Aug
03

The Significance of the Austrian School and Ludwig von Mises

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This entry is part 1 of 1 in the series Essentials of Austrian Economics

This is the first essay in LibertarianChristians.com series “Essentials of Austrian Economics.” Throughout this series, we will explore important economic concepts and why they are crucial to an understanding of a free society.

MisesSuitMost people are unfamiliar with Austrian School of Economics and the work of Ludwig von Mises, Murray Rothbard, and Friedrich Hayek, but thanks to the efforts of Ron Paul, the Mises Institute, and many others the ideas are becoming much more well known.

Austrian economics is more than just a sub-theory within the field of economics – it is an different way of thinking about economic science altogether. Most of modern economics falls into either neoclassical or Keynesian economics, which tend to focus on mathematical modeling and statistical analysis. Austrian economics, in constrast, claims that economic activity is too complex and varied to be reasonably described through mathematical models. This is not to say that mathematics and statistics are bad altogether when doing economics, but such tools have limitations that do not permit them to access the core of economic theory.

Instead of statistics and numerical models, Austrian economics begins with basic axioms of human action, a study known as praxeology. The starting point that humans utilize means to achieve desired ends begins the elucidation of economic law. Ludwig von Mises defined human action in this way:

“Human action is purposeful behavior. Or we may say: Action is will put into operation and transformed into an agency, is aiming at ends and goals, is the ego’s meaningful response to stimuli and to the conditions of its environment, is a person’s conscious adjustment to the state of the universe that determines his life. Such paraphrases may clarify the definition given and prevent possible misinterpretations. But the definition itself is adequate and does not need complement of commentary.” [from Human Action]

The Austrian school also follows the principle of methodological individualism, that social phenomena can only be understood via the study of individual agents. In other words, only individuals act, not society. A society is formed by individuals, and has no special philosophical position that supersedes the individuals within it. Note that methodological individualism is not social atomism. Communities and groups are important and good. However, we cannot divorce the understanding of community from the understanding of individuals.

The Austrian school can trace an intellectual heritage back to the Scholastics of Salamanca in Spain (following after Thomas Aquinas). However, the Austrian school primarily derives its name based upon the work of three great thinkers from Austria, including Carl Menger, Eugen von Boehm-Bawerk, and especially Ludwig von Mises. Menger inspired the “marginalist revolution,” which proposed that economic value was subjective to the individual. Boehm-Bawerk built upon Menger’s ideas and applied them to theories of prices, capital, and interest. Ludwig von Mises, student of Boehm-Bawerk, synthesized their prior work and greatly expanded upon it in monetary theory, business cycle theory, and praxeology. His three major works (The Theory of Money and Credit, Socialism, and Human Action) are considered essential reading amongst all Austrian economists today. Each of them also stood firmly in the classical liberal tradition, which promoted individual liberty and opposed government intervention in person and property.

Ludwig von Mises in particular has had the greatest impact in the Austrian school, primarily because of his incredible body of work that pushed the field of economics forward despite the near impossible odds he faced. The political climate when Mises first began his professional work was incredibly opporessive. In the first half of the 20th century, socialism permeated nearly all of western Europe and America. Yet, economic theorists and politicians supporting socialism neglected explaining exactly how a socialist economy would work. Throughout his work, Mises definitively showed that socialism provided no method of economic calculation for producing capital goods and could not help but fail. Considering that the great socialist regime of his day – the Soviet Union – fell primarily due to internal economic concerns, it is no wonder that many people see Mises as an economic prophet.

How is it possible that philosophy and economics students across the world are unfamiliar with Mises and his work? Upon Mises’ death, even the New York Times, known for their leftist leanings, called him one of the foremost (not to mention formidable) economists of the 20th century. Perhaps the reason that few people know of him is that his ideas are dangerous to the ruling elite in government and academia and hence he remains both suppressed and unknown. Yet, it is still strange considering that he was a great champion of classical liberalism, a school of thought that has its root in the work of John Locke, Adam Smith, Turgot, Jefferson, Madison, Alexis de Tocqueville, and many others.

Mises belongs in the order of intellectuals that includes Galileo, Beethoven, Madison, Jefferson, and Bach, because he not only possessed an irrepressible intellect, he also lived a life that people admired. He pursued truth, opposed tyranny, and pushed forward the field of economic science like few before him.

For further reading: What is Austrian Economics? and The Last Knight of Liberalism.

