would subject Austria's courts to the control of

321
00:31:02.520 --> 00:31:07.080
the financial administration. Other young economists also gave reports at

322
00:31:07.080 --> 00:31:12.480
the meeting, but theirs did not have as great an impact on the public or the press. Mises's

323
00:31:12.480 --> 00:31:18.440
set new standards both for analytical scope and rigor and for their political audacity.

324
00:31:18.440 --> 00:31:23.320
The wind of change blew through the Comer. Even though Comer executives did not always

325
00:31:23.320 --> 00:31:28.080
share the views expressed in the reports of their new employee, they benefited politically

326
00:31:28.080 --> 00:31:34.040
from the fact that his seemingly extreme positions were always backed up for such thorough research

327
00:31:34.040 --> 00:31:41.240
that the Comer was able to reach more favourable compromises in the political process.

328
00:31:41.240 --> 00:31:48.740
Home Clouds. Meanwhile, Austrian foreign policy had taken a fateful turn in 1908. A revolution

329
00:31:48.740 --> 00:31:54.500
in Turkey had smashed a theocratic establishment that had been unable to enact real reforms

330
00:31:54.500 --> 00:31:59.900
for decades, and swept into power a group of ambitious young men who came to be known

331
00:31:59.900 --> 00:32:06.540
as the Young Turks. All over the world there were various young movements, among the Czechs,

332
00:32:06.540 --> 00:32:11.640
in Chinese, in literature, painting, politics, etc.

333
00:32:11.640 --> 00:32:16.520
These young Turks pursued a radical reform programme designed to make Turkey more like

334
00:32:16.520 --> 00:32:21.580
the secular democracies of the West. European leaders were amazed to see the young Turks

335
00:32:21.580 --> 00:32:27.280
putting their ideas into practice so quickly. Many of them believed that Turkey would soon

336
00:32:27.280 --> 00:32:33.680
regain formidable strength, with drastic consequences for the political map of southeastern Europe.

337
00:32:33.680 --> 00:32:39.320
The hawks in Vienna immediately began agitating for the annexation of Bosnia and Herzegovina.

338
00:32:39.320 --> 00:32:45.640
The Austro-Hungarian army had occupied these territories since 1878, but they had not been

339
00:32:45.640 --> 00:32:51.720
formally incorporated into the empire. The advocates of war insisted that Austria-Hungary

340
00:32:51.720 --> 00:32:58.800
could not afford to wait until the Turks were strong enough to reclaim their former colonies.

341
00:32:58.800 --> 00:33:03.280
When it became obvious that the hawks would have their way in Vienna, war nearly broke

342
00:33:03.280 --> 00:33:21.840
The war was averted, however, when the Russians withdrew their support for the Serbs. After

343
00:33:21.840 --> 00:33:28.520
a year of negotiations, Bosnia was constituted as a part of Austria-Hungary, but the event

344
00:33:28.520 --> 00:33:34.840
had a lasting negative impact on foreign relations. Austria-Hungary's Hawkesh Minister of Foreign

345
00:33:34.840 --> 00:33:40.720
Affairs, Erenthal, successfully lobbied the governments of Russia, France, Italy and Great

346
00:33:40.720 --> 00:33:45.920
Britain to approve the annexation, but the old trust that Austrian statesmen had enjoyed

347
00:33:45.920 --> 00:33:52.320
abroad had been destroyed. Rudolf Sieghart, a high government official at the time, said

348
00:33:52.320 --> 00:33:58.400
in retrospect that the annexation was the overture to the World War.

349
00:33:58.400 --> 00:34:02.960
An increasing number of crises entangled the major European powers over the next several

350
00:34:02.960 --> 00:34:08.680
years. Austria-Hungary mobilised its troops again in 1912 against another Russian-Serb

351
00:34:08.680 --> 00:34:13.500
coalition. Once again the Russians withdrew at the last minute, but two years later they

352
00:34:13.500 --> 00:34:18.920
would stand fast. The annexation campaign had a profound impact on domestic policy as

353
00:34:18.920 --> 00:34:24.320
well. The Liberal Prime Minister Beck had resigned in November of 1908 to protest the

354
00:34:24.320 --> 00:34:27.920
The Annexation The last phase of bourgeois liberal rule in

355
00:34:27.920 --> 00:34:34.120
Austria ended with his administration. Beginning with Kerber's administration in 1900, which

356
00:34:34.120 --> 00:34:38.840
included Boehm-Bawerk as finance minister, Austria had been ruled for eight years by

357
00:34:38.840 --> 00:34:44.960
governments that found their main support in the liberal press and in business and finance.

358
00:34:44.960 --> 00:34:49.720
Every prime minister since 1900 had risen to his position through a career in the Austrian

359
00:34:49.720 --> 00:34:54.720
to Eurocracy, and each ruled on the basis of emergency laws that allowed the Emperor

360
00:34:54.720 --> 00:34:59.200
to appoint governments without parliamentary approval, but Kerber had pioneered the method

361
00:34:59.200 --> 00:35:05.760
of governing through the press, and his successors Gauch and Beck skillfully continued this approach.

362
00:35:05.760 --> 00:35:10.240
They were not mere administrators for the Emperor, but could initiate political change

363
00:35:10.240 --> 00:35:16.520
through direct communication with the citizenry, thus bypassing political party organisations.

