The Last Knight of Liberalism

Chapter 6. Treatise on Money

1 Landmarks are his essay on “Sociology and History” (1929) and several book publications: Epistemological Problems of Economics (first German edition, 1933; translated into English by George Reisman [Princeton, N.J.: Van Nostrand, 1960; 3rd ed., Auburn, Ala.: Ludwig von Mises Institute, 2003]); Nationalökonomie (Geneva: Editions Union, 1940); Human Action (New Haven, Conn.: Yale University Press, 1949; 3rd ed. [Auburn, Ala.: Ludwig von Mises Institute, 1998); Theory and History (New Haven, Conn.: Yale University Press, 1957; reprinted Auburn, Ala.: Ludwig von Mises Institute, 1985); and The Ultimate Foundation of Economic Science (New Rochelle, N.Y: Arlington House, 1962).

2 See Carl Menger, Grundsätze der Volkswirthschaftslehre (Vienna: Braumüller, 1871); idem, Untersuchungen über die Methode der Socialwissenschaften und der Politischen oekonomie insbesondere (Leipzig: Duncker & Humblot, 1883).

3 Mises, Notes and Recollections (Spring Mills, Penn.: Libertarian Press, 1978), pp. 55f.

4 Mises, Erinnerungen (Stuttgart: Gustav Fischer Verlag, 1978), p. 74; Notes and Recollections, p. 112. See also Murray N. Rothbard, Ludwig von Mises: Scholar, Creator, Hero (Auburn, Ala.: Ludwig von Mises Institute, 1988), and James Rolph Edwards, The Economist of the Century: Ludwig von Mises in the History of Monetary Thought (New York: Carlton Press, 1985).

5 Although Menger delivered a painstaking analysis of the process of the emergence of money (a process that was in his view the best illustration of the emergence of social institutions) he was not the first economist to point out that money does not come into being by social contract. Among Menger’s predecessors were John Law (1705), Ferdinando Galliani (1751), Étienne de Condillac (1776), Adam Smith (1776), Antonio Genovesi (1788), Jean-Baptiste Say (1802), and Richard Whately (1832). On the emergence of this approach in the eighteenth century see Arthur E. Monroe, Monetary Theory before Adam Smith (New York: Augustus M. Kelley, [1923] 1966).

6 Mises, Theory of Money and Credit, p. 65; also Mises quoted Böhm-Bawerk’s Rechte und Verhältnisse vom güterwirthschaftlichen Standpunkte, pp. 120ff.

7 Regrettably, this comparative focus of his analysis was lost in the English translation of the title of the book: Theory of Money and Credit. The term Umlaufsmittel, which literally translates into “means of circulation,” was rendered in the English text as “fiduciary media.” Consequently the title of the book should have been Theory of Money and Fiduciary Media, but the publisher decided that the unusual terminology would irritate readers and thus opted for the smoother but toothless Theory of Money and Credit, failing to honor the fact that even in the original German version the expression was unusual. Mises was hostile to innovations in language that were not justified by the analysis of hitherto neglected phenomena. But the difference between money certificates on the one hand, and Umlaufsmittel on the other was such a neglected phenomenon, to the point that established scientific terminology even lacked the means for expressing this difference. Mises thus introduced the expression Umlaufsmittel for this purpose and even used it in the title of his book to highlight its importance.

8 See Franz Cuhel, Zur Lehre von den Bedürfnissen. Theoretische Untersuchungen über das Grenzgebiet von Ökonomik und Psychologie (Innsbruck: Wagner, 1907).

9 See ibid., pp. 190f. Böhm-Bawerk had made this claim in a long essay on the theory of value, his first statement on value theory. See Böhm-Bawerk, “Grundzüge der Theorie des wirtschaftlichen Güterwertes,” Jahrbücher für Nationalökonomie und Statistik n.s. 13 (1886): 48. It was this passage that met with criticism in Cuhel and Mises. Mises said many years later that, in distinct contrast to corresponding passages in Böhm-Bawerk’s Positive Theory of Capital (New York: G.E. Stechert, 1930), the statement in Grundzüge “was incompatible with the whole tenor of Böhm’s theory” (Mises to A.E. Foerster, letter dated March 2, 1965; Grove City Archive: Böhm-Bawerk file). This letter raises a certain problem because Mises here said that Böhm-Bawerk eventually realized his error and expressed the correct formulation in a later edition of Capital and Interest (South Holland, Ill.: Libertarian Press, 1959, vol. 2, bk. 3, part A, chap. 3, p. 148). But in the second edition of Theorie des Geldes und der Umlaufsmittel, 2nd ed. (Munich and Leipzig: Duncker & Humblot, 1924, p. 13), Mises said Böhm-Bawerk had not said anything new on this matter.

