The Theory of Money and Credit - Ludwig von Mises [61]
Helfferich also is of the opinion that there is an insurmountable obstacle in the way of applying the marginal-utility theory to the problem of money; for while the marginal-utility theory attempts to base the exchange value of goods on the degree of their utility to the individual, the degree of utility of money to the individual quite obviously depends on its exchange value, since money can have utility only if it has exchange value, and the degree of the utility is determined by the level of the exchange value. Money is valued subjectively according to the amount of consumable goods that can be obtained in exchange for it, or according to what other goods have to be given in order to obtain the money needed for making payments. The marginal utility of money to any individual, that is, the marginal utility derivable from the goods that can be obtained with the given quantity of money or that must be surrendered for the required money, presupposes a certain exchange value of the money; so the latter cannot be derived from the former. [22]
Those who have realized the significance of historically transmitted values in the determination of the objective exchange value of money will not find great difficulty in escaping from this apparently circular argument. It is true that valuation of the monetary unit by the individual is possible only on the assumption that an exchange ratio already exists in the market between the money and other economic goods. Nevertheless, it is erroneous to deduce from this that a complete and satisfactory explanation of the determination of the objective exchange value of money cannot be provided by the marginal-utility theory. The fact that this theory is unable to explain the objective exchange value of money entirely by reference to its monetary utility; that to complete its explanation, as we were able to show, it is obliged to go back to that original exchange value which was based not on a monetary function at all but on other uses of the object that was to be used as money—this must not in any way be reckoned to the discredit of the theory, for it corresponds exactly to the nature and origin of the particular objective exchange value under discussion. To demand of a theory of the value of money that it should explain the exchange ratio between money and commodities solely with reference to the monetary function, and without the assistance of the element of historical continuity in the value of money, is to make demands of it that run quite contrary to its nature and its proper task.
The theory of the value of money as such can trace back the objective exchange value of money only to that point where it ceases to be the value of money and becomes merely the value of a commodity. At this point the theory must hand over all further investigation to the general theory of value, which will then find no further difficulty in the solution of the problem. It is true that the subjective valuation of money presupposes an existing objective exchange value; but the value that has to be presupposed is not the same as the value that has to be explained; what has to be presupposed is yesterday's exchange value, and it is quite legitimate to use it in an explanation of that of today. The objective exchange value of money which rules in the market today is derived from day's under the influence of the subjective valuations of the