364
00:35:16.520 --> 00:35:21.320
The succeeding governments could no longer rely on the support of the liberal establishment,

365
00:35:21.320 --> 00:35:26.440
especially the press, and for this reason alone were unable to address any pressing political

366
00:35:26.440 --> 00:35:32.080
problem before the outbreak of war. National conflicts and suppressed democratic longings

367
00:35:32.080 --> 00:35:37.880
continued to alienate the citizenry from the empire. Under relentless centrifugal forces,

368
00:35:37.880 --> 00:35:41.200
the country was ready to break apart.

369
00:35:41.200 --> 00:35:46.860
and a meeting of the Verein für Sozialpolitik. These developments would surface over the

370
00:35:46.860 --> 00:35:52.960
next several years and would include two Balkan Wars and the Morocco Crisis that preceded

371
00:35:52.960 --> 00:36:00.260
World War I, but in 1909 the world had not yet fallen apart. Mises enjoyed his new work

372
00:36:00.260 --> 00:36:05.680
at the Comer and continued to pursue his other intellectual interests, including Boehm-Bawerk's

373
00:36:05.680 --> 00:36:12.200
seminar and the discussion group he had founded with his friend Peels and others.

374
00:36:12.200 --> 00:36:18.520
In September 1909 the plenary meeting of the Verein für Sozialpolitik took place in Vienna.

375
00:36:18.520 --> 00:36:24.360
It turned out to be one of the most significant intellectual events before WWI. The conference

376
00:36:24.360 --> 00:36:29.080
took place at the end of September and featured sessions on the problems of municipally owned

377
00:36:29.080 --> 00:36:35.560
companies and on the concept of productivity. Mises probably joined the Verein at this point.

378
00:36:35.560 --> 00:36:41.360
He certainly attended the sessions that were organized and directed by his teacher Filipowicz.

379
00:36:41.360 --> 00:36:45.600
Filipowicz, one of the vice presidents of the Verein, had successfully promoted the

380
00:36:45.600 --> 00:36:51.760
subject of the productivity of national economies and the empirical measurement thereof.

381
00:36:51.760 --> 00:36:56.800
Other topics dealt with were problems of enterprise owned by local government and a memorial lecture

382
00:36:56.800 --> 00:37:01.880
on the German economist Hansen, which was delivered by Georg F. Knapp. It was the first

383
00:37:01.880 --> 00:37:07.000
The first time ever that the Verein dealt with a problem of pure economic theory. Moreover,

384
00:37:07.000 --> 00:37:11.280
it was a problem of fundamental importance for the cause of the social policy movements

385
00:37:11.280 --> 00:37:16.520
so dear to Filipowicz. The productivity debate at the Vienna meeting would become a high

386
00:37:16.520 --> 00:37:22.240
point in the history of the Verein and of German economics, featuring the confrontation

387
00:37:22.240 --> 00:37:27.780
between the historicist majority and the vociferous group of brilliant younger scholars such as

388
00:37:27.780 --> 00:37:33.400
as Werner Sombart, Bernd Heims, the Weber Brothers and Pastor Friedrich Naumann. Over

389
00:37:33.400 --> 00:37:37.960
the years Max Weber had become the leader of those who contested both premises of the

390
00:37:37.960 --> 00:37:44.560
Verein, the utility of government interventionism and the historicist methodology. Leadership

391
00:37:44.560 --> 00:37:50.820
accrued to him not only because of his imposing personality, but also and especially because

392
00:37:50.820 --> 00:37:57.160
he had started his career within the Verein as both an interventionist and historicist.

393
00:37:57.160 --> 00:38:03.880
The dissenting voices Dietzel, Wolf, Ehrenberg, Poehle, Basso and Adolf Weber, Adolf Weber

394
00:38:03.880 --> 00:38:09.100
had no family ties with the brothers Alfred Weber and Max Weber, had never been Schmollerites

395
00:38:09.100 --> 00:38:15.060
in the first place, but Max Weber was elected into the committee in 1893 as a young star

396
00:38:15.060 --> 00:38:21.260
in the Kathedas socialist tradition. According to Mises, he was appointed professor of economics

397
00:38:21.260 --> 00:38:26.500
without having dealt with this science before, which was a customary procedure at that time.

398
00:38:26.500 --> 00:38:31.500
reflected the historical school's opinion on the nature of social sciences and on the

399
00:38:31.500 --> 00:38:37.500
scientific expertise of legal historians. When he accepted the position, the jurist

400
00:38:37.500 --> 00:38:42.400
and historian in him rebelled against the manner in which the school treated legal and

401
00:38:42.400 --> 00:38:48.180
historical problems. This is why he began his pioneering methodological anti-pistemological

402
00:38:48.180 --> 00:38:53.940
investigations. It led him to the problems of materialistic philosophy of history, from

403
00:38:53.940 --> 00:38:59.500
in which he then approached the religious sociological tasks. He proceeded finally to

404
00:38:59.500 --> 00:39:06.380
a grandiose attempt at a system of social sciences. But all these studies, step by step,

405
00:39:06.380 --> 00:39:11.900
led Max Weber away from the political and social ideals of his youth. He moved for the

