Taking Austrian Economics to the Airwaves!

During my stay at the Mises Institute as a Research Fellow last summer, I was fortunate enough to be able to travel to Montgomery, Alabama with two other representatives of the Mises Institute, to appear on The Joey Clark Radio Hour on News Talk 93.1 FM.

During the hour we touched on a huge variety of topics, including Britain’s failing National Health Service, why it’s still important to read the works of “dead white men”, whether the gold standard really caused the Great Depression, the economics of fantasy football, why the Fed is a scam, what freedom means to us individually, and which Rothbard books we would personally recommend to a beginner.

It was my first ever appearance on the radio, as is painfully obvious from the fact that the simple act of introducing myself on air somehow caused me to trip and fall into confused and aimless rambling. I like to think that it was all uphill from there though, and am happy with how the recording turned out overall.

At the very least I certainly enjoyed appearing on Joey Clark’s programme, and hope that the opportunity to for a repeat appearance will arise again someday.


For more info on the Joey Clark Radio Hour, see their Facebook page: https://www.facebook.com/thejoeyclarkradiohour/

Appearing alongside me were Tho Bishop, the Mises Institute’s Media Coordinator, and my fellow Fellow Joakim Book Jönsson.

For more from Tho Bishop, consider following him on Twitter (https://twitter.com/ThoBishop) and reading his regular topical articles at Mises.org (https://mises.org/profile/tho-bishop-0)

For more from Joakim Book Jönsson, check out his blog ‘Life of an Econ Student’ (http://joakimbook.blogspot.co.uk).


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Yours truly, during the broadcast. 


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After the show. (l-r: Joey Clark, Joakim Book Jönsson, Tho Bishop.)






Mises on why the State shouldn’t ban War Profits

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I was recently reading Ludwig von Mises’ book Interventionism: An Economic Analysis, and came across a particularly well-worded passage on why governments shouldn’t resort to economic central planning in times of war. Specifically, Mises was arguing that it was economically unwise for governments to try to prevent private companies from making profits by supplying the war effort, even though war profiteering is regarded with distaste by almost everybody and banning it would be a very popular policy.

The fact that Mises argued so ably against this policy, and did so in 1940 of all years, is a testament not only to his characteristically brilliant economic insight but also to his extraordinary moral courage and perseverance in pursuing the truth above all other considerations.

Due to the length of the quote, I have decided to share it here rather than on Twitter, which is my usual repository for particularly pithy Mises lines I come across.

“In England, too, the government was concerned primarily with preventing war profiteering, rather than with the procurement of the best possible equipment for the armed forces. For example, the 100 percent war profits tax might be cited. …

The anti-capitalist says, ‘This is precisely the point. Business is unpatriotic. The rest of us are told to leave our families and to give up our jobs; we are placed in the army and have to risk our lives. The capitalists, however, demand their profits even in time of war. They ought to be forced to work unselfishly for the country, if we are forced to fight for it.’ Such arguments shift the problem into the sphere of ethics. This, however, is not a matter of ethics but of expediency.

Those who detest war on moral grounds because they consider the killing and maiming of people as inhumane, should attempt to replace the ideology which leads to war by an ideology which would secure permanent peace. However, if a peaceful nation is attacked and has to defend itself, only one thing counts: the defense must be organized as quickly and as efficiently as possible; the soldiers must be given the best weapons and equipment. This can only be accomplished if the working of the market economy is not interfered with. …

When the capitalist nations in time of war give up the industrial superiority which their economic system provides them, their powers to resist and their chances to win are considerably reduced.

That some incidental consequences of warfare are regarded as unjust can readily be understood. The fact that entrepreneurs get rich on armament production is but one of many unsatisfactory and unjust conditions which war creates. But the soldiers risk their lives and health. That they die unknown and without reward in the front line, while the army leaders and staff remain safe and secure to win glory and to further their careers is ‘unjust’ too. The demand to eliminate war profits is not any more reasonable than the demand that the army leaders, their staff, the surgeons, and the men on the home front should do their work under the privations and dangers to which the fighting soldier is exposed.

