All publications
Ludwig von Mises: the return of genius
Ludwig von Mises and the rethinking of the significance of the Austrian School of Economics for a prosperous world. Why did Mises’ teachings — praxeology, business cycles, and the laws of the market economy — not become mainstream? The implementation of Mises’ ideas as a chance for Ukraine’s economic recovery.
27 September, 2025
Austrian economic school
Economic history
Economic Freedom
Share
In recent years, the star of Ludwig von Mises has shone brighter in the sky of Ukrainian economic science. And the reason for this is the attempts to find alternative ways out of the endless economic crises caused by the poison of state interventionism. We are witnessing a slow entry into the academic realm of understanding his intellectual heritage. Only now are the achievements of the Austrian School of Economics being opened up to the Ukrainian and international academic and expert community, and this process is already difficult to ignore.
Ignoring Mises' scientific heritage is unacceptable, because his ideas of the Austrian School of Economics are opposed to the crisis mainstream economy, and he is a native of Lviv, which obliges us to study and develop his work.
By the will of fate, Mises became a direct witness and participant in the most tumultuous events of the twentieth century, the comprehension of which shaped his views on the nature of freedom, the state, and the economy. For the Jewish intellectual living in Vienna at the time of the rise of German National Socialism, Nazism, fascism, and communism were not abstractions but a very real threat to life.
He was "hated" by the socialists, regarded as a "class enemy" by the communists, and despised as a "racial scum" by the Nazis. This unique experience turned his academic findings into a personal testimony to the dangers of irrational systems, and thus his scholarly work ceases to be merely theoretical treatises and becomes a powerful argument based on his personal awareness of the destructiveness of authoritarianism.
The life of an extraordinary personality. Mises and Ukraine
Born on September 29, 1881, into a wealthy Jewish family in Lviv (then part of the Austro-Hungarian Empire, known as Lemberg), Ludwig von Mises was surrounded by the intellectual culture and entrepreneurial spirit that characterized the multinational environment of Galicia from childhood. His home on Jagiellonianska (now Volodymyr Hnatiuk) Street stood in the heart of Lviv, a city that has always been open to European ideas and cultural influences.
His parents were well-off and well-educated individuals. By the age of 12, Mises demonstrated outstanding language abilities, being fluent in German, Russian, Polish, and French, as well as reading Latin and understanding Ukrainian. His younger brother, Richard von Mises, became a renowned mathematician and a member of the Vienna Circle.
Around 1887, the family moved to Vienna, where Mises completed his secondary education at the Academic Gymnasium and then entered the University of Vienna. There, he studied law and social sciences, intending to pursue a career as a civil servant. His intellectual path changed after reading the book Karl Menger “Principles of Economic Science”, which, in his own words, "made him an economist". In 1906, Mises received his doctorate in law.
And the first return of Ludwig von Mises to Ukraine took place ten years later. In 1902, his first book, The Development of Landlord-Peasant Relations in Galicia (1772-1848), was published. Ivan Franko published a review of the book in the Notes of the Shevchenko Scientific Society. It can be stated that Ivan Franko, having positively evaluated the work of the young researcher, introduced Mises' name to the "Ukrainian scientific space".
At the outbreak of World War I, Mises served as an artillery officer on the eastern front in Galicia and later as an economist in the War Department. After the war, he helped the new Austrian Republic avoid the communist revolution and the threat of hyperinflation in the early 1920s.
Source: Mises, Ludwig von. Bureaucracy / Ludwig von Mises; translated by Mykola Z. Bunyk; edited by N. Z. Onysko - Lviv: LRIDU NADU, 2021.
But his actual professional career in Vienna was multifaceted. From 1912, he taught at the University of Vienna as a Privatdozent, an unpaid position that nevertheless allowed him to conduct his own seminars. From 1913 to 1938, he was a professor at the university, where he mentored the future Nobel Prize-winning economist Friedrich Hayek. At the same time, he served as chief economist of the Austrian Chamber of Commerce and was an economic adviser to several governments, including the government of Chancellor Engelbert Dolphus.
Ludwig von Mises and Friedrich Hayek
In 1918, Ludwig von Mises came to Ukraine for the last time, where he participated in the Austro-Hungarian financial mission to the Ukrainian state of Hetman Pavlo Skoropadsky. In his book The Last Knight of Liberalism, Jörg Guido Gülsmann notes that Mises was sent to Odesa and Kyiv to prepare reports on the Ukrainian currency and the creation of a central bank. He therefore arrived in Odesa on September 7, 1918, and served as a financial advisor in these matters during the government of Hetman Skoropadskyi until its fall.