406
00:39:11.900 --> 00:39:19.060
first time toward liberalism, rationalism, utilitarianism. In contrast to the still dominant

407
00:39:19.060 --> 00:39:24.260
Schmoller writes, Max Weber and his brother Alfred thought that normative propositions

408
00:39:24.260 --> 00:39:29.180
of the type, the government should do this or that, had no scientific basis and reflected

409
00:39:29.180 --> 00:39:34.940
only the personal value judgments of their author. Heino Heinrich Nao points out that

410
00:39:34.940 --> 00:39:40.900
Max Weber merely elaborated Carl Menger's methodological position. His main contribution

411
00:39:40.900 --> 00:39:47.020
was to synthesise Menger's methodology with Heinrich Rickert's theory of value relations.

412
00:39:47.020 --> 00:39:53.460
The debate on value freedom itself was therefore a continuation of Methodenstreit between Menger

413
00:39:53.460 --> 00:39:55.300
and Schmoller.

414
00:39:55.300 --> 00:39:59.300
After World War II, there was another round of essentially the same debate in the so-called

415
00:39:59.300 --> 00:40:04.700
positivismusstreit, which at the beginning of the 1960s opposed the Marxist Frankfurt

416
00:40:04.700 --> 00:40:08.520
School and Karl Popper and his followers.

417
00:40:08.520 --> 00:40:12.660
These views had been reinforced just a year before the Vienna meeting through Schumpeter's

418
00:40:12.660 --> 00:40:18.780
Nature and Essence, which championed the claim that economic research could mimic the natural

419
00:40:18.780 --> 00:40:24.980
sciences. The Weber's also thought that the mainstream systematically overlooked the problems

420
00:40:24.980 --> 00:40:31.500
that arose from government intervention. In 1905, the plenary meeting in Mannheim featured

421
00:40:31.500 --> 00:40:36.140
the first open clash between the young radicals and the establishment over the question of

422
00:40:36.140 --> 00:40:39.500
of Cartels and Anti-Trust Policies

423
00:40:39.500 --> 00:40:45.600
In the 1870s and 1880s, the majority of the Verein had welcomed the formation of cartels

424
00:40:45.600 --> 00:40:50.640
as an anti-immigration device. The cartels reduced foreign competition and thus they

425
00:40:50.640 --> 00:40:55.300
diminished for a while at least the downward pressure on wage rates in the least competitive

426
00:40:55.300 --> 00:41:00.940
industries. Workers employed in these industries had less incentive to emigrate than they otherwise

427
00:41:00.940 --> 00:41:07.500
In the 1890s, the dominant view was reversed mainly because the civil servants were jealous

428
00:41:07.500 --> 00:41:12.660
of fast-growing corporate power. The Mannheim meeting was meant to be an important milestone

429
00:41:12.660 --> 00:41:19.540
of this new orientation. The invited lecturers by Brentano, Leidig, Schmoller and Kierdorff

430
00:41:19.540 --> 00:41:24.080
made the case for various policies designed to reinforce the position of labour unions

431
00:41:24.080 --> 00:41:30.660
within large firms to curb corporate power and to make large firms socially responsible.

432
00:41:30.660 --> 00:41:35.900
Schmoller proposed, for example, that 25% of the seats of the corporate boards be reserved

433
00:41:35.900 --> 00:41:41.380
for government representatives. In the ensuing debate, Friedrich Naumann, Werner Sombart

434
00:41:41.380 --> 00:41:47.420
and Max Weber heavily criticised these analyses and conclusions. Weber accused Schmoller of

435
00:41:47.420 --> 00:41:52.500
cultivating old illusory notions about the nature of the state, but the greatest blow

436
00:41:52.500 --> 00:41:57.700
against the establishment position came through a speech by Pastor Naumann, who seems to have

437
00:41:57.700 --> 00:42:03.160
have been in his Marxist phase. He argued that the formation of cartels had resulted

438
00:42:03.160 --> 00:42:08.660
from great secular forces that could not possibly be prevailed against by some minor state and

439
00:42:08.660 --> 00:42:12.100
its middle-class policies in support of the handicrafts.

440
00:42:12.100 --> 00:42:16.940
Moreover, anticipating an argument that Mises would carefully develop many years later,

441
00:42:16.940 --> 00:42:21.760
Naumann pointed out that the proposed government interventions could not attain the end they

442
00:42:21.760 --> 00:42:26.820
were meant to achieve. These interventions were, from a technical and economic point

443
00:42:26.820 --> 00:42:33.160
of View Nonsense. Nauman's speech roused the audience to unusually enthusiastic applause,

444
00:42:33.160 --> 00:42:38.180
applause that lasted much too long for the embarrassed Schmoller, who later scoffed that

445
00:42:38.180 --> 00:42:44.160
the response had been frenetic. By tradition Schmoller wrapped up the meeting. He called

446
00:42:44.160 --> 00:42:49.700
Nauman a demagogue, and said that if he were not allowed to distance himself from Nauman,

447
00:42:49.700 --> 00:42:55.060
he would have to step down as president of the Virein. Many thought Schmoller's reaction

448
00:42:55.060 --> 00:43:00.620
was excessive, and long-time critics such as Ludwig Poehler and Andreas Voigt cancelled

449
00:43:00.620 --> 00:43:05.520
their membership. The controversy eventually died down, especially because the next meeting

450
00:43:05.520 --> 00:43:11.120
in Magdeburg, 1907, dealt with less controversial subjects, such as the training of young economists

451
00:43:11.120 --> 00:43:16.460
and problems of city administration. But the stage was set for the Vienna meeting, where

452
00:43:16.460 --> 00:43:21.000
core issues of the social policy movement were on the agenda.