Norman Horn

Norman is the founder and editor of LibertarianChristians.com. He holds a PhD in Chemical Engineering from the University of Texas at Austin and a Master of Arts in Theological Studies from the Austin Graduate School of Theology.

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  • Shane Coley

    I am totally, thoroughly and unequivocally opposed to top down planning by men, and I believe that the institution of government is unlawful, unjust and destructive. So, your thinking that I somehow favor government defining money or planning things is, again, a gross error in understanding.

    Your wrote: “There is no confusion as long as the payment is made clear.”

    What a foolish statement to make in the context you are making it! The payment is made clear when the translator faithfully translates the word written by the author. Once again, I am simply saying that if the writer in antiquity wrote on the page “barley” in his language, then the translator should write “barley” in the target language. You, on the other hand, suggest that the word barley could be translated money “as long as the payment is made clear”, but when you replace the word barley with the word money, just the opposite happens. Now the reader is not clear as to what was traded.

    Keep in mind that to you, everything is money. You have stated that your are satisfied in translation to replace a specific numeral with the word “some”, and that you are satisfied in translation to replace a specific word denoting a particular commodity with the word “money”. These are very ambiguous things. And for what purpose?

    People should use things of value in exchange. It is very simple. If people want to use coins, so be it, as long as government has nothing to do with it.

    “Money is a system employed in indirect exchange between two parties, plus at least a third party who controls the properties of the system over time.”

    The difference between government money and free market money is that the government can force people to use the coins and to trade them based on face value, rather than intrinsic value. Consider the coinage acts of 1792 and 1853.

    A free market producer of coins could debase the coins, but the market would reject these. Consider Templeton Reid and his short time as a coin producer. When the market discovered his assay was not precisely correct, no one would use his coins. End of story.

    But when government debases, they force people to continue using the coins at face value. There is no opportunity to reject the coin.

    In both cases there is a third party who controls the properties of the system over time. However, in a free market, this product can be rejected just like any other poor quality product. When government is in control, the product cannot be rejected.

    You will notice that there have been severe penalties for people who tried to compete with government in producing coins or other forms of money.

    But the same cannot be said about about people producing cattle, grain or precious metals. Once again, the dividing line between commodities used in indirect exchange vis-a-vis money is the third party to the transaction.

    The free market keeps the coin producer honest. Not so with government.

    People used commodities in indirect exchange – a wonderful, effective, useful thing – for thousands of years. We have been trained to think that the thing traded was money because ancient texts have had the word money shoe-horned in, as though it was a term in those ancient languages. It was not. It is a 700 year old term. The word which has been most frequently over-written is silver, precise to the atom.

    One could say something like, “silver was used in those days like money is used today”, which I would follow with a question. Who was the third party? The answer is that there was no third party, which means the wealth transfer component, which is the very purpose of coercively controlled money, is absent. It was simply silver used in trade, as plainly written by the writer of the ancient text.

    Again I ask, why do you demand that silver, barley, cattle, etc. be called money?

    We agree these kinds of things were used effectively in indirect exchange. We also agree that the the words which are translated money also mean silver. Thus we agree that the ancient word in question meant silver. We disagree that the ancient word for silver also meant money, which, by the way, we agree was a non-existent term at the time. You say translating a precise word to an imprecise word is just fine. I say, faithfully translate ancient words for silver as silver. No meaning is lost. There is no confusion. Silver is silver. Plain and simple.

    If you have something else to say about it as an opinion thereafter, fine. But start with what was written. The trouble is that you are basing much of your thinking on incorrect translations of what was written. Hence you begin down the path of circular reasoning, without even knowing it.

    I advocate for sophisticated systems of honest exchange – a free market in money products, like coins or other things of value.

    By the way, I am enjoying the exchange. I wish I knew how to better convey my thoughts. As I said early on, we agree on many things. But the issue of what money is and isn’t is critical and is worth getting right.

    I suppose this may be a fitting question. If you set aside all the claims made about ancient times and begin your thinking with a clean slate, would you reach the same conclusions that others have reached? To answer the question you would have to forget all the things you know about the ancient times except just what the source documents and artifacts would tell you. Further, imagine that in your study you draw your conclusions based on what was known in the decade immediately following the events in question.

    Even if earlier historians wanted to say that silver was money, there was no way they could have done so in 1000 AD, even though it was 3000 years beyond 2000 BC, at which time we have records of silver used in indirect exchange.

    Not until after 1300 AD could the term money be superimposed over the term silver. What would the translation of an ancient text containing silver look like in 1000 AD?

