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Introduction by Per Bylund and David Howden

Ten years ago Joe Salerno inherited the Mises Institute’s summer fellowship program from his predecessor, Jörg Guido Hülsmann. Generously funded by Peg Rowley, summer fellows are given time to study Austrian economics firsthand with some of the current masters. Not only is a sense of camaraderie inculcated amongst the participants, but they are also given access to the world’s best Austrian economics library and other resources. Frequent visits by friends of the Institute give these young scholars the ability to ask questions about the theory and history of the movement, and give them an ability to become a part of its ongoing evolution.

Central to this fellowship is the mentorship of Professor Salerno himself. Under his stewardship the program has brought 138 students to the Institute’s facility in Auburn, Alabama, from 2005 to 2013. These students have produced magnificent works central to Austrian economics during their summers in Auburn, and have gone on to take active roles in both the academic community and with private industry.

Perhaps more important than the careers that these young scholars have gone on to live is the enlightenment that they have shared with others through their daily lives. Using their argumentation skills fomented during their stays at the Mises Institute, these scholars have had their reach extended to others in subsequent encounters. We are all the better off for it.

The contributors to the present volume come from the ranks of PhD students, post-doctoral researchers and university professors. They have reached out to others in a bid to have the truth of their studies heard by the widest audience possible. Professor Salerno’s work in fostering debate and encouraging students during their summer in Auburn has no doubt been influential in spurring on this activism.

The present book is divided into three sections: money, policy and what we can refer to as mundane economics, the study of the basic, yet vital topics of the science. Each section represents an important area of Professor Salerno’s own research and his imprint on each chapter should be apparent to the reader. Suffice to say, a brief overview of his contributions will assist the reader in seeing his impact on the development of these young Austrian scholars in particular, and on Austrian economics in general.

Influence on Mundane Economics

Professor Salerno is one of the leading contemporary theorists in the Austrian tradition. A former colleague of Murray Rothbard’s, Professor Salerno has made his unfading mark on the theoretical Austrian literature through several influential as well as highly provocative articles. He has also changed the landscape for Austrian theorizing and the self-perception of Austrians.

His perhaps most debated contribution is “Mises and Hayek Dehomogenized” (1993), an article that essentially rewrote the history and sociology of the Austrian school. Professor Salerno here argues that “the Mengerian tradition was developed in very different directions by his brilliant followers, Eugen von Böhm-Bawerk and Friedrich von Wieser, and by their own students and followers” (1993, p. 114). In fact, Professor Salerno argues, these directions constitute “very different paradigms.” The former focuses on monetary calculation and resource allocation using actual market prices and comprises the social rationalism of Mises (Salerno 1990) and the judgmental entrepreneur (Salerno 2008b); one may also add the distinctly Austrian method of praxeology (see e.g., Rothbard 1951a; 1951b). The latter, in contrast, is a “general equilibrium tradition” (Salerno 2002) focused on the problem of coordination due to dispersed and tacit knowledge (see Hayek 1937; 1945) and much more inclined to quantitative analyses.

While only one of many influential contributions, the “dehomogenized” article represents Professor Salerno’s contributions to Austrian theory well. His contributions to “mundane” theory are primarily in the form of integrating existing theories and prospective theoretical perspectives by offering reinterpreting and contextualizing commentary, comparisons, and theoretical extensions. While perhaps not as glamorous as producing thousand-page treatises, this important integrative work is what produces a consistent body of theory that defines and furthers a tradition or school of thought.