453
00:43:21.000 --> 00:43:25.960
The first two sessions dealt with problems of municipal firms. As usual, the lectures

454
00:43:25.960 --> 00:43:30.460
and the discussion concerned technical problems relating in particular to the administration

455
00:43:30.460 --> 00:43:35.900
of those firms, their means of finance, and the remuneration of their employees. This

456
00:43:35.900 --> 00:43:40.700
cosy exchange of municipal socialists was shaken up, however, when the Weber brothers

457
00:43:40.700 --> 00:43:45.100
brought some rather fundamental considerations into play.

458
00:43:45.100 --> 00:43:50.320
An eminent historian of the Verein, who, siding with the mainstream, attended the Vienna meeting,

459
00:43:50.320 --> 00:43:56.200
He called the sensation that the Weber brothers stirred with their remarks.

460
00:43:56.200 --> 00:44:00.080
Whereas as many speakers stressed the entire debate had relied on the opinion shared by

461
00:44:00.080 --> 00:44:05.440
all that municipalisation, the transfer of certain suitable industries from private hands

462
00:44:05.440 --> 00:44:11.260
into the hands of their municipality always means social progress, Alfred Weber contested

463
00:44:11.260 --> 00:44:16.940
this opinion. He pointed out that municipalisation turned ever-greater parts of the population

464
00:44:16.940 --> 00:44:23.820
into bureaucrats and presented this without any ambiguity as a great defect. Alfred Weber

465
00:44:23.820 --> 00:44:29.500
had dared to suggest that there might be something wrong with becoming a civil servant, and something

466
00:44:29.500 --> 00:44:35.100
even worse about turning large segments of the population into employees of the state.

467
00:44:35.100 --> 00:44:40.760
In doing so, he denounced the very mission of the Virein, which was to provide scientific

468
00:44:40.760 --> 00:44:47.440
underpinnings for ever more government intervention and a larger, more powerful bureaucracy.

469
00:44:47.440 --> 00:44:51.420
After his speech there was too little time for discussion but the confrontation between

470
00:44:51.420 --> 00:44:55.800
the Weber's and the Schmollerites would be continued the next day, which dealt with

471
00:44:55.800 --> 00:44:58.840
the central concept of national productivity.

472
00:44:58.840 --> 00:45:02.740
The prevailing justification for government intervention stressed the distinction between

473
00:45:02.740 --> 00:45:05.360
profitability and productivity.

474
00:45:05.360 --> 00:45:10.120
The typical Schmollerite professor would argue that the profit of an investment was primarily

475
00:45:10.120 --> 00:45:15.120
an indicator of the investment's importance from an individual point of view. Only under

476
00:45:15.120 --> 00:45:21.360
very specific and rare conditions was it also indicative of the social value of an investment.

477
00:45:21.360 --> 00:45:26.000
From a larger social point of view, it was therefore crucial to judge any decision about

478
00:45:26.000 --> 00:45:31.620
the use of society's scarce resources in terms of its productivity. But is there anything

479
00:45:31.620 --> 00:45:38.480
at all like an objective criterion to distinguish more from less productive uses of resources?

480
00:45:38.480 --> 00:45:43.880
On this decisive point the cathedra socialist professors were silent. Filipowicz felt that

481
00:45:43.880 --> 00:45:49.120
scientific integrity required a clarification of this theoretical issue and he set up an

482
00:45:49.120 --> 00:45:55.240
Austrian session on productivity theory featuring plenary lectures by himself and by his distinguished

483
00:45:55.240 --> 00:46:01.000
colleague Friedrich von Mises. Filipowicz delivered the first of the two lectures. He

484
00:46:01.000 --> 00:46:05.360
gave a brilliant overview of the history of the concept of national productivity but then

485
00:46:05.360 --> 00:46:09.600
One evaded the true subject of his lecture, which was supposed to deal with the nature

486
00:46:09.600 --> 00:46:14.120
of national economic productivity and the possibility of measuring it.

487
00:46:14.120 --> 00:46:19.040
Filipowicz focused entirely on the narrower question of the impact of technological progress

488
00:46:19.040 --> 00:46:20.620
on productivity.

489
00:46:20.620 --> 00:46:25.240
This evasion derived in part from the difficulty of the subject, but was also due to the fierce

490
00:46:25.240 --> 00:46:30.640
opposition that was to be expected from the Weber brothers and their allies.