  • Vangel

    “I am totally, thoroughly and unequivocally opposed to top down planning by men, and I believe that the institution of government is unlawful, unjust and destructive. So, your thinking that I somehow favor government defining money or planning things is, again, a gross error in understanding.”

    Yet you think that a medium of exchange does not qualify until some government recognizes it as a valid currency.

    “What a foolish statement to make in the context you are making it! The payment is made clear when the translator faithfully translates the word written by the author.”

    We need to stop playing games with word. When a monetary commodity is used as payment to facilitate indirect trade it is money whether that commodity is a given weight of silver, barley, a cow, sea shells, or a promissory note that is backed by corn, wheat, or wine.

    “Keep in mind that to you, everything is money.”

    I did not say that. I said that many things can be used as the monetary media of exchange. There is a huge difference.

    “People should use things of value in exchange. It is very simple. If people want to use coins, so be it, as long as government has nothing to do with it.”

    I agree. People were using privately minted coins for centuries because they did not trust the government to issue honest money. But as you said, they could use many things as the medium of exchange. If that medium becomes widely circulating it becomes money.

    “The difference between government money and free market money is that the government can force people to use the coins and to trade them based on face value, rather than intrinsic value. Consider the coinage acts of 1792 and 1853.”

    The face value is meaningless because the money can lose purchasing power. Coins are usually better than paper because the metal does have some intrinsic value.

    “A free market producer of coins could debase the coins, but the market would reject these. Consider Templeton Reid and his short time as a coin producer. When the market discovered his assay was not precisely correct, no one would use his coins. End of story.”

    Correct. The market is much better at figuring out value than government edict.

    “But when government debases, they force people to continue using the coins at face value. There is no opportunity to reject the coin.”

    You are confused. The fact that the face markings do not change is meaningless because value is actually subjective. What used to take $20 yesterday might require $20,000 to purchase today. The fact that the $20 note did not change does not mean that you won’t have to come up with 1,000 of them to make the new purchase.

    “In both cases there is a third party who controls the properties of the system over time. However, in a free market, this product can be rejected just like any other poor quality product. When government is in control, the product cannot be rejected.”

    Sure it can. As I wrote before, value is subjective and fiat money depends on the faith of market players. When faith is lost the money dies.

    “You will notice that there have been severe penalties for people who tried to compete with government in producing coins or other forms of money.”

    Of course. The thieves that run the government hate competition.

    “But the same cannot be said about about people producing cattle, grain or precious metals. Once again, the dividing line between commodities used in indirect exchange vis-a-vis money is the third party to the transaction”

    But cattle, grain, or gold can also be used as money. In fact, they have been throughout history.

    “People used commodities in indirect exchange – a wonderful, effective, useful thing – for thousands of years. We have been trained to think that the thing traded was money because ancient texts have had the word money shoe-horned in, as though it was a term in those ancient languages. It was not. It is a 700 year old term. The word which has been most frequently over-written is silver, precise to the atom.”

    You are arguing semantics again. When something is used as money it is money. If it walks like a duck, quacks like a duck,….

    “One could say something like, “silver was used in those days like money is used today”, which I would follow with a question. Who was the third party? The answer is that there was no third party, which means the wealth transfer component, which is the very purpose of coercively controlled money, is absent. It was simply silver used in trade, as plainly written by the writer of the ancient text.”

    You don’t need a third party. If Joe buys Bob’s eggs for two grains of silver or a few bushels of rice you don’t need a third party. There are only two parties that agree to a transaction and the means of payment. Joe may be a simple merchant who does not want to use the eggs and Bob may not have use for the rice except as a monetary media. I have no clue why this concept seems difficult for you to grasp.

    “Again I ask, why do you demand that silver, barley, cattle, etc. be called money?”

    I don’t demand anything. All I wrote is that if it is used as money it is perfectly all right to call it money.

    “We agree these kinds of things were used effectively in indirect exchange. We also agree that the the words which are translated money also mean silver. Thus we agree that the ancient word in question meant silver. We disagree that the ancient word for silver also meant money, which, by the way, we agree was a non-existent term at the time. You say translating a precise word to an imprecise word is just fine. I say, faithfully translate ancient words for silver as silver. No meaning is lost. There is no confusion. Silver is silver. Plain and simple.”

    And money is money. When you use silver to make payments why isn’t silver money?

    “If you have something else to say about it as an opinion thereafter, fine. But start with what was written. The trouble is that you are basing much of your thinking on incorrect translations of what was written. Hence you begin down the path of circular reasoning, without even knowing it.”

