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The Ludwig von Mises Institute

Advancing Austrian Economics, Liberty, and Peace

Advancing the scholarship of liberty in the tradition of the Austrian School

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LUDWIG VON MISES (1881-1973)
Chronological Bibliography

Theory of Money and Credit

Mises's first major work, originally published in German in 1912. This has ever since been recognized as a basic textbook of monetary theory. Its most important theoretical contribution was to integrate monetary theory with general utility theory.

This had been considered an impossible accomplishment, since money is (aside from its value as a commodity) valued for its purchasing power. How then can it have a utility of its own? Mises solved this problem through the monetary regression theorem, developing the earlier work of Carl Menger. He showed that the purchasing power of money at a particular period or "day" stems from its value the preceding "day." This process goes back until one arrives at a value due entirely to the monetary commodity's value as a non-monetary commodity. Money was then originally a commodity like any other.

Mises claimed that money can only have originated in this way. Only the market, not the fiat of the state, can give rise to money. In the course of integrating monetary theory into general economics, Mises criticized the quantity theory of money. Equations do not explain the individual actions of people in reacting to changes in the supply and demand of money.

The work also includes a discussion of "forced saving" that exerted considerable influence. In addition, of course, the book discusses the standard issues of monetary theory, since it was intended for use as a comprehensive textbook on money and banking. John Maynard Keynes, although generally complimentary, criticized the book as unoriginal in his review of the German edition in Economic Journal XXIV:417-19. This was in spite of his later admission that he could not understand original contributions if written in German.

Newer 1953 edition includes an essay on "Monetary Reconstruction." Here Mises strongly supports a full return to the gold standard, as the only means of avoiding inflation. The operation of the system is virtually "automatic": nothing depends on the decision of particular government administrators. Here, it is important to note, Mises has in mind the "pure" gold standard, rather than the gold exchange standard.

Although the views in this essay are entirely consistent with the earlier part of the book, Mises expresses himself in a distinctly more vehement way here.

Ludwig von Mises:
An Annotated Bibliography
David Gordon