491
00:46:30.640 --> 00:46:34.720
The second lecture also avoided the crucial question of the concrete meaning of national

492
00:46:34.720 --> 00:46:40.820
Productivity. Visa's subject was the measurement of the value of money and of the changes of

493
00:46:40.820 --> 00:46:46.520
its value, with special consideration to the problem of productivity. The general idea

494
00:46:46.520 --> 00:46:52.040
was that money prices could be used as a yardstick to measure the economy's productivity or

495
00:46:52.040 --> 00:46:58.440
at least changes in productivity. This in turn presupposes that it is possible to analyse

496
00:46:58.440 --> 00:47:04.760
and Quantify Alterations in the yardstick itself, Changes in the Value of Money.

497
00:47:04.760 --> 00:47:10.400
Now Wieser had his own views on what precisely was to be understood by the value of money

498
00:47:10.400 --> 00:47:14.320
and he stated his position in a long essay that appeared in advance of the conference

499
00:47:14.320 --> 00:47:19.600
in Wieser's publication series. Based on this essay, he delivered his lecture focusing

500
00:47:19.600 --> 00:47:25.000
more narrowly on the technical problems of money value measurement. Wieser's discussion

501
00:47:25.000 --> 00:47:29.400
and highlighted once again that he believed that the natural value of an economic good

502
00:47:29.400 --> 00:47:35.200
was not tied to individuals. The natural value of a good was rather its general economic

503
00:47:35.200 --> 00:47:42.360
significance within a social context. The difference in value between two goods indicated

504
00:47:42.360 --> 00:47:47.840
that the more highly valued good was generally more important than the less valued good,

505
00:47:47.840 --> 00:47:53.280
not just for the individual but for all subjects of the commonwealth. In short, the differences

506
00:47:53.280 --> 00:48:04.280
The differences between the various values reflected a hierarchy of values. What was better or worse from an economic point of view could therefore be determined by reference to differences in value.

507
00:48:04.280 --> 00:48:11.280
And despite all problems relating to technical procedure, the value of all things could be ascertained by the inquiring mind.

508
00:48:11.280 --> 00:48:20.280
In principle, at least, it was possible to measure economic productivity and economic progress just as it was possible to measure the changing value of money.

509
00:48:20.280 --> 00:48:31.280
These views enabled Wieser to bridge some of the differences that he, the highly prominent theorist, otherwise had, with the predominantly historicist members of the Verein.

510
00:48:31.280 --> 00:48:44.280
In fact, the traditional purpose of the Verein was to provide theoretical guidelines for public policy, and on the most fundamental level this required that one be able to distinguish between better and worse economic states of affairs.

511
00:48:44.280 --> 00:48:49.640
Shares, Viserion Economics promised such a distinction based on the Theory of Value,

512
00:48:49.640 --> 00:48:54.600
even though Wieser himself was reluctant to commit to any policy position.

513
00:48:54.600 --> 00:48:59.880
After Wieser had finished his lecture, the first comments came from Herkner and Knupp,

514
00:48:59.880 --> 00:49:04.040
champions of the traditional view which considered the notion of national productivity to be

515
00:49:04.040 --> 00:49:10.200
generally coherent, though it was difficult to give it operational meaning. But then came,

516
00:49:10.200 --> 00:49:15.720
Mises later recalled that memorable exchange of arguments in which, for the first time

517
00:49:15.720 --> 00:49:20.280
within the Verein, the amalgamation of the economic, theoretical, and ethical political

518
00:49:20.280 --> 00:49:22.960
viewpoints was vervently attacked.

519
00:49:22.960 --> 00:49:28.180
Werner Sombart led the attack, denying that the concept of national productivity was useful

520
00:49:28.180 --> 00:49:29.960
for scientific research.

521
00:49:29.960 --> 00:49:35.160
Then Gottel-Odlienfeld argued in the same vein that the notion of national productivity

522
00:49:35.160 --> 00:49:37.780
had no correlate in the real world.

523
00:49:37.780 --> 00:49:42.720
It was finally Max Weber's turn to address the question. He had long awaited this opportunity

524
00:49:42.720 --> 00:49:47.700
to corner his opponents on the question of the nature of scientific research. He was

525
00:49:47.700 --> 00:49:53.140
already known for his ideal of value-free scientific research, that is, research with

526
00:49:53.140 --> 00:49:58.340
the strict orientation toward the ascertainment of matters of fact. He was himself a passionate

527
00:49:58.340 --> 00:50:03.220
man, and he did not believe that value freedom required emotional detachment from the object

528
00:50:03.220 --> 00:50:09.640
of One Study. But it did imply that the scientist, and especially the social scientist, strictly

529
00:50:09.640 --> 00:50:15.140
distinguish between what is and what should be. It implied that he must not conflate his

530
00:50:15.140 --> 00:50:19.220
personal preferences with the factual results of his research.

