The Privatseminar

Besides the impact on the economics profession made by his published works, Mises made a less easily measured—but perhaps ultimately more important—impression on twentieth-century economics through his teaching at the University of Vienna and, separately from his university influence, through his famed Privatseminar. Mises had, upon his return from military service at the end of World War I, been promoted

(from privatdozent) to the tank of "ausserordendichen Professor."7 While this gave him the tide of professor, it was not an appointment to a professorial chair.

Nonetheless Mises did lecture at the university and also conducted a well-attended university seminar. But his most important influence was through the Privatsaninar he held once every two weeks at his office in die Chamber of Commerce. A number of the participants in this seminar have published their reminiscences of it,8 and Mises himself subsequendy wrote about it with obvious pleasure. The seminar had no formal connection with the university. Its members participated by invitation; all were young scholars who had already obtained their doctorates. In Hayek's words, "during the final years of the Austrian School in Austria, it was the center not only for the Austrian School itself, but attracted students from all over the world "9 Haberler has described it as one of the important elements of the intellectual life of Vienna during die years between 1920 and 1934. As was noted in chapter 1, the participants included a number of economists who were to become world famous in their profession, including Gottfried Haberler, Friedrich Hayek, Fritz Machlup, Oskar Morgenstern, and Paul Rosenstein-Rodan. But a number of scholars who were to become famous in other disciplines were also regular participants. Among these were Felix Kaufmann, a philosopher; Alfred Schutz, a sociologist; and Eric Voegelin, a philosopher of history. The topics discussed at the seminar ranged widely across the areas of "economic theory, economic policy, sociology or methodology."10 As Martha Steffy Browne has observed: it is "an important feet which should be reported in future histories of economic thought that the contributions of members to future growth of economic thought was truly remarkable. Many of the seminar members joined the best universities in the U.S. and in England and participated in government projects in the U.S. and in basic work in [international organizations such as the World Bank].""

The work being stimulated by the discussions in the Privatseminar of the twenties and early thirties must be appreciated within the broader context of contemporary developments in the Austrian tradition. Besides the circle of scholars that assembled around Mises, a second circle, centered around Hans Mayer, existed at the University of Vienna. Mayer, a disciple of Friedrich Wieser, had assumed (upon the latter's death in 1926) the professorial chair which Wieser had occupied at the University. Although, by all accounts, there was (to say the leasd) litde cordiality between Mises and Mayer, a number of the participants in the Mises seminar were at the same time members of the Mayer circle. (It was this fact that led Stephan Boehm to refer to the "inter-locking circles" in interwar Vienna economics.)12 For the most part, it can be argued, the Austrian economics of the 1920s tended to follow up on the work of Bohm-Bawerk and Wieser, rather than that of Menger. As a result, the Austrian economics of the twenties tended to take on a character and offer a substance not at all radically different from what had developed as the broadly shared neoclassical economic consensus emerging from the Marshallian and Walrasian schools. When Lionel Robbins wrote The Nature and Significance of Economic Science in 1932, he drew freely from the Austrian writings of the twenties, introducing insights into British economics which had been absent from the Marshallian tradition (and also absent from the economics of Robbins's own teacher, Edwin Cannan). But Robbins made it clear that, in emphasizing Austrian insights concerning methodological individualism, the centrality of allocative, economizing choice, and the related importance of the opportunity cost concept, he was not requiring any revolution in British economics. "I venture to hope," he wrote, "that in one or two instances I have succeeded in giving expository force to certain principles not always clearly stated. But, in the main, my object has been to state, as simply as I could, propositions which are the common property of most modern economics."13

When, decades later, Fritz Machlup would attempt to pin down the defining tenets of Austrian economics, the list he offered hardly contained anything to which a mainstream mid-twentieth-century microeconomist might not have subscribed (if perhaps with a somewhat different emphasis).14 Machlup was, in this respect, simply reflecting the atmosphere of Vienna economics of the twenties. The fact that, decades later, at a time of decline in the reputation of the Austrian tradition, mainstream economists could agree to Machlup's list, merely reflects the extent to which, partly as a result of Robbins's work, Austrian insights had become successfully absorbed into the mainstream. Yet it seems fair to suggest, at the same time, that in spite of the degree of convergence between the Austrian economics of the twenties and the emerging mainstream neoclassical consensus, there were certain signs, even during the twenties and thirties, that Mises would steer Austrian economics onto a path that would eventually diverge sharply from that mainstream neoclassical consensus.

It was during the late twenties and early thirties that Mises wrote the methodological and foundational papers which he assembled in 1933 and published as Grundprobleme der Nationalökonomie (much later translated as Epistemological Problems of Economics [i960]). And at least some of these papers were, no doubt, discussed at his seminar. It is in diese papers (as well as in certain passages in his earlier books of 1912 and 1922) that we find early statements of the positions which would later be systematically laid out in Mises' 1940 treatise, Nationalökonomie (and its subsequent expanded English-language counterpart, Human Action). These positions include Mises' concept of economics as the "science of human action," the role of a priorism in economic theory, the relation of theory to history, and his views on the limitations of mathematical methods in economics. (As we shall point out in some detail in subsequent chapters, these characteristically Misesian positions would set his work sharply apart from mainstream economics.) So it seems reasonable to assert that much that separates the Mises of Human Action from the general perspective of the Austrian economists of a quarter century earlier was in feet being developed, in Mises' thinking, during that very period, and was bong discussed in his Privatseminar. On the one hand, the Austrian economics of the twenties was responsible for Lionel Robbins's work, which, while it introduced Austrian insights into British economics, was eventually to point that economics toward the standard neoclassical microeconomics of the post-World War II decades.15 On the other hand, that same Austrian economics of the twenties was inspiring Mises toward a comprehensive revision of the basic foundations of economics, a revision that would eventually render his economics inconsistent with what was to emerge as the mainstream economics paradigm of the second half of the twentieth century. And it was largely these doctrinally radical features of Mises' system that would, in turn, inspire a late-twentieth-century revival of interest in the Austrian tradition.

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