It is not the war profits of the entrepreneurs that are objectionable. War itself is objectionable!”    (pp.73-74)

For more information on Mises’ book Interventionism, which stands alongside his better-known books Socialism and Liberalism in his writings comparing different economic systems, follow this link to Mises.org for information about the book’s significance and where to find a copy: https://mises.org/library/interventionism-economic-analysis

Book Review: The Progressive Era by Murray N. Rothbard

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I recently finished reading a great new book published by the Mises Institute, entitled The Progressive Era. This new work is mostly formed of previously unpublished material – 9 previously unpublished chapters and 6 previously published essays, which have been edited together into a cohesive whole  – written by the great ‘Austrian’ economist, historian, and libertarian theorist Murray N. Rothbard. As the title would tend to suggest, the book covers the ‘Progressive’ period of American history (generally dated from the 1890s to the 1920s), during which the relatively laissez-faire politics and economics of 19th century America gave way to the modern corporatist and interventionist state as we know it today.

Rothbard began writing the book in the 1970s during his association with the Cato Institute, but due to a number of reasons – ranging from his other projects to the characteristic way in which his great enthusiasm for the subject matter propelled the book far beyond its initial word limit, and ultimately due to his premature death in 1995 – the book was never completed in his lifetime. Fortunately however, the book’s editor Dr. Patrick Newman (with whom I was a Mises Institute Fellow in Residence in the summer of 2017) was able to unearth the unpublished manuscripts from Rothbard’s voluminous archives and piece this great work back together for publication over 22 years after the author’s death. The result is a brilliant account of this important period of American history, and a towering achievement in its own right, even aside from the significance of its author and the story of its troubled journey to publication.

Typical accounts of the Progressive Era usually paint it as a glorious victory of benevolent government which, in faithful response to the demands of the people, put an end to the dog-eat-dog competition and robber barons of 19th-century capitalism. In light of how naive and simplistic such traditional accounts of the era have been, it is particularly refreshing to hear Rothbard’s revisionist history of the period, particularly given the extraordinary scope and depth of the work.

Rothbard begins his study with an analysis of the rise of the railroads in the 1840s as America’s first big business and extends it through the cartelisation and regulation which characterised the Progressive Era, the collapse of the Third Party System, and ultimately to the ‘fulfillment’ of the new progressive state in World War One and the Great Depression. Far from a benevolent government response to the spontaneous outcries of the people, Rothbard finds that the key policies of the Progressive era can more often be characterised as attempts at cartelisation by big businesses in the pursuit of higher profits. Having failed to successfully cartelise on the relatively free markets of the preceding decades, such big businesses increasingly turned to government in the latter years of the 19th century, to enforce such cartels and impose burdensome regulations on their smaller competitors. This revisionist interpretation is strongly supported by Rothbard’s characteristically details-oriented approach to history writing, making this book an excellent resource for students and researchers, with plenty of pointers to further reading implied by the vast number of figures and events referenced.

Rothbard’s analysis is also set apart from others on the subject by the great weight it gives to religious divisions in US for understanding the Third Party System and its ultimate collapse. Reduced to its absolute essentials, Rothbard’s argument is that postmillennial Pietists (usually Protestants) believed that the Second Advent of Jesus Christ could not occur until a thousand-year Kingdom of God on Earth was established, which they believed required the stamping out of a great number of personal sins, significantly including alcohol. This led the Pietists to favour a much higher degree of state intervention into the economic and personal lives of its subjects, in the pursuit of this lofty and vital goal. The Pietists were consequently much more likely to vote for the statist parties of the time, including the Republicans, the Abolitionists, and the strongly anti-immigrant ‘Know-Nothing’ party. Liturgicals (such as Catholics) conversely believed that the thousand-year Kingdom of God on Earth would occur after the Second Advent of Jesus Christ, causing them to concern themselves more with adhering to religious rituals, keeping an eye out for portents that His coming was near, and so forth. The Liturgicals were therefore less concerned with stamping out personal sin and enforcing holiness, and hence were much more likely to vote for the more laissez-faire Democratic party. While most modern historians are inclined to dismiss such religious considerations in favour of ‘real’ factors, such as economic class, ethnicity, geography and so forth, Rothbard’s case is nevertheless made extremely convincing by his extensive application of demographic and electoral data from the time. Even if you’re inclined to disagree with Rothbard’s conclusions, it is now difficult for me to believe, having read the book, that one’s understanding of the Progressive Era and the Third Party System could be complete without this understanding of the religious factors at play.