10 See Cuhel, Zur Lehre von den Bedürfnissen, pp. 178f.

11 See ibid., p. 210. Cuhel called subjective utilities by the unusual name of “Egenzen.” In an analogous case, Vilfredo Pareto called subjective utility “ophélimité.”

12 Mises, Notes and Recollections, p. 58.

13 See Henri Cernuschi, Nomisma; or, “Legal Tender” (New York: Appleton & Co., 1877); Josef von Neupauer, Die Schäden und Gefahren der Valutaregulierung für die Volkswirtschaft und die Kriegsbereitschaft (Vienna: Lesk & Schwidernoch, 1892); Wilhelm Lexis, “Papiergeld,” Handwörterbuch der Staatswissenschaften (Jena: Gustav Fischer, 1893; 2nd ed., 1901, 3rd ed., 1910). Mises mentions Neupauer’s book in Mises, “Die wirtschaftspolitischen Motive der österreichischen Valutaregulierung,” Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung 16 (1907): 578.

14 See Georg F. Knapp, Staatliche Theorie des Geldes, 2nd ed. (Munich & Leipzig: Duncker & Humblot, 1918), p. 1.

15 See ibid., p. 31. Knapp thought he had to create an entirely new vocabulary to adequately deal with the theory of money and among many other innovations came up with the expression “chartal.”

16 In particular Andreas Voigt, one of the leaders of the small but growing cadre of anti-Schmoller economists, gave Knapp an unfavorable review. See Andres Voigt, “Die staatliche Theorie des Geldes,” Zeitschrift für die gesamte Staatswissenschaft 62 (1906): 317–40.

17 See L. Calligaris, “Staatliche Theorie des Geldes,” Münchener Allgemeine Zeitung (February 1, 1906); idem, “Staatliche Theorie des Geldes,” Österreichische Rundschau 7, no. 80 (May 10, 1906); F. Bendixen, Das Wesen des Geldes (Leipzig: Duncker & Humblot, 1908), p. 3; idem, “Fünf Jahre Geldtheorie,” Bank-Archiv 10, no. 10 (1911): 145ff.; W. Lexis, “Eine neue Geldtheorie,” Archiv für Sozialwissenschaften und Sozialpolitik 5 (1906): 557–74; idem, “Die Knappsche Geldtheorie,” Jahrhücher für Nationalökonomie und Statistik, 3rd series, 32 (1906): 534–45.

18 Ludwig von Mises, Staat, Nation und Wirtschaft (Vienna: Manz, 1919), p. 5, n. 3. Mises referred to Anderson’s verdict that Knapp’s book “has had wide influence on German thinking on money. It is typical of the tendency in German thought to make the State the center of everything.” Benjamin M. Anderson, The Value of Money (New York: Macmillan, 1917), p. 433. He also quoted Carl Menger’s exasperated comment on the success of the State Theory of Money: “It is the logical development of Prussian police science. What are we to think of a nation whose elite, after two hundred years of economics, admire such nonsense, which is not even new, as highest revelation?” Mises, Erinnerungen, p. 20; Notes and Recollections, p. 35.

19 Mises, Theory of Money and Credit, p. 93.

20 This particular standpoint for evaluating social problems is also reflected in the standard German names for the discipline of economics: “Nationalökonomie” (national economics) and “Volkswirtschaftslehre” (theory of the economy of the nation).

21 John Stuart Mill, Principles of Political Economy (Fairfield, Conn.: Augustus M. Kelley, [1848] 1976), bk. 3, chap. 7, § 3, p. 488.

22 See Knut Wicksell, Geldzins und Güterpreise (Jena: Gustav Fischer Verlag, 1898).

23 See Karl Helfferich, Das Geld, 5th ed. (Leipzig: Hirschfeld, [1903] 1921), pp. 544ff. It is noteworthy that in his exposition Helfferich conflates physical and value terms.

24 See Friedrich von Wieser, “Der Geldwert und seine geschichtlichen Veränderungen,” Zeitschrift für Volkswirtschaft, Socialpolitik und Verwaltung 13 (1904); reprinted in Wieser, Gesammelte Abhandlungen (Tübingen: Mohr, 1929), pp. 164–92.