Salerno’s work has strengthened the Austrian theoretical tradition and helped identify precursors and “proto-Austrians.” His work stretches beyond publishing in specifically Austrian journals and discussing exclusively Austrian theorists. Much thanks to Professor Salerno’s work, we are able to trace the philosophical origins of Austrian thought centuries if not millennia back in time and can identify kinship with other traditions. To exemplify, Professor Salerno has pursued illuminating commentary on the legacies of Carl Menger (Salerno 2004; 2010a), Eugen von Böhm-Bawerk (Salerno 2008), Ludwig von Mises (Salerno 1995a; 1999; 2012), Murray N. Rothbard (Salerno 2006), as well as of the French Liberal school’s Jean-Baptiste Say and Frédéric Bastiat (Salerno 1978; 1985; 1988; 1998; 2001), and has addressed the theoretical origins and shortcomings of opponents and competing traditions (Salerno 1992). Professor Salerno has also addressed traditions in monetary theory (Salerno 1991), but this work has come to be overshadowed by his important theoretical advances related to macroeconomics and money, especially monetary policy, business cycle theory (Salerno 1989; 2012b), and the calculation problem (Salerno 1990b; 1994b; 1996a).

Money and Policy

Besides his work on the more mundane aspects of economics, Professor Salerno has pushed forward the development of the one topic, besides method, that most separates neoclassical from Austrian economists: business cycle theory. This focus stems from the fact that the

Austrian theory [of the business cycle] embodies all the distinctive Austrian traits: the theory of heterogeneous capital, the structure of production, the passage of time, sequential analysis of monetary interventionism, the market origins and function of the interest rate, and more. (Salerno 1996b)

While this focus on business cycle theory has most recently been summarized in Salerno (2012), the bulk of his work on the topic has fallen into monetary theory and history. (Understandably so, as manipulations to the money supply as the root of economic disturbances remain the bulwark of the Austrian theory.) As the title of his most comprehensive book alludes to (Salerno 2010b), the undercurrent of his life’s work can be summed up in two words: “sound money.” In this agenda, Professor Salerno can be included in a long line of great economists championing a solid currency for the economy to be built upon, starting with the Spanish scholastics in the sixteenth century, expanded upon by David Ricardo and his fellow “bullionists” in the early nineteenth century, and most forcefully and completely argued by Ludwig von Mises in the early twentieth century. According to Mises (1971, pp. 414–16),

the sound money principle has two aspects. It is affirmative in approving the market’s choice of a commonly used medium of exchange. It is negative in obstructing the government’s propensity to meddle with the currency system. … Sound money meant a metallic standard. … The excellence of the gold standard is to be seen in the fact that it renders the determination of the monetary unit’s purchasing power independent of governments and political parties.

Professor Salerno has made available to his professional colleagues, students and laymen alike the true historical role and functioning of the “gold standard” (in its myriad forms). His work (Salerno 1983) on defining what a true gold standard entails has been instrumental in recognizing red-herring gold standards, imperfectly designed as they were, and which are commonly used to denigrate the usefulness of the “barbarous” monetary relic. His most comprehensive work on the topic (Salerno 1984), shows that the international gold standard is an oft-misunderstood beast because of the aggregative tactic the profession chooses to look at economic phenomena. Taking a more disaggregated approach to monetary and balance-of-payments theory allows one to see the true equilibrating mechanisms promoted by a healthily functioning gold standard.

Nor have these historical insights been merely apparent, allowing one to gain an understanding of a past disconnected from the future. In “War and the Money Machine: Concealing the Costs of War beneath the Veil of Inflation,” Professor Salerno lays out a theory of war finance, showing that monetary inflation obscures the cost of war and contributes to the capital decumulation and wealth destruction that ultimately ensues. That war-time inflation paves the way to “economic fascism” should be more than apparent to the reader who considers the socialization of large swaths of the American economy that have taken place over the past fifteen years in the wake of the ongoing “War on Terror,” an insidious undertaking with an enormous price tag. With some estimates of the total cost of this war as high as $5.5 trillion (nearly $20,000 per American citizen) the role of inflation in financing this broad-reaching undertaking cannot be overstated (Eisenhower Study Group 2011).

