The Theory of Money and Credit - Ludwig von Mises [227]
5 The Concept of "Metallism" in Wieser and Philippovich
Knapp's mistakes in the history of theory have unfortunately already been accepted by other writers. This started with the attempt to expound Knapp's theory in the most kindly manner possible, that is, to judge its weaknesses gently and if possible to credit it with some sort of usefulness. But this was not possible without reading into the state theory things that simply cannot be found in it, things in fact which definitely contradict both its spirit and its letter, or without taking over Knapp's mistakes in the history of theory.
First, Wieser must be mentioned. Wieser draws a contrast between two monetary theories. "For the metallists, money has an independent value, arising from itself, from its substance; for modern theory, its value is derived from that of the objects of exchange, the commodities." [21] Again, in another place, Wieser says: "The value of the monetary material is a conflux from two different sources. It is constituted from the use value which the monetary material obtains by reason of its various industrial employments—for jewelry, for utensils, for technical uses of all kinds—and from the exchange value which the money obtains by reason of being a means of payment ... The service performed by the coins as a medium of exchange and that performed by the money in its industrial uses, lead in combination to a common estimate of its value ... We may ... assert, that each of the two services is independent enough to be able to go on existing even if the other ceased. Just as the industrial functions of gold would not cease if gold were no longer coined, so its monetary functions would not come to an end if the state decided to forbid its use in industry and requisitioned it all for minting ... The dominant metallistic opinion is different. From this point of view, the metal value of the money means the same thing as the use value of the metal; it has only the one source—industrial employment—and if the exchange value of the money coincides with its metal value, then it is nothing but a reflection of the use value of the metal. According to the prevailing metallistic opinion, money made from valueless material is inconceivable; for, it is said, money could not measure the value of commodities if it was not valuable itself, by virtue of the material from which it is made." [22]
Here Wieser contrasts two theories of the value of money: the modern and the metallistic. The theory which he calls the modern is the monetary theory that logically follows from that theory of value which traces value to utility. Now since the utility theory has only recently received scientific exposition (to have contributed to which is one of Wieser's great merits), and since it undoubtedly may nowadays be regarded as the prevailing doctrine (pace Wieser himself, who calls metallism the prevailing doctrine), it may well be admissible to call that monetary theory which is based upon it the modern theory Greek kat esechun. But in so doing we must not forget that, just as the subjective theory of value can look back over a long history, so also the theory of money corresponding to it is already more than two hundred years old. For example, as early as the year 1705 John Law had expressed it in classical form in his Money and Trade. A comparison of Law's arguments with those of Wieser will demonstrate the fundamental agreement between their views. [23]
But this theory, which Wieser calls the modern, is certainly not the doctrine of Knapp; in Knapp, not the slightest suggestion of it can be discovered. All that it has in common with his nominalism, which ignores the problem of the value of money, is the fact that neither is "metallistic."
Wieser himself sees quite clearly that his theory has nothing to do with that of Knapp. Unfortunately however, he takes over from Knapp the opinion that according to the "prevailing metallistic opinion," the "metal