The monetary problem – the market problem – is the medium of exchange. The illusion is that one would be better off if only one had more money. Everybody should have more money. Therefore, make more money. This creates the system of inflation. This increase in the quantity of money brings about higher prices. Individuals are left with no real possibilities of acting.
So, in truth, the medium of exchange (money) must, first of all, be restricted in quantity. Why gold? Gold is scarce. Its quantity cannot be easily increased by governments.
Two models for society exist. One model is the absolute rule of one. All must obey. The totalitarian system produces order which is slavery.
Another model is individuals acting by their own ideas. The market system produces exchanges and social cooperation through everybody voluntarily making choices.
Recorded June 23,1970. Special thanks to Bettina Bien Greaves for making this important recording available. [1:00:53]
Ludwig von Mises was the acknowledged leader of the Austrian school of economic thought, a prodigious originator in economic theory, and a prolific author. Mises's writings and lectures encompassed economic theory, history, epistemology, government, and political philosophy. His contributions to economic theory include important clarifications on the quantity theory of money, the theory of the trade cycle, the integration of monetary theory with economic theory in general, and a demonstration that socialism must fail because it cannot solve the problem of economic calculation. Mises was the first scholar to recognize that economics is part of a larger science in human action, a science that he called praxeology.