Source: Hülsmann, J. G. (2007). Mises: The last knight of liberalism. Auburn, AL: Ludwig von Mises Institute.
In 1934, against the backdrop of the rise of national socialism in Europe, Mises left Austria and moved to Geneva, where he worked as a professor at the Graduate Institute of International Studies in 1940. In 1940, he and his wife, Margit, emigrated to the United States on a grant from the Rockefeller Foundation. In New York, he found financial support and, in 1945, took up a position as a visiting professor at New York University, where he taught until his retirement in 1969.
Emigrating to the United States in 1940 moved Mises into a different intellectual environment dominated by Keynesianism. In the United States, unlike in Vienna, where he was a recognized leader of the school, he found himself in the position of an "outsider" whose ideas, based on the principles of laisser-faire and "a priori" methodologies, were out of fashion. This alienation from the mainstream academic community probably strengthened his convictions and influenced the tone of his later work. Some analysts have pointed out a marked difference between the "calmly argued" style of his early work, such as «The Theory of Money and Credit», and the more "militant" nature of later publications, which may reflect his struggle to preserve and promote his ideas in a hostile intellectual climate.
Throughout his life, Mises received numerous awards, including honorary doctorates and recognition from the American Economic Association.
He passed away on October 10, 1973, in New York, without receiving recognition in the mainstream professional community. Yet the modern world, facing crisis after crisis, repeatedly returns to Mises’ legacy. His books are featured in Amazon rankings — Human Action, The Theory of Money and Credit, Omnipotent Government; Socialism — experiencing a new wave of interest both among researchers and among all who value the free market and economic freedom. Articles about him are published by Forbes, Bloomberg, and a well-known German economist, Jörg Guido Gülsmann, wrote a book, a biography, "The Last Knight of Liberalism." Mises think tanks are actively operating in different countries of the world.
In 2011, a memorial plaque was installed in Lviv, at 13 Hnatiuk Street, where Ludwig von Mises was born. This was done at the expense of funds raised online by the Ukrainian and European communities. Unfortunately, there is still no museum of Ludwig von Mises in the birthplace of the great economist.
The Uniqueness of Ludwig von Mises’ Doctrine
What is unique about this extraordinary man? Why is the world, in the midst of an economic collapse, returning to his intellectual legacy?
Ludwig von Mises managed to build a holistic system of thinking about the economy and society that goes beyond individual theories or political programs. Praxeology, the science of human activity, became the basis for understanding the economy as a process based not on abstract equations, but on the individual’s choice and motivation.Share
He consistently demonstrated that knowledge of how to coordinate resources, dispersed among millions of individuals, is available only through the mechanism of free prices. That is why no centralized planning can replace the market. His legacy is also unique in that he did not seek compromise: at a time when most economists were adjusting their views to meet political demands, Mises remained faithful to the logic of freedom, private property, and individual responsibility.
Thanks to this, he left not just a set of theories, but a holistic philosophy of economic freedom, which still sounds like an alternative to the mainstream and a challenge for societies seeking economic transformation.
We present to you the most significant achievements of Ludwig von Mises in economic science.
The Theory of Money and Credit and the Regression Theorem
In his first major work, “The Theory of Money and Credit” (1912), Ludwig von Mises integrated the theory of money into the general theory of value of the Austrian School. Before that, economists often considered money separately from other goods. Mises showed that the value of money, like any other good, is based on its marginal utility. He argued that people do not want money for its own sake, but because of its utility as a medium of exchange that allows them to purchase other goods.
To explain how money acquires its original exchange value, Mises formulated the regression theorem, which states that the current purchasing power of money depends on its past value, i.e., it is based on the value of the previous period. This logical chain leads to the origin of money as a commodity that used to have value in itself, which ensured its initial exchange value.
With this analysis, Ludwig von Mises combined the micro- and macroeconomic spheres, explaining a macroeconomic phenomenon (the general purchasing power of money) through microeconomic mechanisms (subjective assessments and actions of individuals).
This analysis of the origin of money, which was a development of Karl Menger's subjectivist ideas, became the basis for further criticism of socialist planning and the development of the theory of economic cycles, since without commodity money and market prices, rational economic calculation is impossible.