Professor Salerno has been instrumental in demonstrating that Ludwig von Mises’s contributions to the theory of money in the early twentieth century not only predated and were ignored by many mainstream economist, but is also far superior (Salerno 1994a). In light of this, it is to his credit that he has not ignored mainstream monetary theory completely. In Salerno (2006) he gives a “Rothbardian” analysis of the familiar equation of exchange. His insights allow the reader to see clearly and in a way that is not possible via the vacuous quantity theory that

the Quantity Theory of Money as expounded in terms of the Quantity Equation gets matters exactly wrong: it is not the flow of spending that determines the price level, given a level of output that is exogenously determined in some separate and mysterious real process. Rather the money prices and quantities of goods exchanged, which are codetermined in the overall market process, are the causal determinants of the spending flow. (Salerno 2006, p. 51)

Never content to rest on the laurels of his forebears, he has striven to improve upon the great works they have achieved. Salerno (1987) provides a better measure of the “true” money supply. Unsatisfied with the existing “M”s expounded with near unanimity by the rest of the profession, Professor Salerno builds off Rothbard (1963, pp. 83–86; 1978; 1983, pp. 254–62) to provide a better answer to a seemingly simple question: how much money is floating around out there? Not only is the exercise admirable for its clarity, it also shows a dedication to truth seeking and an undogmatic approach to economic analysis. Though clearly following in the footsteps of Rothbard, Professor Salerno does not hesitate to correct the dean of the Austrian school in his previous attempts to define the money supply.

To the Next Generation

The contributions to economic science discussed above, although formidable, will not be Professor Salerno’s greatest professional achievement. The thirteen contributors to the present volume have all learned from him, and there can be no doubt as to the influence he has had on their intellectual development. Just as Professor Salerno very clearly is influenced by the Menger-Mises-Rothbard tradition of the Austrian school, each of these thirteen authors (as well as the other summer fellows under his tutelage, and the thousands of people who have listened to his lectures and read his works) can be considered an intellectual descendant of his. To introduce the adjective, we are all “Salernians” in some way.

Professor Salerno was not only present for the rebirth and revival of Austrian economics in the mid-1960s, he has been an important focal point of its continual growth over the ensuing decades. With this book, we present to him the evidence that the discipline is in good hands, and that his reach and influence has not only been wide, but also strong, ensuring its promulgation for another generation. It is with this contribution that his most lasting influence has been made, and continues to grow with each passing year. Thanks, Joe.


Eisenhower Study Group. 2011. “Cost of Iraq, Afghanistan, and Anti-Terrorism Operations.” Watson Institute for International Studies, Brown University. Accessed 27 August 2014.

Hayek, F. A. v. 1937. “Economics and Knowledge.” Economica 4(13): 33–54.

——. 1945. “The Use of Knowledge in Society.” American Economic Review 35(4): 519–30.

Mises, Ludwig von. 1971. The Theory of Money and Credit, 2nd ed. Irvington-on-Hudson, N.Y.: Foundation for Economic Education

Rothbard, Murray N. 1951a. “Mises ‘Human Action’: Comment.” The American Economic Review 41(1): 181–85.

——. 1951b. “Praxeology: Reply to Mr. Schuller.” The American Economic Review 41(5): 943–46.

——. 1963. America´s Great Depression. Princeton, N.J.: Van Nostrand.

——. 1978. “Austrian Definitions of the Supply of Money. In Louis M. Spadaro, ed., New Directions in Austrian Economics, pp. 143–56. Kansas City: Sheed, Andrews and McMeel.

——. 1983. The Mystery of Banking (New York: Richardson and Snyder.

Salerno, J. T. 1978. “Comment on the French Liberal School.” Journal of Libertarian Studies 2(1): 65–68.

——. 1983. “Gold Standards: True and False.” Cato Journal 3 (Spring): 239–67.

——. 1984. “The International Gold Standard: A New Perspective.” Eastern Economic Journal 10 (October/December): 488–98.

——. 1985. “The influence of Cantillon’s Essai on the Methodology of J. B. Say: A Comment on Liggio.” Journal of Libertarian Studies 7(2): 305–16.