    I think that you are just getting confused. What I am saying is (or should have been) consistent. If something is used as a circulating monetary media it is money. The fact that a liberal is defined as someone who favours big government and welfare programs does not mean that Liberals used to oppose them not all that long ago. I think that you need to read up on your Orwell again.

    “I advocate for sophisticated systems of honest exchange – a free market in money products, like coins or other things of value.”

    Sophisticated? What does that mean? The use of gold and silver to facilitate trade has gone on for thousands of years and many of the most complex instruments had their origins hundreds of years ago. Let the market choose what it will and let us stop with adjectives such as sophisticated. I actually am grateful for this discussion because you have made me appreciate Max Stirner’s augments much more than I used to. It looks as I am going to have to hit the books again.

    “By the way, I am enjoying the exchange. I wish I knew how to better convey my thoughts. As I said early on, we agree on many things. But the issue of what money is and isn’t is critical and is worth getting right.”

    I think that you get hung up on the language and a lot of what are ultimately empty concepts. I think that we simply need to see what happens and describe it clearly. As I wrote before, as far as I am concerned if something is chosen as a monetary media by many market participants and is widely circulating then it is money. I have yet to see an argument that convincingly makes the case that such a circulating monetary media cannot be called money. It is getting late and I am somewhat cranky so I will end this now. Our differences are actually small in many regards but I still think that the way we approach things are far apart.

  • Vangel

    “I suppose this may be a fitting question. If you set aside all the claims made about ancient times and begin your thinking with a clean slate, would you reach the same conclusions that others have reached?”

    I really don’t know what you mean. It is clear to me that Menger, Mises, and Rothbard were right; to figure out how a commodity becomes a medium of exchange we need to explain how it is valued because it serves as a medium of exchange. I suggest that you take a look at Man, Economy & State to get the argument because it is much better than anything that I can come up with. The free ePub copy of the book can be downloaded from the link below. Look at chapter 4 and read the part on the marginal utility of money and regression. (I think that pages 260 to 290 or so cover most of what you need.)

    http://tinyurl.com/l4ajbtq

    “To answer the question you would have to forget all the things you know about the ancient times except just what the source documents and artifacts would tell you. Further, imagine that in your study you draw your conclusions based on what was known in the decade immediately following the events in question.”

    It is not that simple. We have to figure out how money acquires its value as a medium of exchange and on that front the regression theory is pretty good. We have to begin not with history but with sound premises and a proper logical structures. While you can get the argument from many sources I prefer Rothbard because he is such a clear thinker and writer. While I do not agree with everything it is clear that he knew his stuff and will be much better at this than the vast majority of economists.

  • Shane Coley

    Vangel, I have been immersed in a project.

    I have had a hard cover print edition of Man, Economy & State in hand for years and am quite familiar with Rothbard’s excellent work. I also have print editions of his series Conceived in Liberty, and other works as well. I have given away hundreds of copies of The Law and hundreds of copies of Penny Candy. I have also given away many copies of What Has Government Done To Our Money and other books.

    So thank you for the reading list, but my arguments still stand in that light.

    I understand why you cannot see what is being said, as evidenced by this kind of thinking: You stated clearly that two numbers (like 5 and 15) and “some” are equivalent terms in translation. You have said it is acceptable for a translator to see “He traded 5 cows for 15 sheep” and then translate that to “He traded some cows for some sheep.” With that kind of thinking you have no regard for logic or precision in your analysis. You say one thing, then do another.

    You are also unwilling to answer direct questions, which is expected with that kind of thinking. Ambiguity is necessary to support your arguments.

    In terms of my personal conjecture, I suspect that Mises and Rothbard were so focused on proving that government did not create money, that they pressed the regression analysis one step too far. Whatever else these fine scholars are capable of, they are not capable of making the illogical logical. Nor is anyone else… They are correct that the market produced the things which became the ingredients in money. Those having sufficient power, i.e. rulers, governments, and bankers, then used these ingredients as starting points for coins around 600 BC, which eventually came to be known as money around 1300 AD. The term money has been around about three times longer than the United States – the country that people in Europe mock for its youth.

    It is clear that the worship of the idea of money, and perhaps the Austrian School, is leading the discussion and thought for you and many others. However, using the tight constraints that you say must be used, like sound premises and proper logical structures, there is no way to place money on the scene for use in translation of ancient texts which were written before the term existed. Neither can one justify its use as a replacement for a precise term in translation, given that money is an imprecise term. Neither can one justify the need for the term in the ancient text, given that the people who were actually living out the relationships and actions which are written about, did so without the use of the term money.

