One of history's most influential economists was born on September 29th, 1881. Ludwig von Mises was born into a very talented family at Lemberg in Galicia, then part of the Austro-Hungarian Empire, now Lviv in Ukraine. By the time he was 12 years old, he could read Latin, understand Ukrainian, and was fluent in German, Polish and French.
One of the most famous of the Austrian economists, von Mises was influenced by Carl Menger, the founder of that school, and had attended the lectures of Eugen von Böhm-Bawerk. He worked for a time in the finance department of Austria's civil service, but worked and wrote as an academic after fleeing Austria in 1940 and moving to the United States.
Mises was an economist, an historian and a sociologist. Amongst his many original and influential publications, he is perhaps best remembered for 'Human Action,' described as "the largest and most scientific defence of human freedom ever published." Mises used what he called praxeology, the scientific study of human action, the purposeful behavior that characterizes us. He was at pains to point out, though, that it could never be like the physical sciences because it deals with human motivation, something we cannot know because there are no windows into the soul. Mises thought we could make logical deductions from the undeniable fact that humans exist and act, and made this the foundation stone of his economic system.
Under capitalism, he said, the price system translates individual subjective values into the objective information that enables resources to be allocated rationally. Socialist economies, with the emphasis on production rather than on the satisfaction of consumer demand, can never do this. There are no real prices, so the central planners can never allocate investment rationally to meet real needs.
Mises was a hugely influential figure in the postwar revival of the ideas and values of liberalism. He was a founding member of the Mont Pelerin Society, and a teacher and friend of F A Hayek. In His book, "The Transmission of the Ideals of Freedom," Hayek pays his respects to the influence of Mises in the 20th century libertarian movement.
Mises examined why it was that intellectuals, especially American academics, opposed free market ideas. In "The Anti-Capitalist Mentality," Mises explained that they resented the necessity of obeying mass demand, which is the basis of prosperity in big business. Hayek made a similar point in "The Intellectuals and Socialism" that academics resent the fact that intelligent people (like themselves) are not in charge of things.
The deductive system of von Mises is in the tradition of Aristotle and Aquinas, and later Ayn Rand, in that it moves from what are posited as undeniable axioms through logical steps to its conclusions. Hayek himself was of more empirical bent, and thought that a closed deductive system shut out the learning process that he thought was an essential feature of economics. He revered his mentor, though, and said, "I just learned he was usually right in his conclusions, but I was not completely satisfied with his argument."
What Mises brought to economics was a thoroughgoing and systematic study of why capitalism works with the grain of human nature, and why socialism does not. He showed in detail why it is that capitalism succeeds, whereas socialism never does.