The Value of MoneyAnderson, Benjamin M. (Benjamin McAlester)
General
The Value of Money
Anderson, Benjamin M. (Benjamin McAlester)
Money
Such a picture, I submit, avoids the circle which is presented in all
other formulations of the Austrian theory of value. I wish, however, to
indicate its limitations as a theory of value, and the impossibility of
any application of it to the problem of the value of money. (1) Its data
are inaccessible: nobody could possibly know all the utility-curves and
all the time-preference curves (and disutility of labor-curves, etc.) of
all goods to all individuals in, say, the United States. To explain
market ratios by utility-curves is a case of _ignotum per ignotius_, so
far as practical application is concerned. Moreover, the scheme is so
difficult to visualize that it is useless as a tool of thought--as one
will find who tries to think it through, without the aid of higher
mathematics, for ten goods, and ten persons, with unequal distribution
of wealth, and different utility curves, time-preference curves, and
disutility-curves for each kind of good to each individual. (2) The
scheme must assume smooth curves and infinitesimal increments in
consumption, which is a fiction so far as the individual psychology is
concerned. Without this assumption, the point-for-point correspondence
between individual and market ratios does not exist. It is only in
social-value curves, or in demand-curves in the big market (which are
social-value curves, expressed in money),[79] that you have, as a matter
of fact, the right to smooth out your curves. (3) The theory must assume
the frictionless static state, in which marginal adjustments are
perfectly accomplished, and equilibrium really reached. Without this
assumption, again the point-for-point inverse correspondence of market
ratios and individual ratios fails. But this makes it quite impossible
to apply the doctrine to any functional theory of the value of money, or
to bring money in any realistic way into the scheme. As will be shown
more fully in later chapters, money functions in bringing about just
the absence of friction which static theory assumes. That is what money
is _for_. The functional theory of money, therefore, cannot abstract
from friction and dynamic change.[80] It is, of course, possible, on
this scheme to pick out any one of the goods in the system, say the
1-1000th part of a horse, call it the "money-unit," and determine a set
of money-prices. These "money-prices" are already given in the scheme in
the ratios between the abstract numbers of this unit and the abstract
numbers of the units of all other goods. But this is meaningless, so far
as a theory of money is concerned. It abstracts entirely from the
_differences_ in _salability_[81] of goods, on which the theory of money
must rest. It gives us no clue to that part of the value of the
money-article which comes from its money-functions.
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