GRosado Posted May 25, 2014 Posted May 25, 2014 While reading through MESwPM I noticed that Rothbards definition of inflation differs significantly from Mises's. Rothbard's- The process of issuing pseudo warehouse receipts or, more exactly, the process of issuing money beyond any increase in the stock of specie, may be called inflation. Mises- In theoretical investigation there is only one meaning that can rationally be attached to the expression Inflation: an increase in the quantity of money (in the broader sense of the term, so as to include fiduciary media as well), that is not offset by a corresponding increase in the need for money (again in the broader sense of the term), so that a fall in the objective exchange-value of money must occur. How did Rothbard deviate from Mises? I find it very strange because usually Rothbard is seen as expanding on Mises but here he has changed his work. I think that both definitions have different ramifications on ABCT but I could be wrong. What does everyone else think?
AustinJames Posted May 25, 2014 Posted May 25, 2014 What are these "different ramifications" that you see?
GRosado Posted May 26, 2014 Author Posted May 26, 2014 What are these "different ramifications" that you see?Well if its defined the Rothbardian way then there is no room for a fractional reserve banking system in the Austrian economic system. However if it's defined the Misesian way then there is room for a fractional reserve banking system in Austrian economic system, if there is a demand for credit that has been created then there isn't inflation so then ABCT will have to go in depth about FRBs relation to the business cycle & might have to redefine money as Exogenous rather than Endogenous.
AustinJames Posted May 26, 2014 Posted May 26, 2014 It seems to me (based on your definitions, and my modest knowledge of economic history) that Rothbard and Mises may have disagreed on the proficiency of fractional reserve banking. I don't see how Rothbard has "changed [Mises'] work." It's a rather marginal issue: in a free society, a fractional reserve banking system may fare well under certain conditions, and fail under others. What is the underlying universal principle in this disagreement? What is your opinion?
GRosado Posted May 26, 2014 Author Posted May 26, 2014 It seems to me (based on your definitions, and my modest knowledge of economic history) that Rothbard and Mises may have disagreed on the proficiency of fractional reserve banking. I don't see how Rothbard has "changed [Mises'] work." It's a rather marginal issue: in a free society, a fractional reserve banking system may fare well under certain conditions, and fail under others. What is the underlying universal principle in this disagreement? What is your opinion?They never got into a disagreement over fractional reserve banking they simply have two different views of what inflation is which leads to different conclusions for fractional reserve banking if you follow one or the other.Rothbard changed Mises work because he originally was writing MES as a college version of Human Action but expanded on mises & the thing he changed was the definition of Inflation that Mises put forward.It might be a marginal issue in a free society but it is essential to the foundations of ABCT.My opinion: I lean towards Mises because his definition would allow for FRB & currency's that aren't backed by a commodity. So I think that is allowing for more choice in currency while according to Rothbard currency has to be backed by a commodity which effectively limits choice.
MrCapitalism Posted May 28, 2014 Posted May 28, 2014 Rothbard adds this note to page 990 of my edition of MES (2nd Scholarly) Inflation, in this work, is explicitly defined to exclude increases in the stock of specie. While these increases have such similar effects as raising the prices of goods, they also differ sharply in other effects: (a) simple increases in specie do not constitute an intervention in the free market, penalizing one group and subsidizing another; and (b) they do no lead to the processes of the business cycle. It may be the case that Mises was taking a more all-encompassing overview of economic theory, and Rothbard narrowed the definition to better suit his goals, which were to demonstrate the negative effects of intervention as opposed to market forces.
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