    If we purge the non-existent-at-the-time term money from the ancient texts, our field of view changes a bit. If we read the texts as they were written, then we see that Bible scholars and other translators of ancient texts have smuggled in bad assumptions when stuffing the term money in text where it does not belong. This then leads to certain beliefs and teaching in theological institutes and studies of ancient texts in Universities. Certain ideas take root, from a false seed. Many of those false ideas are precisely what sites like this are fighting against.

    So my point and challenge is that we should be rigorously precise, dropping preconceived notions and permitting the great thinkers like Rothbard to make their case in that light, not in the radiant glow of economic sainthood.

    BTW, your belief that, for example, 5=15=some has prevented us from delving into many other powerful proofs.

  • Shane Coley

    Since these things have already been covered in our , conversation, and you persist in your confusion and contradictory statements, I’ll only respond to a couple of points.

    You wrote: “Yet you think that a medium of exchange does not qualify until some government recognizes it as a valid currency.”

    Your statement above is false and illustrates that you do not understand my position or thinking.

    You wrote: “You are arguing semantics again. When something is used as money it is money. If it walks like a duck, quacks like a duck,….”

    Ok then, let’s apply that thinking to an ancient text which records events in 2100 BC, about 1500 years before the first coins and 3300 years before the term money existed.

    In other words, using the term money in such a text would be like trying to stick the word “google” in an article written in 1997, when describing a person doing a web search.

    Consider, for the sake of argument, that the text employs the ancient language term for silver, as evidenced by many proofs, not the least of which being that money did not exist as a term at the time. For the English reader, since the ancient term is silver, translate the ancient term using the English term silver.

    To be clear, in this case silver is the duck.

  • Vangel

    Sorry Shane but you are still not understanding my points.

    It is a fact that commodities have been used as money throughout history. In fact, it is fiat currencies that are the outlier and exception, not gold, silver, cattle, beaver pelts, etc.

    And unless you are one of those that buy into the Whig theory of history you should not immediately assume that fiat currencies are a sign of advancement and progress, particularly when you look around and see how inflation has devastated savers and enabled massive transfers of wealth from them to the financial system and individuals/corporations that take advantage of the welfare state programs that progressive governments have enacted over the decades.

    It is a fact that people used monetary commodities to facilitate non-barter trade so I have no problem when translators use the word money to describe what was exchanged. I think that you are hang up on details that have little to do with the essentials of this argument. And that is that you do not need to have government issued paper, coins, or credit to have money.

  • Shane Coley

    Your confusion and misunderstanding persist. You continue arguing against positions I do not hold.

  • Vangel

    “BTW, your belief that, for example, 5=15=some has prevented us from delving into many other powerful proofs.”

    Let me be clear here. When you write 5=15 you are clearly referring to a mathematical statement that is false. But that is very different than saying that 5 apples cannot be valued equally to 15 oranges by two parties of a transaction. The simple fact is that value is subjective and that when people engage in trade they do so by making choices. If I value my 5 apples less than your 15 oranges I agree to make the trade. If you value my 5 apples more than your 15 oranges you agree to make the trade. Since we both agree the trade happens. But note that there is nothing ‘equal’ about it because we both preferred what we received for what we gave up.

    I suggest that you go back and read your Mises and Rothbard but that you pay closer attention to the logic and the actual arguments being made. I fear that you have spent so much time on a few peripheral details that you miss their point.

  • Shane Coley

    Again, you are confused, even by your own statements. You said that that using the word “some” in place of both 5 and 15 was acceptable when doing a translation of a text.

    It therefore follows logically from your statements that 5=15=some.

    This has zero to do with valuations of various goods or services. That is a totally separate issue.

  • Vangel

    “In terms of my personal conjecture, I suspect that Mises and Rothbard were so focused on proving that government did not create money, that they pressed the regression analysis one step too far.”

    Rothbard and Mises were far more familiar with monetary history than you are. As long as their production met certain standards coins from any source were a perfectly acceptable form of money for the purpose of trade. Americans accepted thalers, Spanish milled dollars, and all kinds of other foreign coins up until 1857 when Congress prohibited their use. The value of those coins was based on weight, not which ‘government’ or private mint issued them. If a particular type of coin has stuck using a higher standard than the rest it tended to trade at a premium to their metal content. Ones that were not as uniform and dependable traded at a discount to their metal content.

