21
May
2011
Deep Thoughts From Mises
I’m working on a study guide for Mises’ The Theory of Money and Credit and came across this neat quote on page 202: “In a social order that is entirely founded on the use of money and in which all accounting is done in terms of money, the destruction of the monetary system means nothing less than the destruction of the basis of all exchange.”
(BTW, I am 200 pages into the book and have yet to hit the bats-it insane part. I can hardly wait to see the transformation, since it’s awesome thus far.)
Mises’s writings are always awesome. His style cuts to the heart of the matter in such a provocative way and with such sharp analysis that it amazes me how he hasn’t gained more renown. Just the quality of his writing should have been enough to make him one of the most influential thinkers to ever tackle the social sciences. Add that to the fact that his logic is clear and impeccable and it’s a crime that he isn’t required reading for all humanities students.
Listen I don’t have the educational pedigree to necessarily combat Brad DeLong’s comments, but I will say it irks me to no end when someone beings a critique by saying: “Start on pg. 416” and then splices some quotes together.
One of the most significant impressions I have taken away from Mises’ lengthier works (specifically The Theory of Money & Credit and Human Action) is that he slowly and methodically builds his argument up in almost painstaking detail. Having said that I just think it is necessary to really embrace and tackle the book cover to cover to have a proper understanding before critiquing his view.
Having said that I think Mises, more so than most authors, requires a much more comprehensive reading especially on areas of a more complex nature such as the ideal monetary policy in order tp have an accurate sense of his viewpoint.
DeLong’s apparently calls ‘insane’ whoever writes something he disagrees with, or is politically incorrect.
And what exactly does “a rhetorical-excess-train-wreck mode” mean?
A little off topic but this is a really hot video where you have the EU facing very fundamental questions of money and trust and politics. We see Ireland and Iceland as debtor nations and their view on inflation (bring it awn) and Germany as a creditor nation demanding hard work and repayments from the people who borrowed the money. It really brings into focus where the limitations of government power really are and why those limitations exist. Americans should be watching this because exactly the same tension exists in the USA but the EU really makes it easier to see with their extra tier between national governments and the EU umbrella organisation that isn’t quite a government but thinks it should be.
http://dailybail.com/home/the-end-of-the-eurozone-stiglitz-at-european-zeitgeist-2011.html
“In a social order that is entirely founded on the use of money and in which all accounting is done in terms of money, the destruction of the monetary system means nothing less than the destruction of the basis of all exchange.”
To which the answer is that social orders can and do change, but exactly how they change is the interesting bit.
Just a bit of background for American readers in case they haven’t been watching the EU closely…
http://www.telegraph.co.uk/news/worldnews/europe/ireland/8349497/Irelands-new-government-on-a-collision-course-with-EU.html
“We have a hostage, it is called the euro,” he said. “The euro is insolvent. The only question is whether Ireland should be sacrificed to keep the Ponzi scheme going. We have to have a Plan B to the misnamed bailout, which is to go back to the Irish Punt.”
,,, also …
http://blogs.telegraph.co.uk/finance/andrewlilico/100010332/what-happens-when-greece-defaults/
Because the ECB has relatively little foreign currency-denominated exposure, it could in principle print its way out, but this is forbidden by its founding charter. On the other hand, the EU Treaty explicitly, and in terms, forbids the form of bailouts used for Greece, Portugal and Ireland, but a little thing like their being blatantly illegal hasn’t prevented that from happening
I don’t know how to interpret this quote other than it being literally false. Barter and credit “transactions” take place constantly, particularly within the household. Surely such institutions precede and are independent of money.
“In a social order that is entirely founded on the use of money…”
In fact, my case is stronger than that. Mises says it is the destruction of the “basis” of all exchange. Perhaps I am just playing semantics, but isn’t the “basis” of all exchange self-interest and scarcity and money merely the means of facilitating said exchange on a large scale?
“In a social order that is entirely founded on the use of money and in which all accounting is done in terms of money, the destruction of the monetary system means nothing less than the destruction of the basis of all exchange.”
He is talking about a social order based on monetary exchange. If you destroy the monetary system, you destroy the basis of exchange upon which that social order is based.
If the monetary system was destroyed and all exchange fell to barter, you would have a completely different social order (a lot less division of labor, a lot more manual labor due to less capital, etc).
You might be right that it’s a little sloppy on a purely technical level. Mises meant all catallactic exchange, which means most exchange on any meaningful level (that is, the level necessary to maintain society as it has developed so far).
If MMTer AP Lerner ever shows up in the future to lecture us on our economic ignorance, keep in mind that he claims (without argument) that catallactic exchange became irrelevant under our “pure” fiat money system in 1971. When I directed him to Mises’ evisceration of MMT hero Knapp and his wacky state theory of money a century ago:
http://tinyurl.com/4f2wp24
AP Lerner responded:
That essay is irrelevant since it was written in a period of time when the current monetary system did not exist. The rules changed in 70’s. The US left the gold standard.
http://tinyurl.com/4rf8pg9
And as a bonus, let us not forget that AP Lerner and his Chartalists seem to believe that they have discovered the secret to abolishing the law of scarcity.
Interesting that Mises – but not his followers – understood that a monetary economy is different from a barter economy or a coconut economy in Robinson’s island. Money is not neutral, nor is the underlying monetary system under which we operate. I guess he – unlike his followers – would have been clever enough to understand MMT.
Obviously a monetary system is not going to be neutral. A Rothbardian system based upon free and voluntary trade is going to be different than our current fiat system which is based upon theft and fraud. No Austrian believes what you just claim they do. You’ve created another straw man derived from your complete ignorance of economics and, specifically, Austrian Economics.
Theft and fraud is how the gas you squander to give meaning to your life was obtained. Are all rothbardians also hypocrites or are you the exception?
There it is folks, the intellectual depth and breadth of our opposition. I assumed a few years ago that they actually had an anti-Austrian line of BS that sounded somewhat plausible. Instead, we now find that they have nothing at all. I was wrong.
Cut it out with the our and we Roddis. You are the self-admitted rothbardian hypocrite.
Theft and fraud is how the gas you squander to give meaning to your life was obtained.?
This mantra is getting boring.
MamMoTh doesn’t know economics, can’t debate to save his life and gets a D- in trash talk.
What sad way to go through life.
No Austrian has ever argued that a monetary economy is absolutely the same as a barter economy. That would be absurd. But, it doesn’t mean that some aspects of a barter economy can be compared to aspects of catallactic exchange. It just means that a money economy is much more complicated than a barter economy.
By the way, the Austrians are some of the most adamant critics of short-run and long-run money neutrality.
Austrian economics is based on money not being neutral.