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Advancing Austrian Economics, Liberty, and Peace

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Mises Made Easier
Percy L. Greaves Jr.


Qua, (Latin). Considered as; in the capacity or character of; as far as; as.

Quadragesimo anno, (Latin). In the fortieth year, being the first words of the 1931 encyclical of Pope Pius XI (1857-1939; Pope, 1922-1939). This encyclical refers to and amplifies the Rerum Novarum (on new things) encyclical promulgated by Pope Leo XIII (1810-1903; Pope, 1878-1903) forty years earlier (1891). Taken together, these two encyclicals present the official position of the Roman Catholic Church on the social order, including socialism and capitalism.

S. 255, 429, 577.

Qualitative credit control. An attempt to force available quantities of credit into specific types of loans, considered desirable, by prohibiting or limiting loans of other types, considered undesirable.

Qualitative economics. Economic theory based on the knowledge that there are no constant relations in the sphere of human actions and that the exact future is always uncertain because the value judgments of acting men cannot be determined in advance with certainty.

EP. 116-18; HA. 55.

Quantitative economics. The theories of "Mathematical economists" based on the idea that there are constant relations in the sphere of human actions that can be quantified or measured, thus permitting the application of statistics and mathematical theories to economics. Mises maintains: "There is no such thing as quantitative economics." All statistics are history, sometimes economic history, but never economics (q.v.). See "Mathematical economics."

EP. 116-18; HA. 55-56,118,350-57; UF. 62.

Quantity theory of money. Simply stated: The theory that changes in the quantity of monetary units tend to affect the purchasing power of money inversely, that is, with every increase in the quantity of money, each monetary unit tends to buy a smaller quantity of goods and services while a decrease in the quantity of monetary units has the opposite effect. Knowledge of the effects of changes in the quantity of money is vital to an understanding of the theory of money, one of the most misunderstood economic problems of our age.

In 1568, Jean Bodin (1530-1596) pointed out that one reason for the then-recent rise in prices was the greater abundance of money due to the discovery of silver in America. He reasoned that since an abundance of anything made its value fall, this was what had happened in the case of money. In 1588, Bemardo Davanzati (1529-1606) espoused the first crude quantity theory of money by equating the total quantity of monetary metal to the total of all things able to satisfy human wants and then reasoning that the prices of available commodity units were proportional to the available quantity of monetary units. Later versions of this crude theory equated the quantity of money available or the quantity of money that changed hands (quantity X velocity), to the quantity of goods and services exchanged for money and maintained that changes on the money side of the equation resulted in proportional changes in the prices of all goods and services sold, i.e., a 20% increase in the quantity of money, or the quantity of money spent for goods and services would raise all prices proportionally by 20%. See "Equation of exchange."

The fallacy of all such crude versions of the quantity theory is their holistic (see "Holism") viewpoint of market transactions which ignores the fact that all changes in the quantity of money must start with changes in the cash holdings of some specific individuals and that it is through their subsequent market actions that the changes in the quantity of money set in motion their effect on price changes.

The refined and logically unassailable quantity theory of money traces the effect of every change in the quantity of money from its inception, as a change in the cash holdings of certain individuals, through the chain of changes in the prices these individuals pay and the effects such changes produce in the cash holdings and subsequent expenditures of other individuals until the full effect of the change in the quantity of money has spent its force and produced an entirely different set of price ratios or relations (price structures). Although a change in the quantity of money may eventually affect all prices, it does not and cannot affect all prices in the same manner, to the same degree or at the same time. The holistic idea that it does is false and has serious consequences.

See "Monetary theory of the trade cycle," "Money relation" and "Neutrality of money."

HA. 38,5555,231,405; M. 115-31, 137-54; also PLG. 146-147, 164-65, 282-83.

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