The irrefutable proof of this theorem is the use of gold as money, so Mises paid considerable attention to the gold standard, emphasizing that
L"...The excellence of the gold standard is to be seen in the fact that it renders the determination of the monetary unit’s purchasing power independent of the policies of governments and political parties."L
Source: Ludwig von Mises. The Theory of Money and Credit, Socium, 2024.
Is economic calculation possible in a socialist economy?
Mises was a consistent critic of the centralized planned economy and socialist system. He argued that without private ownership of the means of production, there can be no market for these means. Without a market, there can be no market prices for land, raw materials, semi-finished products, and other production resources. Without prices that reflect the relative scarcity of resources and the subjective preferences of consumers, it is impossible to determine which of the technologically possible production methods is the most efficient. This leads to irrational allocation of resources, as planners are essentially "wandering in the dark". They cannot calculate profit or loss, which is a key signal for efficient production. Mises wrote:
L"Economic calculation can only take place through monetary prices established in the market for capital goods in a society based on private ownership of the means of production."L
Source: Ludwig von Mises. Socialism [trans. Serhiy Rachinsky], WellBooks, 2024.
As a result, the failure of almost all planned economies in the 20th century provides strong empirical evidence in favor of Mises' arguments.
What is the Praxeology of Ludwig von Mises
Mises's unique contribution is the development of praxeology - a formal, general logic of human action.
Praxeology is based on the axiom that people act purposefully, using limited means to achieve their most desirable goals. For action to occur, an individual must feel discomfort, imagine a more satisfactory state, and believe that purposeful behavior can improve their situation.
Praxeology is an a priori science, which means that its truths are self-evident and are derived logically from the fundamental axiom of action, not empirically. This approach stood in sharp contrast to the prevailing positivism and empiricism of the time, which attempted to imitate the methods of the natural sciences, such as mathematical modeling.
The development of praxeology was a challenge to the economic science of the time and to the social sciences in general. But even today, this doctrine arouses interest and criticism at the same time. Ludwig von. Mises insisted that economic laws are derived by deduction and are true by definition, like theorems in geometry.
Austrian Business Cycle Theory
Ludwig von Mises developed the Austrian Business Cycle Theory, which asserts that business cycles are caused by the ‘uncontrolled expansion of bank credit. According to this theory, when the central bank or commercial banks artificially keep interest rates below the ‘natural’ level—which reflects the true time preferences of consumers and their willingness to save—this ultimately distorts business calculations.
Artificially low interest rates signal to entrepreneurs that there are more savings available for investment than actually exist. This leads to ‘malinvestments’ in long-term production projects that would be unprofitable under normal conditions. These projects consume resources that could have been used to produce consumer goods. As a result, a mismatch arises between the newly created production capacities and the actual consumer demand, which has not changed.
In the end, consumer spending, which corresponds to people's true preferences, counteracts credit expansion, leading to a crash in which unprofitable projects are liquidated.
Mises considered crises not as catastrophes, but as an inevitable and necessary corrective process that eliminates malinvestments and restores alignment between the structure of production and consumer preferences.
This theory was not in line with the ideas of the time about the nature of economic crises and directly contradicted Keynesian ideas that explained unemployment and recessions by insufficient demand and proposed government intervention as a solution. In contrast, Mises believed that state intervention (interventionism) would only delay and deepen the inevitable crisis.
Why Mises' ideas have not become mainstream in economics?
Despite the power of Ludwig von Mises's ideas, they have not yet become mainstream economics. The reason is simple: his uncompromising approach. Mises insisted that any government intervention leads to distortions and ultimately to a crisis.
For most governments and academic schools, this position was too radical, as it deprived the state of the ‘tools for managing the economy’ that politicians so like to rely on. Universities, dependent on government funding, were also reluctant to promote a doctrine that undermines the very foundation of their system.
In addition, the mainstream economics of the twentieth century chose a different Keynesianism with its belief in the stimulating role of government spending and monetarism with its emphasis on money supply management. Against this background, Mises's approaches seemed "unscientific" because they were based not on complex mathematical models but on the logic of human action. Many of his colleagues criticized his praxeology as overly abstract and detached from ‘empirical data,’ yet in practice, it was his predictions that often proved more accurate than conventional model calculations.
Another reason for criticism is that Mises' ideas require intellectual honesty and courage. To recognize them is to accept that government officials cannot "manage the economy" better than the people themselves, and thus lose enormous amounts of power and resources. Not surprisingly, his teachings remained unwelcome and even dangerous to many.
