The Value of MoneyAnderson, Benjamin M. (Benjamin McAlester)
General
The Value of Money
Anderson, Benjamin M. (Benjamin McAlester)
Money
Criticism of this theory is almost superfluous. There are elements in
Wieser's discussion, not here presented, which have very considerable
importance, and which will be presented in a later chapter when the
criticism of the quantity theory is taken up. Wieser deals some heavy
blows to the quantity theory. But his constructive doctrine presents the
clearest possible case of the Austrian circle. The value of money
depends, not on its subjective use-value, its own marginal utility--it
has none. The value of money depends on its subjective value in
exchange, the marginal utility of the goods which are exchanged for it.
But these depend on prices. And prices depend, in part, on the value of
money itself! This circle, present in every form of the Austrian theory
which seeks a causal explanation of value and prices by means of
marginal utility,[73] though often less obviously present, is here quite
glaring. The distinction between volume of money income and quantity of
money is, on the other hand, an important one, and will be emphasized
when the quantity theory is taken up.[74] One further point in Wieser's
doctrine calls for comment. It is strange indeed to find an Austrian
seeing in a rise in money costs a _cause_ of a general rise in prices.
The Austrian doctrine is rather that rising money costs are
_reflections_ of rising general prices. Wieser's doctrine that the
extension of the money economy to rural regions, compelling the farmer
to reckon all his costs in money and so to raise his prices, has been
adequately criticised by von Mises, who points out that Wieser sees only
half the phenomenon; that eggs and butter are, indeed, higher in price
in the rural region when it comes into contact with the city, but that
they are correspondingly lower in the city from the same cause. On the
other hand, the doctrine of costs is not the whole point in Wieser's
notion of the extension of the money economy as a cause of higher
prices, and we shall deal with the doctrine again, in a different
connection.
By devitalizing the marginal utility theory, by stating it in such a way
that it makes no causal assertions, and in such a way that it leaves the
real value problem untouched, it is possible to free it from the circle
just pointed out. Schumpeter does so state it.
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