Copyright © 2008 by the Ludwig von Mises Institute

Cover image: Detail from Sachsenspiegel manuscript, courtesy of the University of Heidelberg.

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ISBN: 978-1-933550-09-1

To the memory of
Hans Sennholz

It has been a long-standing project of mine to give a concise exposition of monetary theory, with special emphasis on the ethical and institutional aspects of money production. Money and banking have been covered more than any other subject in economics. Still there is reason to hope that the following pages will not be superfluous, for they combine three elements that have not previously been integrated into a single work.

1. MONEY PRODUCTION AND JUSTICE

The production of goods and services is not a purely technological matter. It always relies on a legal and moral framework, and feeds back on this framework. A firm or an industry can pursue its activities in a way that confirms and nourishes the basic legal and moral presuppositions of human cooperation; yet it can also, intentionally or unintentionally, contradict and destroy these foundations.

1. THE DIVISION OF LABOR WITHOUT MONEY

To understand the origin and nature of money, one must first consider how human beings would cooperate in a world without money—in a barter world. Exchanging goods and services in such a barter world confronts the members of society with certain problems. They then turn to monetary exchanges as a means for alleviating these problems. In short, money is a (partial) solution for problems of barter exchanges. But let us look at this in just a little more detail.