Theory of Money and Fiduciary Media

0:00Well, it is a great honor to be here and to be able to present this book, The Theory of Money and Fiduciary Media. This, as Mark said, this collection of essays is actually edited by Guido Hulsman, who was the one who was responsible for the project. But since Guido could not be here, it falls to me as one of the contributors to try to say something about...

0:23It falls to me to try to say something about the book and the contributions that it hopes to make. There it is. So yeah, so ideally Guido would have been able to do this, but since he couldn't be here you're just going to have to, you won't get the handsome German, you're just going to have to settle for the extraordinarily handsome American instead. By the way, this show just goes to show you why you should never write jokes in advance, because I wrote this before I realized that I was going to be speaking at the same time as Dr. Hoppe, so I didn't mean to imply that there aren't any other attractive Germans here. As to the book, so this book, as you can see from the subtitle, this book is a celebration of the 100th anniversary of Mises's first great work, The Theory of Money and Credit, which was first published in German in 1912.

1:16The title of this volume, The Theory of Money and Fiduciary Media, might appear somewhat obscure because that title is not well known in English. But The Theory of Money and Fiduciary Media is actually the literal translation of the original German title of the book, which was shortened simply to credit for the English version. And in a sense, it's fitting that Guido brought back the original title for this centennial celebration, because this new collection helps to clarify many of the issues that Mises raised in The Theory of Money and Credit that have since become lost or perhaps confused due to these simple changes in translation or perhaps between different editions of the book. And those changes are actually the subject of the first essay in the collection, which is by Guido, where he discusses how Mises' thoughts on money evolved over the course of the different editions of The Theory of Money and Credit.

2:09But I should first say some sort of general things about this collection. This book is broadly intended for an academic audience, but I think it would also be very useful for students who have studied the basics of Austrian economics and would like to read more, and also for the interested lay person who simply wishes to further explore Austrian ideas, particularly with regard to money. In many ways, I think the collection can serve as an important companion to The Theory of Money and Credit. because it helps to explain the great originality of Mises' work and why it is so truly revolutionary in the history of economic thought. The book contains 13 essays by different economists, each discussing a different aspect of the theory of money and credit.

2:56The papers cover a fairly wide range of topics, including how the theory of money and credit first came to be written and Mises' influences in writing it, along with comparisons between Mises and his predecessors. It also explores how Mises' ideas on money and banking evolved over the course of his career. A great deal of the collection is devoted to discussing Mises' contributions that still remain overlooked, as well as the necessity for contemporary economists and policy makers to understand the theory of money and credit. And all these are in addition to explaining just many of the fundamental contributions Mises made that people are perhaps more familiar with, such as his introduction of the Austrian business cycle theory. With these topics in mind, one of the ideas the collection hopes to bring out is the extraordinary scope of the project of The Theory of Money and Credit.

3:50I think for any ordinary economist, even one of the accomplishments of this book would have been enough on which to build a career, but Mises made many such contributions. I mean, I think it would have been entirely reasonable for him to have presented, say, the outlines of the Austrian business cycle theory and just simply called it a day. But in addition to that idea, he made dozens of other path-breaking contributions as well, such as the integration of the Austrian value theory with the theory of money and the development of the regression theorem. He also developed a sophisticated typology of money. He developed new interpretations of monetary history and the history of economic thought, and of course new ways of thinking about monetary institutions, monetary policy, and of course monetary reform.

4:39All of these are discovered, are covered in some way or another in this collection, and each of them I think is vital in understanding Mises' own thinking, as well as the differences between his approach and the ideas that have been adopted by the mainstream. And that is actually yet another subject covered in the collection in a paper devoted to studying the significance of Mises' ideas in contemporary mainstream macroeconomics teaching. So these essays, they can also help us understand and appreciate how Mises' ideas compare to other Austrians, as well as many fellow travelers and even enemies of Austrian economics. And how, again, just the extraordinary scope of this project and how Mises sifted through their own work and integrated into his own, sorting through their valuable ideas and discarding the ones that he found to be misleading.