531
00:50:19.220 --> 00:50:24.160
In a frontal attack against Filipowicz, Weber argued that there was no objective way to

532
00:50:24.160 --> 00:50:29.200
speak about the productivity of an aggregate of human beings. The very notion of national

533
00:50:29.200 --> 00:50:33.880
Professional productivity had a normative rather than descriptive function. It therefore

534
00:50:33.880 --> 00:50:39.600
had no place in economic science and should be cast into the economist's dustbin where

535
00:50:39.600 --> 00:50:44.520
it belonged. Significantly, the main target of Weber's

536
00:50:44.520 --> 00:50:49.760
attacks was Filipovich and Schmoller. Weber was implicitly acknowledging Filipovich as

537
00:50:49.760 --> 00:50:55.680
the true intellectual leader of the interventionist movement. In his replies to Weber, the latter

538
00:50:55.680 --> 00:51:00.600
Walter demonstrated the qualities that had won him this position. As Mises recalled many

539
00:51:00.600 --> 00:51:07.840
years later, the cause that Filipovich advocated has been defeated. Today it is generally recognised

540
00:51:07.840 --> 00:51:13.400
that it is not the task of science to establish value judgements, but in that encounter in

541
00:51:13.400 --> 00:51:18.020
which Filipovich was on the wrong side he was greater than his opponents, who turned out

542
00:51:18.020 --> 00:51:23.420
to be right, and these opponents were led by Max Weber. Never has Filipovich's intellectual

543
00:51:23.420 --> 00:51:28.980
Persona revealed itself in a brighter light, never have his oratorical skills made a deeper

544
00:51:28.980 --> 00:51:34.380
impact on the audience than in the final comment of that now famous debate.

545
00:51:34.380 --> 00:51:39.220
The Cateda Socialist establishment had spent all its energies justifying the introduction

546
00:51:39.220 --> 00:51:45.620
of ethical considerations into economic analysis and insisting that this was science too. In

547
00:51:45.620 --> 00:51:51.820
Vienna they had won the day to the great frustration of Max Weber, who no longer believed the Verein

548
00:51:51.820 --> 00:51:56.660
could be a suitable forum for genuinely scientific questions.

549
00:51:56.660 --> 00:52:00.700
The Vienna Debate had a follow-up in a meeting of the Vereins Committee, which took place

550
00:52:00.700 --> 00:52:06.740
on January 5th, 1914 in Berlin and was dedicated exclusively to the discussion of the role

551
00:52:06.740 --> 00:52:10.580
of value judgements in economic science.

552
00:52:10.580 --> 00:52:15.460
In order to avoid unsuitable publicity, the fifteen papers on which the meeting was based

553
00:52:15.460 --> 00:52:19.380
were not published and there are no records of the debate.

554
00:52:19.380 --> 00:52:23.900
The meeting was the culmination of the value judgment debate which in modified form was

555
00:52:23.900 --> 00:52:31.240
continued in the 1960s in the so-called positivismusstreit. Meanwhile, those 15 papers have fortunately

556
00:52:31.240 --> 00:52:33.340
been published.

557
00:52:33.340 --> 00:52:38.140
After the Vienna meeting, Max Weber founded the German Sociological Association, which

558
00:52:38.140 --> 00:52:44.580
met for the first time a year later in Frankfurt am Main. By early January 1909, Weber had

559
00:52:44.580 --> 00:52:50.300
had taken part in a meeting in Berlin to prepare the establishment of the Sociological Association.

560
00:52:50.300 --> 00:52:56.260
Among the 39 other participants were Ferdinand Tönnies, Georg Simmel, Werner Sombart, Friedrich

561
00:52:56.260 --> 00:53:04.400
Herkner, Paul Barth, Ludwig Goldscheid, Hermann Kantorowitz, Franz Oppenheimer, Ernst Tröltsch

562
00:53:04.400 --> 00:53:10.040
and his brother Alfred. Max Weber was also among the signers of the open letter of invitation

563
00:53:10.040 --> 00:53:14.620
to the First Meeting of the Association in Frankfurt in 1910, where Tönnies was elected

564
00:53:14.620 --> 00:53:18.400
president and Weber himself treasurer.

565
00:53:18.400 --> 00:53:21.660
This retreat turned out to be unnecessary.

566
00:53:21.660 --> 00:53:25.600
After the Vienna meeting, the cause of Schmoller and Filipowicz was doomed.

567
00:53:25.600 --> 00:53:29.700
They had failed to capture the hearts of the rising generation.

568
00:53:29.700 --> 00:53:35.480
After Schmoller's death in 1917, new men would begin to take over the Verein für sozialpolitik

569
00:53:35.480 --> 00:53:39.460
and set German social research on an entirely different path.

570
00:53:39.460 --> 00:53:44.660
Among these men was Mises, who fully endorsed Max Weber's view of science as a purely fact-oriented

571
00:53:44.660 --> 00:53:51.220
discipline, a view that was emphasized in the by-laws of the new sociological association.

572
00:53:51.220 --> 00:53:56.380
For the rest of his life, most notably after the death of Boehm-Bawerk, Mises would fight

573
00:53:56.380 --> 00:54:02.660
for truly empirical research. During the 1920s he even upheld Max Weber's use of the expression

574
00:54:02.660 --> 00:54:09.420
and Sociology, shorthand for empirical social science, as opposed to the value-laden rumblings

575
00:54:09.420 --> 00:54:15.000
of the German early government scientists to describe his own works. He abandoned this

576
00:54:15.000 --> 00:54:19.220
practice when he realised that most other writers used the same word to establish a

577
00:54:19.220 --> 00:54:24.100
parallel social science based on foundations completely different from economics, but this

578
00:54:24.100 --> 00:54:27.140
is a topic for a later chapter.