25 Mises later explained that the tenets of the Currency School were unacceptable to the kathedersocialist mindset because it seemed to leave no scope for government intervention. The German professors

favored the Banking School. The victory of the Historical School practically brought excommunication of the Currency School. Karl Marx, Adolf Wagner, Helfferich, Hilferding, Havenstein, and Bendixen held to the doctrines of the Banking School. (Ludwig von Mises, A Critique of Interventionism [New York: Arlington House, 1977], p. 94)

Even after World War I, the mainstream opinion among German monetary economists was that the Banking School had won the debate with the Currency School on virtually all substantive issues. The fact that John Stuart Mill, arch-advocate of the veil-of-money theory, endorsed the banking theory with only slight modifications played a crucial role in its sweeping success. See W. Mildschuh, “Geschichtliche Entwicklung der Geldtheorie,” Handwörterbuch der Staatswissenschaften 4 (1927): 720; J.S. Mill, Principles of Political Economy, book 3, chap. 24. Mill’s view was probably strongly influenced by the crisis that erupted in 1846 despite the Bank Charter Act (1844), which sought to put the principles of the Currency School into legislation.

26 In Geldzins und Güterpreise (pp. 34ff. and passim), Knut Wicksell had already delivered a scathing critique of the main tenets of the Banking School. His book was pointedly ignored at the time, as was Mises’s Theory of Money and Credit. Only after World War I did both books enjoy a renaissance.

27 See Wieser, “Der Geldwert und seine geschichtlichen Veränderungen,” pp. 180f. This was also Knut Wicksell’s view; see in particular Geldzins und Güterpreise, chap. 3, where he elaborates on the distinction between relative prices and money prices. Wicksell’s book had virtually no impact on the German scene at the time it first appeared. But his monetary views seem to have influenced his countryman Gustav Cassel, and through Cassel they eventually reached a broad academic audience after World War I, when Cassel’s textbook became the main work of reference on theoretical economics at German Universities. See Gustav Cassel, Theoretische Sozialökonomik, 4th ed. (Leipzig: Deichert, 1927), in particular book three.

28 For similar reasons, Wicksell believed that a cashless payment system or pure credit economy was possible. See his Geldzins und Güterpreise, pp. 58, 64ff.

29 See Wieser, “Der Geldwert und seine geschichtlichen Veränderungen,” pp. 169, 175, 179.

30 See ibid., pp. 175, 184.

31 See ibid., pp. 176f.

32 See Reinhard Kamitz, “Die österreichische Geld- und Währungspolitik von 1848 bis 1948,” Hans Mayer, ed., Hundert Jahre österreichischer Wirtschaftsentwicklung, 1848–1948 (Vienna: Springer, 1949), pp. 145f.

33 See Wieser, “Der Geldwert und seine geschichtlichen Veränderungen,” pp. 184ff.

34 He admitted that the increased production of commodity money was another factor explaining the secular decline of the purchasing power of money (see ibid., p. 192). Another factor was government expenditures, which were “shifted forward” in the form of taxation and thus “added” to prices, implying a lower purchasing power of money (see ibid., p. 186).

35 Friedrich von Wieser, “Der Geldwert und seine Veränderungen,” Schriften des Vereins für Socialpolitik 132 (Munich and Leipzig: Duncker & Humblot, 1909); reprinted in Wieser, Gesammelte Abhandlungen, Hayek, ed., pp. 193–242.

36 See ibid., pp. 204f., 208, 211. Wieser stressed that the value of money was determined in monetary exchanges of consumers’ goods only. This precluded taking into consideration, for example, idle cash holdings not used in market exchanges, or monetary exchanges on the markets for producers’ goods. The values of producers’ goods were in fact merely derived from the values of consumers’ goods (see ibid., pp. 214, 219).

37 See ibid., pp. 165, 173. Wieser here argued that money was an object of exchange only in case it was bought and sold as monetary capital.

38 Wieser, “Der Geldwert und seine Veränderungen,” p. 220. Joseph Schumpeter adopted the same point of view. See his Theorie der wirtschaftlichen Entwicklung (Leipzig: Duncker & Humblot, 1911), p. 196.

