What matters is that a man acquires a good not in order to consume it or to use it in production, but in order to give it away in a further act of exchange. Such conduct makes a good a medium of exchange. FULL ARTICLE by Ludwig von Mises
Source link: http://archive.mises.org/10811/carl-mengers-theory-of-the-origin-of-money/
Carl Menger’s Theory of the Origin of Money
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No comments? This is one of those basic things that really need to be understood before moving on to more advanced or complex economics issues. What is money? Where did the concept of money come from? This article helps tremendously with such a basic concept of economics.
Michael A. Clem
“No comments? This is one of those basic things that really need to be understood before moving on to more advanced or complex economics issues. What is money? Where did the concept of money come from? This article helps tremendously with such a basic concept of economics.”
If I understood this article correctly, Mises is saying that from an economic point of view, a knowledge of “where did the concept of money come from” is of no concern whatsoever. Am I mistaken in this interpretation?
As far as the statement that indirect exchange and money were established by decree or by covenant is meant to be an account of historical events, it is the task of historians to expose its falsity.
He agrees that it is false, but that it is unimportant from a catallactic (economic) point of view. But much of Austrian economics is dealing with government or political interference in the economy, and I think where the concept of money came from is related to that. If people realize that money arose spontaneously in society through increased indirect trade, and not because a state or states decreed money into existence, then government’s reasons for controlling money become much less justified or reasonable.
Furthermore, just to make the connection even tighter, it seems to me that the theory on the origin of money strongly indicates that a state or government could not have decreed the creation of the concept–they could only come along after money had already been created and then take control of it.
I see your point, but I don’t think that one needs to think that a state invented money in order to think that a state should control it. It is enough to view the damage done by business cycles, and think that state control can mitigate that damage.
I also don’t think that business cycles can only be caused by governments, although they certainly can do so, especially if they are enamored of Keynesian economics. I recently read a history book saying that the panic following Jackson and Biddle’s Bank War was not in fact caused (mainly) by the bank war, but by a silver mine in Mexico that injected a large amount of specie into the economy via the Santa Fe Trail, and then played out, causing a contraction. I’m not sure that this is true, but I can see how such things *could* happen even in a purely free market.
Sure, in a free market, there would still be fluctuations of the money supply–there’s only a tendency towards equilibrium, it’s never actually reached. But such fluctuations would generally be much smaller and easier to handle than the booms and busts that government manipulation of money has caused.
Furthermore, what IS the justification for government control of money production? It’s not like it’s even related to the protection of rights as police, military, or courts are. Money is a medium of exchange, a fundamental of trade.
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