579
00:54:27.140 --> 00:54:29.600
Breakthrough at the Cummer

580
00:54:29.600 --> 00:54:34.380
At the end of January 1910, Mises finished a long report that had consumed his energies

581
00:54:34.380 --> 00:54:39.380
in the preceding months. He presented the report to a plenary CUMMA meeting. In it,

582
00:54:39.380 --> 00:54:44.440
he took issue with proposed legislation to increase corporate income tax rate, to subject

583
00:54:44.440 --> 00:54:48.800
corporate managers to additional taxes and to give the financial administration access

584
00:54:48.800 --> 00:54:54.720
to corporate bookkeeping. Mises criticized the bias of this new legislation, which sought

585
00:54:54.720 --> 00:55:00.840
To Increase Government Revenue at the Expense of Austrian Industry, the Kammer Klientel,

586
00:55:00.840 --> 00:55:05.560
while favouring agricultural producers, Mises suggested that a more reasonable policy would

587
00:55:05.560 --> 00:55:11.420
be to apply existing tax laws equitably. His position with the Kammer left him even

588
00:55:11.420 --> 00:55:16.140
less time than usual for his academic endeavours, but he seems to have continued his studies

589
00:55:16.140 --> 00:55:21.740
with iron discipline. In 1910 he came out with two new publications, an article in a

590
00:55:21.740 --> 00:55:27.600
The New French Journal on the Reform of Government Finance in Austria, and a survey of New Literature

591
00:55:27.600 --> 00:55:32.180
on Money and Banking for Boehm-Bawerk's Zeitschrift. But he was far better known for

592
00:55:32.180 --> 00:55:37.220
his Kummer Report, which were followed attentively by friends and foes, and praised in the Vienna

593
00:55:37.220 --> 00:55:43.380
Daily Press as very thorough, exhaustive, very well researched, and richly documented

594
00:55:43.380 --> 00:55:48.300
with statistical material. The thoroughness of his work, and the intellectual leadership

595
00:55:48.300 --> 00:55:53.160
that he exercised in cummer circles gained Mises a level of public recognition that allowed

596
00:55:53.160 --> 00:55:58.120
him to comment on government policy in the central organ of Austria's ruling elites.

597
00:55:58.120 --> 00:56:05.080
Thus, in a Neue Freie Presse-piece from October 1911, he criticised Finance Minister Bielinski

598
00:56:05.080 --> 00:56:10.060
for his proposed increase of income taxes, and about a year later he criticised the tax

599
00:56:10.060 --> 00:56:16.460
proposers of MP Steinbender, observing that they would reintroduce the bad old pre-Boehm-Bawerk

600
00:56:16.460 --> 00:56:30.820
The government's constant drive to increase old taxes and to create new ones was a permanent

601
00:56:30.820 --> 00:56:36.020
issue on the public agenda. At the end of October 1911, the Commer hosted a meeting

602
00:56:36.020 --> 00:56:42.740
of various automobile associations to discuss the government's plan to tax cars. Mises

603
00:56:42.740 --> 00:56:47.380
Mises was unhappy with the assembly's toothless resolution to appeal to the government not

604
00:56:47.380 --> 00:56:52.880
to exceed German automobile taxes and to tax foreigners only after a stay of more than

605
00:56:52.880 --> 00:56:58.300
three months in Austria. He was similarly disappointed in a November 1911 meeting in

606
00:56:58.300 --> 00:57:03.340
which the Commer took up the problem of rising meat prices. Mises' report stressed the

607
00:57:03.340 --> 00:57:08.140
common-sense point that the easiest solution would be to open the borders for foreign meat

608
00:57:08.140 --> 00:57:13.660
Imports. But this solution was not politically viable. The reduction of meat taxes, another

609
00:57:13.660 --> 00:57:18.700
simple and effective solution, was equally unfeasible because of the government's chronic

610
00:57:18.700 --> 00:57:24.380
financial difficulties. Despite such setbacks, Mises tenaciously pursued his strategy of

611
00:57:24.380 --> 00:57:30.100
changing the structure of Austrian taxation, and in March 1912 he was promoted to the rank

612
00:57:30.100 --> 00:57:35.720
of consulente, counselor. The bottom line of his many reports was that the prevailing

613
00:57:35.720 --> 00:57:40.660
Banking Tax Code enshrined the privileges of various vested interests, particularly

614
00:57:40.660 --> 00:57:45.680
Austrian agriculture and hampered industrial progress. This line of argument seems to have

615
00:57:45.680 --> 00:57:50.560
been especially pronounced at the end of his campaign. A case in point is a report that

616
00:57:50.560 --> 00:57:57.880
he probably submitted in May 1913 on the proposed taxation of insurance contracts. Mises here

617
00:57:57.880 --> 00:58:03.360
criticised the differential treatment of agrarian and urban segments of the population and the

618
00:58:03.360 --> 00:58:09.280
and the excessive orientation of the proposal toward the interests of the financial administration.