39 In the English edition of Mises’s book, Anweisungstheorie is translated as “claim theory” (see Mises, Theory of Money and Credit, appendix). The translation is however somewhat inappropriate. The term “claim” involves an underlying legalistic interpretation of what the assignment theorists hold the nature of money to be. But compared to a legal interpretation of money as a claim, the flaws of the assignment theory look minor. It is obvious that market exchanges are categorically different from the redemption of claims. But assignment theorists never subscribe to such clearly stated (and clearly wrong) interpretations of money. Their doctrine survives precisely because it is ambiguous.

40 John Law, Money and Trade Considered with a Proposal for Supplying the Nation with Money (Edinburgh: Anderson, 1705), chap. 2. While Mises rejected this view, he accepted as fundamental the distinction that Law had made between the monetary and non-monetary demand for money:

It is reasonable to think Silver was Barter’d as it was valued for its Uses as a Mettal, and was given as Money according to its Value in Barter. The additional Use of Money Silver was apply’d to would add to its Value, because as Money it remedied the Disadvantages and Inconveniences of Barter, and consequently the demand for Silver encreasing, it received an additional Value equal to the greater demand its Use as Money occasioned. (ibid., chap. 1)

41 See in particular Henry D. Macleod, Theory and Practice of Banking, 2 vols. (London: Longman, Brown, Green, and Longmans, 1855), vol. 1. In the first chapter, the author characterizes money as an “evidence of debt being made transferable.” Again, although Mises rejected this opinion, he learned an important lesson from MacLeod, namely, that bank deposits are substitutes for money in essentially the same way as banknotes. However, while MacLeod inferred that there was no point in limiting the issuance of new notes, Mises concluded that deposit creation had to be limited, just as note issues had been limited through Peel’s Bank Charter Act.

42 Adolf Wagner, Die russische Papierwährung (Riga: Kymmel, 1868), p. 44.

43 Mises discusses Wagner’s impact in Money, Method, and the Market Process: Essays by Ludwig von Mises, Richard Ebeling, ed. (Boston: Kluwer, 1990), chap. 7.

44 Eugen von Böhm-Bawerk, Innsbrucker Vorlesungen über Nationalökonomie, Shigeki Tomo, ed. (Marburg: Metropolis, 1998), p. 211. This is from his Innsbruck lectures in the early 1880s. One must assume that Böhm-Bawerk stressed the same point in his lectures in Vienna.

45 See Wieser, “Der Geldwert und seine Veränderungen,” p. 240.

46 See ibid., pp. 229f.

47 See F.X. Weiss, “Die moderne Tendenz in der Lehre vom Geldwert,” Zeitschrift für Volkswirtschaft, Socialpolitik und Verwaltung 19 (1909): 532ff.

48 Wicksell relied on the same assumption. See Wicksell, Geldzins und Güterpreise, pp. 17ff.

49 Again, Wicksell’s monetary thought suffered from the same flaw. See ibid. pp. 20f., 64f.

50 Mises here quotes Friedrich von Wieser, Der natürliche Wert (Vienna: Hölder-Pichler-Tempsky, 1889) p. 46.

51 See Mises, Theory of Money and Credit, p. 119.

52 See Mises, Nationalökonomie (Geneva: Editions Union, 1940), pp. 361f.; Human Action, Scholar’s edition (Auburn, Ala.: Ludwig von Mises Institute, 1998) p. 408.

53 Similarly, in his first publication on monetary problems, he had asserted at the beginning of his exposition that the media of circulation need to be “adjusted” to the demand for money. And in the same vein, he talks about conditions for a possible lack of fiduciary media. Such a condition holds when the quantity of the means of payment lags behind the economic development. This would “certainly lead to credit restrictions and, as a consequence, symptoms of economic crises.” See Mises, “Die wirtschaftspolitischen Motive der österreichischen Valutaregulierung,” pp. 562, 572.

54 Discussing a somewhat different issue, Mises later admitted that at the time he wrote The Theory of Money and Credit he “was still too much under the influence of Mill” (Notes and Recollections, p. 60). This prevented him from decisively arguing against Böhm-Bawerk’s ideas about money-induced “frictions;” but Mill’s influence seems to have reached further than that.

55 See Nikolay Gertchev, “Dehomogenizing Mises’s Monetary Theory,” Journal of Libertarian Studies 18, no. 3 (2004): 57–90.

56 See Don Patinkin, Money, Interest, and Prices: An Integration of Monetary and Value Theory (Evanston, Ill.: Row, Peterson, and Co., 1956).

