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The Historical Setting of the Austrian School of Economics
Ludwig von Mises

I.
Carl Menger and the Austrian
School of Economics

2.
The Austrian School of Economics
and the Austrian Universities

The Austrian Cabinet in whose journalistic department Menger served in the early Seventies?before his appointment in 1873 as assistant professor at the University of Vienna?was composed of members of the Liberal Party that stood for civil liberties, representative government, equality of all citizens under the law, sound money, and free trade. At the end of the Seventies the Liberal Party was evicted by an alliance of the Church, the princes and counts of the Czech and Polish aristocracy, and the nationalist parties of the various Slavonic nationalities. This coalition was opposed to all the ideals which the Liberals had supported. However, until the disintegration of the Habsburg Empire in 1918, the Constitution which the Liberals had induced the Emperor to accept in 1867 and the fundamental laws that complemented it remained by and large valid.

In the climate of freedom that these statutes warranted, Vienna became a center of the harbingers of new ways of thinking. From the middle of the sixteenth to the end of the eighteenth century Austria was foreign to the intellectual effort of Europe. Nobody in Vienna?and still less in other parts of the Austrian Dominions?cared for the philosophy, literature, and science of Western Europe. When Leibniz and later David Hume visited Vienna, no indigenes were to be found there who would have been interested in their work. [1]With the exception of Bolzano, no Austrian before the second part of the nineteenth century contributed anything of importance to the philosophical or the historical sciences.

But when the Liberals had removed the fetters that had prevented any intellectual effort, when they had abolished censorship and had denounced the concordat, eminent minds began to converge toward Vienna. Some came from Germany-like the philosopher Franz Brentano and the lawyers and philosophers Lorenz von Stein and Rudolf von Jhering?but most of them came from the Austrian provinces; a few were born Viennese. There was no conformity among these leaders, nor among their followers. Brentano, the exDominican, inaugurated a line of thought that finally led to Husserl's phenomenology. Mach was the exponent of a philosophy that resulted in the logical positivism of Schlick, Carnap, and their "Vienna Circle." Breuer, Freud, and Adler interpreted neurotic phenomena in a way radically different from the methods of Krafft-Ebing and Wagner-Jauregg.

The Austrian "Ministry of Worship and Instruction" looked askance upon all these endeavors. Since the early Eighties the Cabinet Minister and the personnel of this department had been chosen from the most reliable conservatives and foes of all modern ideas and political institutions. They had nothing but contempt for what in their eyes were outlandish fads." They would have liked to bar the universities from access to all this innovation.

But the power of the administration was seriously restricted by three "privileges" which the universities had acquired under the impact of the Liberal ideas. The professors were civil servants and, like all other civil servants, bound to obey the orders issued by their superiors, i.e., the Cabinet Minister and his aides. However, these superiors did not have the right to interfere with the content of the doctrines taught in the classes and seminars; in this regard the professors enjoyed the much talked about "academic freedom." Furthermore, the Minister was obliged?although this obligation had never been unambiguously stated?to comply in appointing professors (or, to speak more precisely, in suggesting to the Emperor the appointment of a professor) with the suggestions made by the faculty concerned. Finally there was the institution of the Privat-Dozent. A doctor who had published a scholarly book could ask the faculty to admit him as a free and private teacher of his discipline; if the faculty decided in favor of the petitioner, the consent of the Minister was still required; in practice this consent was, before the days of the Schuschnigg regime, always given. The duly admitted Privat-Dozent was not, in this capacity, a civil servant. Even if the title of professor was accorded to him, he did not receive any compensation from the government. A few Privat-Dozents could live from their own funds. Most of them worked for their living. Their right to collect the fees paid by the students who attended their courses was in most cases practically valueless.

The effect of this arrangement of academic affairs was that the councils of the professors enjoyed almost unlimited autonomy in the management of their schools. Economics was taught at the Schools of Law and Social Sciences (Rechts und staatswissenschaftliche Fakult?ten) of the universities. At most of these universities there were two chairs of economics. If one of these chairs became vacant, a body of lawyers had?with the cooperation, at most, of one economist?to choose the future incumbent. Thus the decision rested with non-economists. It may be fairly assumed that these professors of law were guided by the best intentions. But they were not economists. They had to choose between two opposed schools of thought, the "Austrian School" on the one hand, and the allegedly "modern" historical school as taught at the universities of the German Reich on the other hand. Even if no political and nationalistic prepossessions had disturbed their judgment, they could not help becoming somewhat suspicious of a line of thought which the professors of the universities of the German Reich dubbed specifically Austrian. Never before had any new mode of thinking originated in Austria. The Austrian universities had been sterile until?after the revolution of 1848?they had been reorganized according to the model of the German universities. For people who were not familiar with economics, the predicate "Austrian" as applied to a doctrine carried strong overtones of the dark days of the Counter-Reformation and of Metternich. To an Austrian intellectual, nothing could appear more disastrous than a relapse of his country into the spiritual inanity of the good old days.

Carl Menger, Wieser, and Böhm-Bawerk had obtained their chairs in Vienna, Prague, and Innsbruck before the Methodenstreit had begun to appear in the opinion of the Austrian laymen as a conflict between "modern" science and Austrian "backwardness." Their colleagues had no personal grudge against them. But whenever possible they tried to bring followers of the historical school from Germany to the Austrian universities. Those whom the world called the "Austrian Economists" were, in the Austrian universities, somewhat reluctantly tolerated outsiders.

[1]The only contemporary Viennese who appreciated the philosophic work of Leibniz was Prince Eugene of Savoy, scion of a French family, born and educated in France.

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