Wednesday, September 20, 2006

the money quote

I have perhaps read a fraction of Ludwig von Mises's effusive output, but I have already corrected myself of the initial misconception that Mises wrote punctilious yet boringly dry economic texts. To witness;
"Superficial critics of the capitalistic economic system are in the habit of directing their attacks principally against money... and yet they want this exchange to be achieved without any medium, or at least without a common medium, or money. They obviously regard the use of money as harmful and hope to overcome all social evils by eliminating it...

All the processes of our economic life appear in a monetary guise; and those who do not see beneath the surface of things are only aware of monetary phenomena and remain unconscious of deeper relationships. Money is regarded as the cause of theft and murder, of deception and betrayal. Money is blamed when the prostitute sells her body and when the bribed judge perverts the law. It is money against which the moralist declaims when he wishes to oppose excessive materialism. Significantly enough avarice is called the love of money; and all evil is attributed to it.

The confused and vague nature of such notions as these is obvious. It is not so clear whether it is thought that a return to direct exchange by itself will be able to overcome all the disadvantages of the use of money, or whether it is thought that other reforms will be necessary as well. The world makers and world improvers responsible for these notions feel no obligation to follow up their ideas inexorably to their final consequences. They prefer to call a halt at the point where the difficulties of the problem are just beginning. And this, incidentally, accounts for the longevity of their doctrines; so long as they remain nebulous, they offer nothing for criticism to seize upon."

--The Theory of Money and Credit, Chapter 6

L. v. Mises, Godfather of the Austrian Mafia

1 comment:

Don Robertson said...

Iceberg Lettuce:

Here's another money quote from Lidwig von Mises that's equally as telling. From "Human Action" Chapter XVII part 4:

"But the critics continue, this means explaining part of money's purchasing power which is due to its service as a medium of exchange by its employment for industrial purposes. The very problem, the explanation of the specific monetary component of its exchange value, remains unsolved. Here too the critics are mistaken. That component of money's value which is an outcome of the services it renders as a medium of exchange is entirely explained by reference to these specific monetary services and the demand they create. Two facts are not to be denied and are not denied by anyone. First, that the demand for a medium of exchange is determined by considerations of its exchange value which is an outcome both of the monetary and industrial services it renders. Second, that the exchange value of a good which has not yet been demanded for service as a medium of exchange is determined solely by a demand on the part of people eager to use it for industrial purposes, i.e., either for consumption or for production. Now, the regression theorem aims at interpreting the first emergence of a monetary demand for a good which previously had been demanded exclusively for industrial purposes as influenced by the exchange value that was ascribed to it at this moment on account of its nonmonentary services only. This certainly does not involve explaining the specific monetary exchange value of a mediumm of exchange on the ground of its industrial exchange value.

Finally it was objected to the regression theorem that its approach is historical, not theoretical. This objection is no less mistaken. To explain an event historically means to show how it was produced by forces and factors operating at a definite date and a definite place. These individual forces and factors are the ultimate elements of interpretation. They are ultimate data and as such not open to any futher analysis or reduction. To explain phenomenon theoretically means to trace back its appearance to the operation of general rules which are already comprised in the theoretical system. The regression theorem complies with this requirement. It traces the specific exchange value of a medium of exchange back to its function as a medium and to theorems concerning the process of valuing and pricing as developed by the general catallactic theory. It deduces a more special case from the rules of a more universal theory. It shows how the special phenomenon necessarily emerges out of the operation of the rules generally valid for all phenomenon. It does not say: This happened at that time and at that place. It says: This always happens when the conditions appear; whenever a good which has not been demanded previously for the employment as a medium of exchange begins to be demanded for this employment, the same effects must appear again; no good can be employed for the function of a medium of exchange which at the very beginning of its use for this purpose did not have exchange value on account of other employments. And all these statements implied in the regression theorem are enounced apodictically as implied in the apriorism of praxeology. It must happen this way. Nobody can ever exceed in constructing a hypothetical case in which things were to occur in a different way.

So, we see, once established the exchange value of a medium of exchange (the dollar) remains so because there is something that can be exchanged for it, and, apparently, that value will remain until there is nothing left to exchange it for.

As Ludwig says, it must happen that way.

Unfortunately, it seems the exchange that is keeping the dollar afloat in mid air seems ever more to be the military hardware this country produces ad nauseum, for which in the Age of Terrorism hype, is in quite high demand.

The doomsayers of dollar collapse are Chicken Little reincarnate.

The Dictatorship of the Marketplace demanded world war, and they got it! We must have markets!

Don Robertson, The American Philosopher
Limestone, Maine

An Illustrated Philosophy Primer for Young Readers
Precious Life - Empirical Knowledge
The Grand Unifying Theory & The Theory of Time
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