In conclusion, I am simply amazed that such strong material was able to go unpublished for so many years, and am grateful to Dr. Patrick Newman and the Mises Institute for their efforts in bringing this masterful book to publication at last. Rothbard’s Progressive Era provides an account of that important time in American history that is both sweepingly broad and deeply details-oriented in a way that will satisfy both serious researchers and interested lay readers.

Furthermore, thanks to the generosity of the Mises Institute’s donors, the book is available for free on their website as a PDF, an ebook, and an audiobook! For more details, see this link: https://mises.org/library/progressive-era-0

If you would like to own a physical copy of the book, you can buy one at this link: https://www.amazon.co.uk/Progressive-Era-Murray-N-Rothbard/dp/1610166744/ref=sr_1_1?ie=UTF8&qid=1516631097&sr=8-1&keywords=rothbard+progressive+era

Finally, if you’re interested to learn more about the book and this period of history before reading, the book’s editor Dr. Patrick Newman gave an excellent talk about the subject at the Mises Institute’s Mises University summer programme last year.

Was Hayek really saying that Free Markets create genius consumers?

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It’s interesting how often the most memorable and thought-provoking parts of a given discussion are to be found in the tangents away from it.

Yesterday I was in a seminar on the history of economic thought in which we were supposed to be discussing Thorstein Veblen and the American Institutionalists, but toward the end of the session we got side-tracked into a discussion of the modern economy’s use of big data and the way companies gather information to provide targeted advertising. The lecturer somehow tied this into Hayek’s famous explanation of how a free price system efficiently conveys information to economic actors, dispersed and local information which could not possibly all be known to an economic central planner, and hence allows for those resources to be economised in a way that more rationally reflects their supply and demand.

Our lecturer, however, seemed to misunderstand the nature of Hayek’s argument and the sort of information to which he was referring. The lecturer sarcastically remarked something to the effect of “Do you think consumers are really well informed about the products they consume, thanks to the free market?” Surely, he seemed to be implying, the fact that most real-world consumers don’t have a full and deep intellectual understanding of every product they consume and where they come from – especially compared to the nefarious producers of those products – proves that Hayek was wrong. Thank goodness our modern understanding of asymmetrical information has superseded Hayek’s naive fantasy of consumers who are automatically kept fully informed by the magic of the market!

This is not only a misinterpretation of Hayek’s conclusions, but a misinterpretation which highlights an incorrect way of even approaching Hayek’s argument to begin with. Therefore I feel it might be worthwhile to briefly clarify what kind of information Hayek was actually talking about, in case anyone else reading this may have fallen prey to the same misunderstanding.

It is certainly true to say that consumers in a relatively free market tend to lack some information about the products they consume. Standing before the bread aisle in a supermarket, most consumers would not be able to tell you off the top of their heads the differences between the different brands of loaves, their ingredients, the companies which made them, and so forth. The same would be true for this sort of information for almost any other product and any other consumer; none of us are omniscient, and Hayek never claimed that a free price system would make us so.

However, this is not the sort of information Hayek was claiming the price system transmits. What the price system does, according to Hayek, is convey the relevant information about the supply and demand for different goods on the market, in a way that allows people to economise those goods as if they did have a conscious, intellectual understanding of those factors, even if they don’t.

To use Hayek’s own famous example, suppose that a major tin mine collapses, making the supply of tin in a given economy even more restricted than it had been before. This information will be reflected by a rise in the price of tin, and this price change will in turn affect the distribution of tin between the different producers who require it. For the producers whose tin-based products are more highly valued by consumers, those consumers will consequently be willing to pay enough for those products that the producers will still be able to sell them at a profit, despite the increased price of the tin the producer needs to buy. For other companies which make tin-based products less highly valued by consumers, those consumers will consequently be less likely to continue buying those products at the increased price, leading those companies to restrict their production of those less highly valued products, hence freeing up tin to be used by the producers of more highly valued products. In this way, the price system has conveyed ‘information’ (the fact that the tin mine has collapsed) to all relevant parties, forcing producers to economise the increasingly scarce tin in a way that sees it being channeled toward the production of the goods most highly valued by consumers.