    The fact is that government did not create and is not necessary for the creation of money. In fact, governments hate competition so they go after all privately issued or foreign money, which is why they shut down private mints and why they pass legal tender laws. To see where you go wrong take a look at the Bitcoin actions in the past few weeks.

  • Shane Coley

    Once again, your statements are completely off-base with regard to my claims and views. You do not understand my positions – at all. You do not follow. You are arguing against points and claims that I do not hold.

    Stated another way, your response above has no place in this dialog. You have views, I have views and then there are the views you think I hold, which I have repeatedly stated I do not hold. You might as well be picking random subjects to write about.

  • Vangel

    “In other words, using the term money in such a text would be like trying to stick the word “google” in an article written in 1997, when describing a person doing a web search.”

    Not at all. Google has a specific meaning that is not applicable to the situation. But the word ‘money’ is applicable because money is simply a medium that can be exchanged for goods and services and is used as a measure of their values on the market. In your own country there were more than a dozen different commodities that could be used as money to pay taxes. In his great book, The History of Money and Banking in the United States, Rothbard points out that:

    “In the sparsely settled American colonies, money, as it always does, arose in the market as a useful and scarce commodity and began to serve as a general medium of exchange. Thus, beaver fur and wampum were used as money in the north for exchanges with the Indians, and fish and corn also served as money. Rice was used as money in South Carolina, and the most widespread use of commodity money was tobacco, which served as money in Virginia. The pound-of-tobacco was the currency unit in Virginia, with warehouse receipts in tobacco circulating as money backed 100 percent by the tobacco in the warehouse.”

    Got that? Commodities were used as money and served the function of money, just as silver did in the ancient world along with rice, barley, wheat, and other scarce commodities.

    I suggest that your biggest problem is your definition of money. Since that is wrong your entire argument is also wrong no matter how smart you are and now patiently you build your logical structures.

  • Vangel

    “It therefore follows logically from your statements that 5=15=some.”

    You are missing the point as usual. Your problem is that you are confused about the nature of money and think that it comes from government. But when you look at history you find that money is created by the market to fill a need and that the market does a pretty good job of it. As I pointed out in previous statements, it is clear that the American colonies accepted different scarce commodities as money media of exchange. In some colonies wampum and beaver pelts were circulating as money while tobacco, dried fish, rice or corn were money in other colonies.

    The exchange values are always changing depending on a number of factors that influence the subjective preferences of the transacting parties. Market value is not determined by some fixed, objective feature but is subjective.

  • Vangel

    “You do not understand my positions – at all. You do not follow. You are arguing against points and claims that I do not hold.”

    You are claiming that when some ancient exchanged 10 rings of silver for a slave he was not using money even though silver was a circulating monetary media. You talk about money as if it comes from a government when history shows that is not the case. What part of that did I get wrong? And if you think that silver rings are money then why all the comments that are to the contrary?

    I do not doubt your sincerity. I simply see contradictions and error where you imagine a sound position.

  • Shane Coley

    You are correct the argument turns on the definition of money. As we have already covered repeatedly, for you everything is money, which means the definition is meaningless.

    The things described above by Rothbard are true, in the sense that these things arose in the market, but it is illogical to call them money.

    But even *if* one granted the label “money” in this case and these times which post-dated the origination of the term money, it is remains an error to translate ancient texts using the term money.

    It is foolish to argue that the precise word silver should be translated to the imprecise word money, when translating any text. This is even more true when translating a text that was written before the term money existed.

    What would you say if a person found an article from 1997 which in part said: “He searched for references to the election results on the internet.” and then translated the same text in the article: “He googled references to the election results on the internet.”

    Based on your arguments to date, this would be perfectly acceptable to you.

    I know the argument is too simple and direct for you, but it is plainly true.

  • Shane Coley

    Vangel, how many times do I have to tell you that you are wrong regarding my views on this topic? Again, you may as well be writing at random. What you are saying to me here involves things about which we agree, and what you are suggesting I think, I do not think.

    In addition, the simple question that I asked earlier in this thread about 5,15, and some, which you answered, had zero to do with the things being exchanged. Based on your comments, I know this is difficult for you to grasp, but the point has nothing to do with valuation, or even exchange. The point is about being precise in translation. Which I have also stated more than once…

  • Shane Coley

    Let’s analyze your statement above:

    You wrote: “You are claiming that when some ancient exchanged 10 rings of silver for a slave he was not using money even though silver was a circulating monetary media.”

