The Theory of Money and Credit - Ludwig von Mises [1]
In this situation an optimist may hope that the nations will be prepared to learn what they blithely disregarded only a short time ago. It is this optimistic expectation that prompted the publishers to republish this book and the author to add to it as an epilogue an essay on monetary reconstruction. [1]
LUDWIG VON MISES
New York
June 1952
Introduction by Professor Lionel Robbins
Of all branches of economic science, that part which relates to money and credit has probably the longest history and the most extensive literature. The elementary truths of the Quantity Theory were established at a time when speculation on other types of economic problem had hardly yet begun. By the middle of the nineteenth century when, in the general theory of value, a satisfactory statical system had not yet been established, the pamphlet literature of money and banking was tackling, often with marked success, many of the subtler problems of economic dynamics. At the present day, with all our differences, there is no part of economic theory which we feel to be more efficient to lend practical aid to the statesman and to the man of affairs, than the theory of money and credit.
Yet for all this there is no part of the subject where the established results of analysis and experience have been so little systematized and brought into relation with the main categories of theoretical economics. Special monographs exist by the hundred. The pamphlet literature is so extensive as to surpass the power of any one man completely to assimilate it. Yet in English, at any rate, there has been so little attempt at synthesis of this kind that, when Mr. Keynes came to write his Treatise on Money, he was compelled to lament the absence, not only of an established tradition of arrangement, but even of a single example of a systematic treatment of the subject on a scale and of a quality comparable with that of the standard discussions of the central problems of pure equilibrium theory.
In these circumstances it is hoped that the present publication will meet a real need among English-speaking students. For the work of which it is a translation, the Theorie des Geldes und der Umlaufsmittel of Professor von Mises of Vienna, does meet just this deficiency. It deals systematically with the chief propositions of the theory of money and credit, and it brings them into relation both with the main body of analytical economics and with the chief problems of contemporary policy to which they are relevant. Commencing with a rigid analysis of the nature and function of money, it leads by a highly ingenious series of approximations, from a discussion of the value of money under simple conditions in which there is only one kind of money and no banking system, through an analysis of the phenomena of parallel currency and foreign exchanges, to an extensive treatment of the problems of modern banking and the effects of credit creation on the capital structure and the stability of business. In continental circles it has long been regarded as the standard textbook on the subject. It is hoped that it will fill a similar role in English-speaking countries. I know few works which convey a more profound impression of the logical unity and the power of modern economic analysis.
It would be a great mistake however to suppose that systematization of the subject constituted the only, or indeed the chief, merit of this work. So many of the propositions which it first introduced have now found their way into the common currency of modern monetary theory that the English reader, coming to it for the first time more than twenty years after its first publication, may be inclined to overlook its merits as an original contribution to knowledge—a contribution from which much of what is most important and vital in contemporary discussions