The critic of Hayek’s theory might object that the price system hasn’t really made anyone more informed about anything, as the above-mentioned consumers and producers wouldn’t necessarily even have to know why the price of tin had risen. But that’s the whole point and the whole beauty of the system! (Indeed, in Hayek’s original argument this was what led him to the conclusion that free markets and free prices would always lead to a more preferable (from the perspective of consumers) distribution of resources than a central planner ever could, as a central planner would have to consciously know such information in order to distribute resources appropriately, whereas economic actors in a free price system are automatically encouraged to do so even without having to consciously grasp why.)

I suppose therefore it is possible, in a certain sense, to criticise Hayek’s preferred system because it does allow consumers to get by despite potentially being ignorant of certain information about the products they consume. An opponent of Adam Smith could likewise lament that, thanks to Smith’s beloved division of labour, many people today are ignorant of how to make bread, a skill which would have been indispensable for survival in previous times. However, rather than sneering at this as evidence of how the division of labour creates consumers who are too stupid to even bake bread, the correct response is to celebrate the fact that many people are now able to enjoy the delicious boon of bread as much as if they did know how to bake it, even if they don’t.

Just as with Smith’s division of labour, so too with Hayek’s division of knowledge. Far from deriding Hayek’s preferred system of free prices because not every consumer under it is perfectly informed about every product they consume, the system should be celebrated for allowing scarce resources to be distributed as if everyone knew all the information concerning their supply and demand, even if they don’t.


Some readers might wonder why I even bothered clarifying such an elementary point about what Hayek was saying. Indeed, as a writer, my own instincts usually tell me to focus on more specific, technical, and arcane points, as my own personal inclination is usually to assume that all of the simple, broad, and sweepingly important things that could be said about economics or libertarianism must already have been said by writers more intelligent and eloquent than I could ever hope to be. However, elementary errors sometimes require elementary responses, and if a lecturer in one of the top economics faculties in the world was capable of misunderstanding what Hayek was saying in this way, hopefully my writing this will have helped clarify the thinking of at least some reader on this topic.

And even if not, I’m still going to publish this post anyway; I have to write about something on this cursed blog, after all.

Live Stream with That Guy T

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This week I have been attending the ‘Mises University’ summer programme, the Mises Institute’s week-long crash course in Austrian Economics, for the second year in a row. It’s always an incredibly fun and intense week of learning, which brings together around 150 students each year from all over the world, and teaches them more economics in one week than most of them have learned in years of university study.

For more info about attending MisesU in future years, as well as about other Mises Institute events, follow this link: https://mises.org/events

One of my fellow MisesU attendees this year is Taleed Brown, better known as ‘That Guy T‘, an infamous libertarian/alt-right social media personality, whose YouTube channel has over 100,000 subscribers. Last night, he invited Tho Bishop, the Mises Institute’s social media director, and me to do a YouTube live stream with him, to talk about the importance of the Mises Institute, as well as other more general topics.

There were a lot of questions about immigration and… *sigh* “ethno-states”, as well as other ultra-edgy alt-right topics which are apparently of considerably greater interest to Taleed’s audience than they are to me. But we managed to get a few bits of economics in there too, as well as raising some very generous donations to the Mises Institute, so that’s what matters.

If you’re interested in watching, I’m attaching the recording of the stream below.

Anarchists for Elizabeth? A follow-up

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[edit: Since writing this post, my views on this topic have changed. See the edit at the bottom of this post for my updated take on this topic.]

Yesterday I published an article on Mises.org defending the Queen from the misinformed faux-outrage of British leftists, who have recently been complaining about the pay rise she will enjoy next year. I argued that it was wrong to view the Queen’s income as a form of welfare from taxpayers’ money, as she is actually paid from the profits of the land she owns, known as ‘the Crown Estate’. I further argued that the world would be a better place from a libertarian perspective if she used her power to veto laws by ‘withholding the royal assent’ more frequently.