57 See Mises, Erinnerungen, p. 37. In his lectures, Böhm-Bawerk had stressed the Cantillon effects, but believed that they would “mainly” entail a higher price level. Besides they would merely affect the relationship between debtors and creditors. Böhm-Bawerk, Innsbrucker Vorlesungen über Nationalökonomie, pp. 220f.

58 Mises, Theory of Money and Credit, pp. 239–40.

59 His teacher Grünberg had analyzed the redistributive impact of inflation during the Napoleonic wars in Grünberg, Studien zur österreichischen Agrargeschichte (Leipzig: Duncker & Humblot, 1901), pp. 121ff. Mises had dealt with these cases on pp. 222ff. of the first edition of Theorie des Geldes und der Umlaufsmittel (1912). He eliminated these passages from further editions because he believed historical illustrations of the harmful effects of inflation were no longer necessary in light of recent firsthand experiences in Germany and Austria.

60 He quotes David Hume and David Ricardo. Among his contemporaries, he merely refers to Rudolf Auspitz and Richard Lieben, Untersuchun-gen über die Theorie des Preises (Leipzig: Duncker & Humblot, 1889), p. 65. Mises quotes them on pp. 240f. of his Theory of Money and Credit. Other forerunners, whom Mises did not mention, were Mill, Principles of Political Economy, bk. 3, chap. 8, § 2, p. 491; Hermann Heinrich Gossen, Entwickelung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für men-schliches Handeln (Braunschweig: Vieweg & Sohn, 1854), pp. 205f.; and John E. Cairnes, “Essay Towards A Solution of the Gold Question: The Course of the Depreciation,” Essays in Political Economy: Theoretical and Applied (London: Macmillan, [1858] 1873), pp. 53ff.

61 The expression is Mark Blaug’s. See Mark Blaug, Economic Theory in Retrospect, 4th ed. (Cambridge: Cambridge University Press, 1985), pp. 21ff.

62 See Richard Cantillon, Essay on the Nature of Commerce in General (reprint, New Brunswick, N.J.: Transaction, 2001). Similarly, Mises also revived the analysis of local price differences, which had been neglected since Richard Cantillon. See Eduard Heimann, History of Economic Doctrines: An Introduction to Economic Theory (New York: New York University Press, 1945), p. 43.

63 See in particular Irving Fisher, The Purchasing Power of Money: Its Determination and Relation to Credit, Interest, and Crises, 2nd ed. (New York: Augustus M. Kelley, [1913] 1985).

64 In contrast, Mises’s analysis might have influenced John Maynard Keynes, who recognized the great importance of Cantillon effects and advocated monetary stabilization as a strategy for social conservation. See in particular John Maynard Keynes, A Tract on Monetary Reform (London: Macmillan, 1923); see also idem, Indian Currency and Finance (London: Macmillan, 1913); The Economic Consequences of the Peace (London: Macmillan, 1920). Keynes had dismissively reviewed Mises’s book in the Economic Journal (September 1914): 417–19 in fairly vague and evasive terms. Later he confessed that “in German I can only clearly understand what I know already!” Treatise on Money (New York: Harcourt Brace, 1930), vol. 1, p. 199, footnote.

65 See Otto Heyn, Irrtümer auf dem Gebiete des Geldwesens (Berlin, 1900), pp. 30f.; idem, Die indische Währungsreform (Berlin, 1903), p. 82; W. Lexis, “Papiergeld,” Handwörterbuch der Staatswissenschaften, 3rd ed. (Jena: Gustav Fischer, 1909–1911), vol. 6, p. 989; Georg D. Knapp, Staatliche Theorie des Geldes (Leipzig, 1905), p. 208.

66 See Ludwig von Mises, “Die wirtschaftspolitischen Motive der österreichischen Valutaregulierung,” Zeitschrift für Volkswirtschaft, Sozialpolitik und Verwaltung 16 (1907), p. 565.

67 Mises, Theory of Money and Credit, p. 284.

68 Ibid.

69 Ibid., p. 207.

70 Here Mises referred to his treatment of these predecessors in the first edition of Theorie des Geldes und der Umlaufsmittel, 1st ed. (Leipzig and Munich: Duncker & Humblot, 1912), pp. 203ff.

71 Ludwig von Mises, “Die geldtheoretische Seite des Stabilisierungsproblems,” Schriften des Vereins für Sozialpolitik 164, no. 2 (Munich: Duncker & Humblot, 1923): 21f.

