Preface

When “Joe the Plumber”—a small business owner who became a hero among conservatives when he challenged candidate Barack Obama’s proposed tax hikes in the 2008 presidential campaign—compiled a list of Christmas book recommendations for The American Spectator, he included The Theory of Money and Credit, saying it was “important reading for these troubled times.” Although Austrians were glad that someone was bringing attention to Mises’s classic work, many were understandably skeptical. After all, The Theory of Money and Credit is a hard book to read.

The present study guide seeks to change that common impression. In preparing it, I have found that Mises’s work can be difficult at times, but there is a definite method behind it. In other words, if the reader will put in the effort to work through the book methodically, he or she will see that Mises systematically builds his argument from one chapter to the next. With the help of this study guide, even the layperson will be able to unlock the amazing insights contained in this tome, first published a century ago.

One of the most enjoyable surprises for me was to discover just how impressive an economist Ludwig von Mises really was, even at a relatively young age. In this single work, Mises integrated (what we now call) microeconomics with macroeconomics. He successfully applied subjectivist, marginal utility theory to the case of money—a task that had eluded earlier theorists in the Austrian tradition. As if that weren’t enough, Mises gave a systematic explanation of the boom-bust cycle, blaming it on the artificial expansion of bank credit and the corresponding reduction of the money rate of interest below the “natural” rate.

These accomplishments alone would have earned Mises an important seat in the history of economic thought. Yet upon my most recent reading, I realized that Mises showcases much more of his talent. For one thing, he displays a thorough command of the relevant literature, not only in pure economic theory but also in applied topics such as money and banking. He also shows a practical understanding of actual financial markets, which often behave differently from the depiction in academic writings. In the final section of the book (written after the original release), Mises offers very wise policy recommendations for returning to sound money.

The format of the study guide follows the 1953 edition of The Theory of Money and Credit published by the Mises Institute. I follow Mises’s work very closely, down to the individual section headings. Each chapter contains an overall summary (except for very short chapters), followed by a detailed outline. Then I include a section on either “Notable Contributions” or “Technical Notes.” There is also a list of new terms for each chapter (with a full list included in the back as a glossary) and finally a list of five study questions to ensure that the reader is grasping the essential points of each chapter.

In order to modernize the style, hyphens have been dropped, and in a few instances, spelling has been updated. However, no content has been altered from the English translation as published by the Mises Institute.

I hope that this study guide eases the understandable “intimidation factor” and allows a new generation of readers to experience the wealth of wisdom contained in Mises’s first major work. As an insightful plumber (and layperson) has remarked, it is important reading for these troubled times.

Robert P. Murphy

Nashville, Tennessee

July, 2011