5:32And just in general, the importance of Mises in taking this first great step in developing what would become an entire system of economic doctrine. So even though Mises would only fully develop his views on economics in the decades following his first book, it's astonishing to see how many of the seeds were already planted in 1912. In addition, I should also emphasize that this collection is not simply an appreciation of Mises' book, but actually also represents ongoing original research in Austrian monetary theory and macroeconomics. Economics. And while the contributors do each attempt to to pay tribute to Mises ideas and to draw out certain strands of his thought which have not yet received attention, the essays in the collection also develop his ideas and push the boundaries of research in new directions. A couple examples of this are Nikolai Gurchev's article which focuses on the interbank market and how it functions as a limit to credit expansion, and also Philip Baggis article Contrasting the Austrian business cycle theory with a series of contemporary mainstream views of the business cycle.

6:41I suppose, though, I am in a position to speak best about my own paper. My essay looks at the theory of money and credit in comparison to the work of two contemporaries of Mises, namely Joseph Schumpeter and Rudolf Hilferding, Because as it turns out, there were not one but three important treatises on money and banking published by promising young Viennese economists about a hundred years ago, in consecutive years in fact. Hilferding's Finance Capital appeared in 1910, Schumpeter's famous Theory of Economic Development was from 1911, and of course Mises' book in 1912. And this is an interesting moment in my opinion in the history of economic thought because each of these economists was a kind of young representative of a different school of thought.

7:29Mises naturally was continuing the Austrian tradition founded by Menger and especially Boehm-Bawerk. And Schumpeter was developing his own sort of personal version of the Vorazian system. And then lastly, Rudolf Hilferding I think is probably the least well-known, but he was also an interesting character. He was a member of what's called the Austro-Marxist School, which is sort of an odd branch of Marxism centered around Vienna in the two or three decades after the turn of the century. But in any case, Hilferding was a sort of a theoretical successor to Marx and was one of the leading lights of the young Marxists. But the result of each of their individual research agendas was a different theory of money and banking and the role that both of those play in transforming the economy.

8:22Whether that means transformation through growth or cartelization of industry or business cycles or the emergence of socialism or what have you, these were topics that they all addressed. And an important secondary theme much related to the idea of this transformation, This transformative power of money and banking is the role that entrepreneurs play in this process. In fact, as far as Schumpeter's book is concerned, the entrepreneur is almost the only thing that people remember about it. But nevertheless, each of these books was focused intensely on monetary problems and represented advances in their own individual ways. And what I do in my essay is to try to contrast these different ideas and explain some of the origins of the disputes between these authors. Because in addition to setting out original ideas, a lot of what each of them had to say turned out to be a further development of some disputes that had started in the 19th century in Britain.

9:19In particular, there were two major groups that became known as the currency school and the banking school that engaged in a long debate about monetary theory and policy in Britain, particularly with regard to the Bank of England. These two groups ended up exercising a powerful influence on monetary thinking for quite some time, one example of which are these treatises from just after the turn of the century. I should say also that in addition to the currency and banking schools, there was also a school devoted to free banking, and that has received some attention in Austrian circles as well. I deal mostly with the first two groups, but the problems of monetary policy and especially issues concerning fiduciary media and Mises' thoughts on fractional reserves and how those ideas relate to free banking, those are also very important parts of this British heritage in Mises' monetary writings.

10:22and those issues are discussed in more detail by Joseph Salerno in his essay in this collection in which he talks about Mises' position in the history of thought as a currency school free banker although there's never actually been any controversy about fractional reserves so I don't know why Salerno devotes so much space to them but we'll have to forgive him but in any case what these essays try to show is that Mises for all his originality also considered himself, was also very humble in a sense because he considered himself simply to be the most recent member in a monetary tradition that had its roots mostly in the 19th century British currency school. So I think I'm pretty much out of time. So just to close, I would just like to say again that although this book is a celebration of one of the great treatises in economics, It is not simply a retrospective, but shows quite well, in my opinion, that we still have a great deal to learn from reading the masters and that there is enormous research potential in the classics.

11:27I think this collection hopes to show that it is through the serious study and appreciation of the work and the brilliance of economists like Mises that we can truly look to some sort of a future in Austrian economics. and Economics. So, thank you.