The Theory of Money and Credit - Ludwig von Mises [225]
Schumpeter has to do violence to his own theory in order to make it appear even fairly tenable. It cannot be compared with the point of view which opposes the total stock of money to the total demand for it (that is, to the total demand of economic agents for reserves), because it does not really attempt to solve more than a small part of the problem. To be of any use, a theory must try to explain the whole of the problem that is before us. Schumpeter's theory arbitrarily splits up the stock of money and the demand for money in order to institute a comparison that would otherwise be impossible. If Schumpeter starts from the statement that the total quantity of money is distributed between three spheres, the sphere of circulation, that of hoards and reserves, and that of capital, then, if he wishes to provide a complete theory of money, the comparison which he makes for the sphere of circulation between total incomes and total amount of consumption goods should be repeated for the two other spheres also; for these also are not without significance in the determination of the value of money. Variations in the amount of money demanded or available for hoards and reserves—to retain this vague distinction—or for the sphere of capital, influence the value of money just as much as variations in the sphere of circulation. No theory of the value of money with pretensions to completeness dare omit an explanation of the influence on the value of money exerted by processes in the sphere of hoards and reserves and in that of capital.
We see, then, that even Schumpeter has not been able to make a complete catallactic theory of money out of the claim theory. The fact that his attempt to make the claim theory into a catallactic theory of money obliged him to set such extraordinary limits to the problem is the best proof that a comprehensive catallactic theory of money cannot be constructed on the basis of the claim analogy. His having arrived in the course of his admirable discussion at conclusions for the rest which do not differ essentially from those which have been discovered in other ways and with other instruments by the catallactic doctrine of money is merely to be ascribed to his having found them in the theory of money already and having therefore been able to adopt them. They by no means follow from the fragmentary theory of money that he himself has put forward.
4 "Metallism"
It is no longer necessary to continue to argue against the nominalistic theory of money. For theoretical economics it has long been finished with. Nevertheless, the nominalist controversy has propagated errors in the history of doctrine that need to be weeded out.
First of all, there is the use of the term metallism. The expression comes from Knapp. "Those writers who start from weight and fineness and see in the stamp nothing but an attestation of these properties," Knapp christens metallists. "The metallist defines the unit of value as a certain quantity of metal." [13]
This definition of metallism given by Knapp is by no means a clear one. It should be pretty well known that there can hardly have been a single writer worth mentioning who has thought of the unit of value as consisting of a quantity of metal. But it must be remembered that, with the exception of the nominalists, there has never been a school so easily satisfied in the interpretation of the concept of value as that of Knapp, for whom the unit of value "is nothing but the unit in which the amount of payments is expressed." [14]
But it is easy to see what Knapp means by metallism even if he does not explicitly say it. For Knapp metallism is all the theories of money that are not nominalistic;[15] and since he formulates the nominalistic doctrine with precision,