That is why Mises was often dismissed as a "dogmatist" or "idealist." But history proves that his criticism of socialism, the planned economy, and inflationary policies was prophetic. And today, when the world is facing crises again, it is those ideas that seemed marginal yesterday that are gaining new meaning.
The world has pushed his teachings to the periphery, but history has proven him right. Socialism, centralized planning, inflationary policies-everything he warned against has repeatedly led countries to crisis.
And this is where a paradox arises: while in many developed countries Mises' ideas still remain in the shadows, for Ukraine, they can become a chance. We are experiencing a situation where half-hearted solutions no longer work. The classic recipes of "stimulating demand" or endlessly maintaining the deficit do not work.
Ukraine is at a crossroads: either to remain trapped in bureaucratic control and external dependence, or to take a step towards true economic freedom. And it is in this context that Mises's teachings cease to be "marginal" and become a guideline for the country's revival.
Mises's Doctrine as a Path to Ukraine's Economic Revival
In his writings, Ludwig von Mises consistently argued that inflation, price controls, protectionism, and socialist experiments destroy economies from within. Ukrainian realities - war, budget deficits, oligarchic monopolies, dependence on foreign aid - only confirm the correctness of his conclusions. Where the state tries to control the market, deficits, shadow schemes, and corruption appear. Where the market is free, entrepreneurship revives and new prosperity is born.
Mises' key idea is that the economy is primarily a sphere of human activity. Only when people can freely exchange, create, and choose does society move forward.
For Ukraine, this means that we need to give people space for entrepreneurship, remove excessive regulations, and guarantee the inviolability of private property. According to Mises, property is the foundation of economic freedom and sustainable development. Equally important is the issue of price: artificial restrictions and government ceilings always lead to market imbalances. A free price, on the contrary, is a coordination mechanism that allows for a quick economic recovery after a crisis.
In the area of money, Mises emphasized that printing banknotes does not create wealth; it only masks problems and postpones their solution. Ukraine cannot afford endless emission.
True monetary stability is a prerequisite for trust in the national currency and in the state as a whole. Therefore, the path to recovery is not through centralized planning or state "development strategies," but through freedom of choice and open markets. Centralized plans are doomed to failure because the knowledge of what to produce and how to produce it is scattered among millions of people, and only the market can bring it together.
The application of Mises's doctrine to Ukraine means:
- radical simplification of the tax and regulatory system,
- creating real protection of property rights through judicial and anti-corruption reform,
- market liberalization of the energy sector,
- abandoning deficit subsidy schemes,
- strict budget discipline.
This also means openness to the world, not through "export strategies" from officials, but through freedom of international trade, which allows Ukrainian businesses to choose partners and markets without interference from above.
Ludwig von Mises wrote:
L"State interference in economic life, which calls itself economic policy, has done nothing but destroy economic life. Prohibitions and regulations have, by their general obstructive tendency, fostered the growth of the spirit of wastefulness."L
Source: Ludwig von Mises. Socialism [trans. Serhiy Rachinsky], WellBooks, 2024.
The revival of Ukraine will be possible not when government agencies try to distribute resources, but when Ukrainians get real freedom to act.
Mises's ideas - freedom of prices, private property, the market as a source of knowledge and coordination - provide a clear and simple guideline: less state, more space for people. This is the real chance for the country's economic recovery.
Share
Topics
Austrian economic school
Economic history
Economic Freedom
Tetiana Stroiko
Tetiana Stroiko, science editor of ILI. Doctor of Economic Sciences, Professor of the Department of Intelligent Digital Economy at the National University of Shipbuilding named after Makarov (Mikolayiv).
Dmytro Dusheiko
A specialist in finance and business processes, business trainer with 15 years of experience in teaching economic theory, Doctor of Economics, supporter of AES, translator of articles and books from the English language, contributor to Wikipedia.
We recommend
Common sense economics
A true people's economics is the one when people themselves choose goods, services, investments, and governance under conditions of open competition, free trade, personal responsibility, and social solidarity.
ECONOMIC MYTHOLOGY: SOURCES AND CONSEQUENCES OF ILLUSIONS
Harmful economic myths underpin entire country strategies implemented by governments and ultimately lead to financial crises, rampant inflation, and the long-term impoverishment of entire nations. Ukraine is an example. But is there an antidote?