New Thinking in Political Economy series
Chapter 4: Economic Calculation under Socialism: Ludwig von Mises and his Predecessors
THE AUSTRIAN SCHOOL OF ECONOMICS IN THE YEARS BETWEEN THE WORLD WARS The era between the world wars was a high watermark in the history of the Austrian School of Economics. Politically, World War I had been a catastrophe for Austria. The dual monarchy of Austria-Hungary, that had given the ruling House of Hapsburg reign over a vast central European empire, splintered into seven different pieces: a new Czechoslovakia, a separate Hungary, an enlarged Romania, a reborn Poland, an expanded Italy, a Serbianled Yugoslavia and a small, land-locked ‘Republic of Austria’. The new Austria was financially bankrupt and economically ruined. An English journalist described the situation in 1920: ‘Vienna, instead of being the vital centre of fifty millions of people, finds itself a derelict city with a province of six millions. It is cut off from its coal supplies, from its food supplies, from its factories, from everything that means existence. It is enveloped by tariff walls.’1 And the economic hardships of trade restrictions were soon joined by a devastating inflation that wreaked even more havoc on the crippled and weak new nation.2 But in spite of the political instability and economic hardships that plagued little Austria through most of the inter-war years, in the 1920s and early 1930s Vienna once again became one of Europe’s cultural and intellectual centres. Vienna was home to Freud and the psychoanalytic movement, to Carnap and Schlick and the school of logical positivism, to Karl Popper and Ludwig Wittgenstein, to Hans Kelsen and the...
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