619
00:58:09.280 --> 00:58:13.540
He sought a compromise that would guarantee the government higher revenue while preventing

620
00:58:13.540 --> 00:58:20.160
the burden from falling entirely on his clientele. His tenacity eventually paid off. In early

621
00:58:20.160 --> 00:58:26.720
1914, parliament voted a new tax law that granted most common demands. The new law stipulated

622
00:58:26.720 --> 00:58:54.240
Theory of Money

623
00:58:54.240 --> 00:58:59.360
Despite his workday immersion in the details and intricacies of the Austrian tax policies,

624
00:58:59.360 --> 00:59:04.960
Mises had somehow managed to write a treatise on money and banking. He had written no articles

625
00:59:04.960 --> 00:59:11.120
for a year, focusing instead on the completion of his book. In mid-December 1911 he put the

626
00:59:11.120 --> 00:59:16.400
finishing touches to a manuscript with the title Theorie des Geldes und der Umlaufsmittel

627
00:59:16.400 --> 00:59:22.440
– Theory of Money and Fiduciary Media, misleadingly published in English as Theory of Money and

628
00:59:22.440 --> 00:59:35.440
Excited to see the work of more than five years come to completion, he had already approached several prestigious publishers and now decided to accept the offer of Dunker & Humlott in Leipzig.

629
00:59:35.440 --> 00:59:50.440
Mises received 50 complimentary copies and had to pay 1372.50 marks or 26.6 ounces of gold as his share of the total production costs, 2264.18 marks.

630
00:59:50.440 --> 00:59:55.600
Works. The first edition comprised a thousand copies plus one hundred complimentary copies

631
00:59:55.600 --> 01:00:01.140
for reviews and gifts. They had produced the beautiful edition of Schumpeter's spectacular

632
01:00:01.140 --> 01:00:07.200
first book, and were one of the most prestigious names in economic publishing. Mises worked

633
01:00:07.200 --> 01:00:12.380
feverishly revising the proof pages, making last-minute changes and constantly inquiring

634
01:00:12.380 --> 01:00:18.040
about the production process. Under his pressure to speed up production, Duncker and Humlott

635
01:00:18.040 --> 01:00:24.040
even hired additional staff. On June 14, 1912, the book was delivered to the book dealers

636
01:00:24.040 --> 01:00:30.400
who sold it for the cover price of 10 marks. The long-term impact of Mises's first treatise

637
01:00:30.400 --> 01:00:35.840
can only be called spectacular, and we therefore take a deeper look at its main ideas in the

638
01:00:35.840 --> 01:00:42.480
next chapter. After 90 years, it is still in print and remains a source of inspiration

639
01:00:42.480 --> 01:00:46.800
Rejection for Monetary Theorists Despite initial rejection by the majority

640
01:00:46.800 --> 01:00:52.320
of German economists, the value of Mises's work was recognised immediately by the profession's

641
01:00:52.320 --> 01:00:58.160
greatest mind. Max Weber called it the most acceptable theory dealing with the substantive

642
01:00:58.160 --> 01:01:05.680
monetary problems. Schumpeter praised its power and originality, noticing that, as usual,

643
01:01:05.680 --> 01:01:10.800
the critics had overlooked these qualities in their discussion of unsubstantial side

644
01:01:10.800 --> 01:01:25.800
After the war, Albert Hahn would stress the Mangerian qualities of Mises' work, saying that its author, the master of economic theory, never falls for the temptation to pursue fictitious abstractions, but stands on the firm ground of the facts.

645
01:01:25.800 --> 01:01:37.800
The principal advantages of the work are found in that the author, in all mastery of the theory, never allows himself to fall into unrealistic abstractions, but remains fully grounded in fact.

646
01:01:37.800 --> 01:01:54.800
On the other side of the Atlantic, a young pioneer of economic theory praised the book for essentially the same reasons. In von Mises, there seems to me to be very noteworthy clarity and power. His Theorie des Geldes unter Umlaufsmittel is an exceptionally excellent book.

647
01:01:54.800 --> 01:02:03.800
Von Mises has a very wide knowledge of the literature of the theory of money. He has a keen insight into the difficulties involved.

648
01:02:03.800 --> 01:02:15.800
The greatest sign of recognition, however, was the fact that Boehm-Bawerk devoted two entire semesters of his seminar to the discussion of Mises's book, an honour shared by no one else, not even Schumpeter.

649
01:02:15.800 --> 01:02:21.800
Boehm-Bawerk acknowledged Schumpeter's brilliance, but wrote that he wished to see Schumpeter turn to serious work.

650
01:02:21.800 --> 01:02:31.800
Apparently Mises's book was serious theoretical work of the sort Boehm-Bawerk had in mind, and its enduring success proved the old master to be right once again.

651
01:02:31.800 --> 01:02:37.640
again. Mises submitted the book to the University of Vienna to obtain the Habilitation degree

652
01:02:37.640 --> 01:02:43.320
and to be admitted as a privatdozent, a private lecturer who could offer the students optional

653
01:02:43.320 --> 01:02:49.400
courses. His request was granted in the spring of 1913 and he began lecturing in the summer semester.

654
01:02:50.200 --> 01:02:56.920
What glorious days when one could study under Boehm-Bawerk, Wieser, Filipowicz and Mises!

655
01:02:56.920 --> 01:03:04.920
But these days were numbered. The all-star Austrian faculty lasted only three semesters.

656
01:03:04.920 --> 01:03:12.000
In August 1914, Boehm-Bawerk died, and Mises was sent to the front. His best students perished

657
01:03:12.000 --> 01:03:12.680
in the war.