——. 1987. “The ‘True’ Money Supply: A Measure of the Supply of the Medium of Exchange in the U.S. Economy.” Austrian Economics Newsletter 6 (Spring): 1–6.

——. 1988. “The neglect of the French liberal school in Anglo-American economics: A critique of received explanations.” Review of Austrian Economics 2(1): 113–56.

——. 1989. “Comment on Tullock’s ‘Why Austrians are wrong about depressions.’” Review of Austrian Economics 3(1): 141–45.

——. 1990. “Ludwig von Mises as social rationalist.” Review of Austrian Economics 4(1): 26–54.

——. 1990b. “Postscript: Why a socialist economy is ‘Impossible’.” Economic Calculation in the Socialist Commonwealth. Auburn, Ala.: Mises Institute.

——. 1991. “Two Traditions in Modern Monetary Theory: John Law and A. R. J. Turgot.” Journal de Economistes et des Etudes Humaines 2(2–3): 337–80.

——. 1992. “The Development of Keynes’s Economics: From Marshall to Millennialism.” Review of Austrian Economics 6(1): 3–64.

——. 1993. “Mises and Hayek Dehomogenized.” Review of Austrian Economics 6(2): 113–46.

——. 1994a. “Ludwig von Mises’s Monetary Theory in Light of Modern Monetary Thought.” Review of Austrian Economics 8(1): 71–115.

——. 1994b. “Reply to Leland B. Yeager on ‘Mises and Hayek on Calculation and Knowledge.’” Review of Austrian Economics 7(2): 111–25.

——. 1995a. “Ludwig Von Mises on inflation and expectations.” Advances in Austrian Economics 2: 297–325.

——. 1995b. “War and the Money Machine: Concealing the Costs of War beneath the Veil of Inflation.” Journal des Economistes et des Etudes Humaines 6 (March): 153–73.

——. 1996a. “A final word: Calculation, knowledge, and appraisement.” Review of Austrian Economics 9(1): 141–42.

——. 1996b. “Why we’re winning.” Austrian Economics Newsletter 16(3).

——. 1998. Review of “J.-B. Say, An Economist in Troubled Times.” Journal of the History of Economic Thought 20(4): 524–27.

——. 1999. “The Place of Mises’s Human Action in the Development of Modern Economic Thought.” Quarterly Journal of Austrian Economics 2(1): 35–65.

——. 2001. “The Neglect of Bastiat’s School by English-Speaking Economists: A Puzzle Resolved.” Journal des Economistes et des Etudes Humaines 11(2).

——. 2002. “Friedrich von Wieser and Friedrich A. Hayek: The General Equilibrium Tradition in Austrian Economics.” Journal des Economistes et des Etudes Humaines 12(2).

——. 2004. “Menger’s theory of monopoly price in the years of high theory: the contribution of Vernon A. Mund.” Managerial Finance 30(2): 72–92.

——. 2006. “A Simple Model of the Theory of Money Prices.” Quarterly Journal of Austrian Economics 9(4): 39–55.

——. 2008. “Böhm-Bawerk’s Vision of the Capitalist Economic Process: Intellectual Influences and Conceptual Foundations.” New Perspectives on Political Economy 4(2): 87–112.

——. 2008b. “The Entrepreneur: Real and Imagined.” Quarterly Journal of Austrian Economics 11: 188–207.

——. 2010a. “Menger’s Causal-Realist Analysis in Modern Economics.” Review of Austrian Economics 23: 1–16.

——. 2010b. Money, Sound and Unsound. Auburn, Ala.: Mises Institute.

——. 2012. “Ludwig von Mises as Currency School Free Banker.” Procesos de Mercado: Revista Europea de Economía Política 9(2): 13–49.

——. 2012. “A reformulation of Austrian business cycle theory in light of the financial crisis.” Quarterly Journal of Austrian Economics 15(1): 3–44.