    You say that he was using ten silver rings as money. I say he was using ten silver rings.

    You say that he used money thousands of years before money was a term. I say that no translator has the liberty to insert the imprecise word money in place of the precise word silver, particularly thousands of years before the term money existed.

    You say everything is money, yet your example above would have made no sense unless you named the commodity being exchanged. You depend on the commodity in language, even while stating that money is a fitting replacement for the commodity in language.

    The definitions of money which are given contradict themselves. Therefore there is error in the definitions. This is simple logic and reasoning.

    You wrote: “You talk about money as if it comes from a government when history shows that is not the case.”

    Commodities used in indirect exchange arose in the market. Rulers, governments and banks have taken the honest things used in the market and attached a system of differing weights and measures to those things, thereby converting the good thing which arises naturally in the market into tools of plunder.

    Money is a system of plunder. There is no denying that it exists in such a form. What you have yet to make any reasonable case for (because it cannot be done) is that a system of plunder and an atom and an animal are enough alike to label them with a single term.

    To suggest that a single term is fitting for BOTH something which arises naturally in the market AND something which is a tool of plunder by design, is foolish.

    If money was a term that existed for thousands of years (which no one would argue) THEN I would say that the honest thing and the dishonest things cannot BOTH be called money. Whichever one is called money, the other must be called something else. They are not alike.

    However, since silver is an element and the term money is only 700 years old, there is no question that money came later and arose under different circumstances. Thus we find with basic reasoning skills that silver is an atom and money is a system of plunder.

    Assuming there is no coercion, which is not the case when a system of plunder is one of the choices, two actors in the market may freely choose to engage in indirect exchange with either thing.

    However, if the trade involves silver in honest measure, then the trade is between two parties only. If the trade involves a coin or instrument which is manipulated forcefully by someone else who is not held accountable in the market, then there is a third party to the transaction. This coercion with regard to the medium of exchange is theft and always destroys the good in society by undermining the productive people. Fiat and fractional money are always unjust and destructive systems of plunder.

    Government should have nothing to do with money. Money, as a product in the market, should be produced by private parties, just like nuts and bolts. If the producer of the money attempts to manipulate the value of his product, or change the threads per inch on his bolt, then the market participants will reject his product and he will go out of business. Templeton Reid is an excellent example of the market participants addressing the issue.

    But in any case, because we are not covering any new ground, I am done with this conversation. We have been around and around and you have proven that you do not value precision in argument or translation. That being the case, you have no intellectual tools with which to consider the argument. I had a dialog with a Mises scholar who had the good judgment to acknowledge that Mises definition of money is in conflict within his own writing, and that in our discussion he had not defeated my argument. A little intellectual honesty and rigor goes a long way.

  • Vangel

    “You are correct the argument turns on the definition of money. As we have already covered repeatedly, for you everything is money, which means the definition is meaningless.”

    Here is where you go off the rails. Not everything is money. Only circulating media of exchange are money. This is a very simple statement and a clear definition. It is clearly supported by historical evidence and by logic.

    “The things described above by Rothbard are true, in the sense that these things arose in the market, but it is illogical to call them money.”

    No it isn’t. Money is a circulating media of exchange. That make wampum, tobacco, rice, gold or silver money.

    “But even *if* one granted the label “money” in this case and these times which post-dated the origination of the term money, it is remains an error to translate ancient texts using the term money.”

    This is not logical. Human beings have not changed all that much. The Mesopotamians used circulating media of exchange just as the North American colonists did. And any circulating media of exchange is money during the period when it is being used.

  • Vangel

    “It is foolish to argue that the precise word silver should be translated to the imprecise word money, when translating any text.”

    Why? A silver ring that weighs 5 shekels that is used to purchase is no different than a silver coin that weighs ten shekels. The parties to the transaction were not exchanging rings, tokens, or coins but the silver content that they contained.

    Think of warehouse receipts backed by tobacco. We would not say that the person selling goods received a piece of paper but that he received a certain weight of tobacco in exchange for those goods. The receipts were the circulating media of exchange, which made them money, but their value was based on the monetary commodity that backed them. It would not be uncommon to have a transaction that included both a warehouse receipt for tobacco along with bundles of tobacco leaves.

    As I pointed out, you have a very limited and faulty definition of the term money. Throughout history the term for a particular unit of currency meant a weight of gold, silver, or some other monetary commodity and the heart of any monetary system was the backing of the commodity that was being used. You say that you have read the books I cited but that is very different than reading them carefully and paying attention. You might try looking at them again and figuring out what the authors actually said. Now if you do not agree with them I would like to see the logic that you are using. So far I see claims not backed up by sound premises or logic.

