Developing New Monetary Economics Using the Monetary Theory of Schumpeter, Mises, and Wicksell

• According to Schumpeter, money is a clearing device, a social institution rather than a commodity, and money supply constitutes a critical figure that determines the price level.Schumpeter argues that the value of money is independent of its metal content, but also finds a legally defined ticket inappropriate.He pointsout that the purchasing power of money cannot bea matter of exchange value, nor of use value, butthe purchasing power of a unit of income.According to Mises, Schumpeter tries to build a catallactic ticket theory, which requires a comparison of available tickets and opportunity space, using the sum of money incomes and the product of prices and consumption goods. He finds that the commodities relate only to circulating money, while money relates to production goods as well as consumption goods, more commonly tothe turnover of production goods to production goodsthan to the exchange of production goods for consumption goods. For Mises, the value of money must be based upon utility, but the objective exchange value of money reflects subjective individual valuations. Money is an emergent order and the intangible money emerging today represents an institutional form of money with an accounting system of exchange, moving towards Wicksell’s pure credit economy, in itself making monetary separation suitable. According to Wicksell, a pure credit economy requires that the value of money is made independent of its commodity function. Credit is a remedy to scarcity of money, while bills of exchange increase virtual velocity. He argues that the unit of value should be independent of material thingsand thatthe inconvertible paper coinis used as credit medium, implying an abstract medium of account. The New Monetary Economics involves a functional separation of monetary functions making units and media of account distinct from media of exchange. In the Black-Fama-Hall (BFH) system, developed by Yeager and Greenfield, the unit of account is physically defined by the state as a non-convertible nearly comprehensive commodity bundle, which constitutes the critical figure in such a system, while the media of exchange are privately issued.This is contrasted to separation of the functions of media of account from media of exchange, where the media of account are abstract, such as Meulen’s banknote pound.These two approachesto the media of account are analyzed from the perspective of Schumpeter, Wicksell, and Mises.

Subject headings

SAMHÄLLSVETENSKAP  -- Ekonomi och näringsliv -- Nationalekonomi (hsv//swe)

SOCIAL SCIENCES  -- Economics and Business -- Economics (hsv//eng)

Keyword

Monetary separation

value of money

medium of account

Schumpeter

Mises

Wicksell

Politik, ekonomi och samhällets organisering

Politics, Economy and the Organization of Society

Publication and Content Type

vet (subject category)

kon (subject category)