The National Bureau of Economic Research recently published a Working Paper on purchasing power parity citing the contribution of the Late Scholastics. The abstract begins: “Originally propounded by the sixteenth-century scholars of the University of Salamanca, the concept of purchasing power parity (PPP) was revived in the interwar period in the context of the debate concerning the appropriate level at which to re-establish international exchange rate parities.” The complete paper can be found here.
Unfortunately, as Murray Rothbard points out in the Foreword to the 1981 Liberty Fund edition of Mises’ Theory of Money and Credit, “[t]he purchasing power parity theory came to England and the United States only through the flawed and diluted form propounded by the Swedish economist Gustav Cassel.” For a discussion of the School of Salamanca see School of Salamanca: Readings in Spanish Monetary Theory 1544-1605 by Marjorie Grice-Hutchinson, as well as Faith and Liberty: The Economic Thought of the Late Scholastics by Alejandro A. Chafuen.
Moreover, Ludwig von Mises discusses the theory in chapter 17, section 5 of Human Action under the heading of “Interlocal Exchange Rates.”