  • Vangel

    I understand you very well my friend. You refuse to acknowledge that money is a circulating medium of exchange and are arguing that it needs some form of centralized backing by some official institution to be money even though you must be aware that history shows that money was provided by the markets without the need for government involvement. Rothbard and Mises made this very clear and explained why and how it works so I suggest that you familiarize yourself with what they wrote.

    This does not mean that you have to accept their conclusions but if you want to be seen as a credible voice on the subject you need to come up with a logical argument showing why they were wrong. So far you have failed to do that. You fail to understand that ten units of A may be the equivalent of five units of B in a system that uses multiple circulating media.

    “The point is about being precise in translation. Which I have also stated more than once…”

    Here you may be correct but that would depend on the exact text or passage. But my point stands. Whether farmer Joe got beaver pelts or wampum for his carrots it was still money.

  • Vangel

    “You say that he was using ten silver rings as money. I say he was using ten silver rings.”

    He was using ten silver rings. But they were money because they were a circulating media of exchange. The seller does not want jewelry for the slave. He wants money that can be used to buy things that are needed or that can be used as investment capital that can provide earnings in the future.

    Civilizations form and advance because of the specialization of labour that allows huge increases in efficiency and a growth in the standard of living. That requires a monetary media to facilitate indirect trade. Which is what silver, barley, oil, wine, etc., were used for. They were money whether you care to admit it or not.

    “You say that he used money thousands of years before money was a term. I say that no translator has the liberty to insert the imprecise word money in place of the precise word silver, particularly thousands of years before the term money existed.”

    You can’t have a civilization without money. Money was invented to allow specialization of labour to take place. If we all had to make our own clothes, houses, or shoes, and if we all had to grow our own food there would be no civilization. And no, direct barter would not help very much because of the coincidence of needs problem. To have civilization you need money. And that money does not have to be created by any one particular State institution.

    You certainly are very persistent even though you are quite aware that your own country had a history of using multiple media of exchange (money) during the same period of time. Just because you have faith it does not mean that you need to ignore facts and logic when they are presented to you.

    “You say everything is money, yet your example above would have made no sense unless you named the commodity being exchanged.”

    I do not say that everything is money. I say that the circulating media of exchange is money. And the most accurate translation in the case that we are arguing about is to say that the person purchased a slave for 50 shekels of silver. The ‘rings’ were not jewelry. They were money.

    To understand this better look to a place like India where people still use gold to protect their purchasing power and whenever they have extra cash they buy gold jewelry, coins, or bars instead of putting it in savings accounts.

  • Vangel

    “We have been around and around and you have proven that you do not value precision in argument or translation.”

    How ironic. I argue that money is a circulating media of exchange and you turn that into a claim that everything is money and yet you accuse me of not being precise? I think that you are so attached to some idea or definition that you are unwilling to open yourself to the possibility that the idea is flawed. You will not get anywhere until you figure out exactly what money is and that you cannot have a civilization without it for the reasons that I gave previously.

  • Shane Coley

    To illustrate that you have been incapable of understanding what is being said, consider this.

    You wrote: ” You fail to understand that ten units of A may be the equivalent of five units of B in a system that uses multiple circulating media.”

    That statement is foolish for you to make. I have not said that, and do not think that. The question that I asked early on about translation illustrates and implies the typical exchange of 5 units of one thing for 15 units of another. That a certain set of things can be exchanged for some other assorted set of other things is the point of exchange. For you to actually think I am questioning that people exchange different collections and quantity of things is absurd.

    You wrote: “Here you may be correct but that would depend on the exact text or passage.”

    Yes, exactly.

  • Vangel

    “I had a dialog with a Mises scholar who had the good judgment to acknowledge that Mises definition of money is in conflict within his own writing, and that in our discussion he had not defeated my argument.”

    I disagree with Mises on a number of issues and have no problem with the possibility that he could be wrong on other issues. But to be persuasive we need to have sound arguments and logic. So far you have failed to provide those. One easy way to support some of your claims is to link to a specific book, paper, or commentary but these scholars where they explain what is wrong and why it is wrong.

    Note that I had no problem providing references and stating the logical arguments to support my side of this debate. I do not see why it would not help your position if you do the same.

  • Shane Coley

    I have learned from this exchange that you are not able to recognize a logical argument, so presenting them to you is useless.

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