72 See Kurt Singer’s book review in Deutsche Wirtschaftszeitung (June 1, 1913).

73 Mises to Lederer, letter dated January 29, 1920; Mises Archive 73: 41f.

74 See Gustav Cassel, “The Present Situation of the Foreign Exchanges,” Economic Journal 26 (1916): 62–65; idem, “Abnormal Deviations in International Exchanges,” Economic Journal 28 (1918): 413–15; idem, Theoretische Sozialökonomie, 4th ed. (Leipzig: Deichert, 1927), §§ 60 and 89.

75 Mises, Notes and Recollections, p. 60.

76 At about the same time, two other members of Böhm-Bawerk’s seminar presented original business cycle theories in elaboration of the principles of the Banking School. See Rudolf Hilferding, Das Finanzkapital (Berlin: Dietz, 1947 [1910]), part 4, chaps. 17 to 19; Joseph A. Schumpeter, Theorie der wirtschaftlichen Entwicklung (Munich: Duncker & Humblot, 1911).

77 A group of French economists had developed similar ideas in the mid-1800s. Victor Bonnet argued that excessive investments in fixed capital—excessive meaning disproportionate in comparison to the investments in circulating capital—were responsible for economic crises; and Charles Coquelin had anticipated Knut Wicksell in elaborating the hypothesis that business cycles were caused by credit expansions. See Charles Coquelin, Du credit et des banques (Paris: Guillaumin, 1848); Victor Bonnet, Etudes sur la monnaie (Paris: Guillaumin, 1870). A good survey of nineteenth-century business cycle theories is in Eugen von Bergmann, Geschichte der nationalökonomischen Krisentheorien (Stuttgart: Kohlhammer, 1895).

78 In 1903, Werner Sombart had presented a “disproportionality theory” of the business cycle at a meeting of the Verein für Socialpolitik in Hamburg (Schriften des Vereins für Socialpolitik 113; Leipzig: Duncker & Humblot, 1903). Sombart argued that increased gold production had provoked a real-location of resources that was unsustainable after the gold production ceased. The ensuing crisis, which hit Germany in 1900–1902, was therefore a structural crisis that reflected the unsuitable use that had been made of the capital goods. Sombart’s theory does not take into account the problem of inter-temporal misallocation.

79 In Wieserian fashion, Wicksell defined the natural rate of interest as the rate that would come into existence under the sole influence of real (non-monetary) factors; see Wicksell, Geldzins und Güterpreise, pp. iii, 93ff. He also defined it as the rate at which the price level would remain constant (see ibid., p. 92). Both distinctions led to great confusion among later theorists, but Mises’s business cycle theory seemed to show that it was useful to make some such distinction. In Human Action he would eventually show that the relevant distinction is between the equilibrium rate of interest and the market rate. Both rates are monetary rates and can therefore coincide.

80 See ibid., pp. v-vi. Wicksell noticed that Frédéric Bastiat had made a similar point in his polemic against Proudhon. Only Bastiat had not insisted that the concomitant price increase would be over-proportional. See Frédéric Bastiat, Œuvres completes, 6th letter to Proudhon.

81 See Mises, Theorie des Geldes und der Umlaufsmittel, 2nd ed., pp. 364ff.

82 Wicksell comes closest to Mises’s discovery when he points out that a low money rate (relative to the natural rate) will incite businessmen to launch additional investment projects and even observes that the low money rate disrupts general equilibrium (see Geldzins und Güterpreise, pp. 87f., 97). But he does not see the implication: that the structure of production is set on a path that is physically impossible to complete.

83 As far as the exposition of Mises’s business-cycle theory is concerned (part 3, chap. 5, in part § 4), there are no differences between the first edition and later editions. But for a few exceptions the text is exactly the same (see 1st ed., pp. 425–36; 2nd ed., pp. 366–75); the same is true for the entire chapter 5, except for § 5 (see below). Thus from the first edition, Mises’s business-cycle theory contains the same discussion of forced savings, the reverse movement of prices, the natural rate of interest and deviations from it induced through fiduciary media, the importance of the subsistence fund, etc. as did all later editions. The difference between the first and the second edition relates to the concluding § 5 of chapter 5, where Mises discusses the significance of his own contribution to business-cycle theory.

84 See Mises, Theorie des Geldes und der Umlaufsmittel, 1st ed., p. 433; my translation.