However, I then went on to claim that the Queen was a hero of liberty for having vetoed a few laws and that she was a victim of state oppression because the profits from her £12 billion worth of land go to the Treasury before she gets her 15% cut. I then finished the article by demanding that all principled libertarians should join me in an impassioned “God save the Queen”.

These latter remarks were obviously tongue-in-cheek, as was the article in general, a fact that should have been clear from the accompanying picture of a monarch posing in front of an anarchist flag. The not-entirely-serious nature of the article would have been made even more obvious had it been entitled ‘Why Anarchists should Support the Queen‘ as I had initially hoped. However, the editor decided to run it under the less obviously humorous title ‘For Libertarians, The British Monarchy is the Least of our Worries‘ in order to broaden the appeal, which threw people off the fact that it was intended as something of a joke. The irony was even further lost after the article was later shared under the title ‘A Libertarian Defence of the British Monarchy‘.

An increasing number of readers who completely missed the joke began leaving angery comments on the article, accusing me of being an idiot, the Mises Institute of being neo-feudalist sellouts, and so on. Such humourless people can be expected to come out of the woodwork whenever anything is posted on the internet, and it was abundantly clear that many of them had not read the article to begin with, so for me to waste my energy trying to persuade them of my opinion would be folly.

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However, there was a second group of commenters who had clearly read the article and agreed with it for the most part, but who kept making the same objection. Their comments tended to go along these lines: “Given that the Crown lands came into the possession of the monarchy unjustly, how can you lament that the Queen suffers from state encroachment into her property? Shouldn’t we take all her land away from her, seeing as it’s unjustly acquired?”

Putting aside the ironic aspects of my original article, I actually tend to agree with this objection. To the extent that the Crown lands were acquired by conquest and coercion by the state, mostly after the invasion by William the Conqueror, it is true to say that the monarchy acquired them unjustly. However, even if we assume for the sake of argument that all the lands the Queen currently owns were originally acquired unjustly by previous monarchs during previous centuries, does this mean that the Queen’s ownership of them now is unjust? I don’t believe that logic necessarily follows, and to explain why it will be helpful to engage in a thought experiment.

What would happen to the Queen’s land under a Rothbardian legal system?

In his book The Ethics of Liberty (1982), the great Austrian economist and anarcho-capitalist philosopher Murray N. Rothbard devoted a considerable number of pages to explaining how just property claims would be preserved and distinguished from unjust property claims in a legal system based on the Non-Aggression Principle: the central moral precept of libertarianism. For example, Rothbard outlines a scenario wherein his NAP-based propertarian legal system would have to determine what would happen to a person, A, who inherited a piece of property from B which, unbeknownst to A, had been stolen by B from its previous owner, C. A has done nothing wrong in this scenario, but how would an NAP based legal system deal with this?

We can apply Rothbard’s solution to this problem to our own issue with the Queen and the Crown lands. Let’s assume for ease of argument that all of the Crown lands that the Queen now owns were acquired for the Crown unjustly by William the Conqueror, 1000 years ago. How would the NAP based legal system solve this problem, according to Rothbard?

Let’s say that Mr. Jones believes that a given parcel of the Queen’s land once belonged to his ancestor 1000 years ago and would belong to him now if it hadn’t been unjustly expropriated by William the Conqueror, and then eventually passed down through inheritance to the Queen. Mr. Jones would therefore take the Queen to the NAP-based court, alleging that she is in possession of stolen goods which rightfully belong to him. Firstly the court would have to determine whether the parcel of land really had been acquired unjustly by William the Conqueror. Assuming that they did determine this, it would therefore be assumed that the Queen’s claim to ownership of the property was unjust, and her claim to the property would no longer be legally recognised or upheld. Then it would be the prerogative of Mr. Jones to prove in the court that the property right in the land was rightfully his. If he was capable of doing this, the land would become his, and would therefore have been restored to its rightful owner. However, in the specific case of the Crown lands, there is an unusually long distance of time between the original expropriation and the present day, making it extremely unlikely that Mr. Jones, or anyone else, would be able to prove in court that they were the rightful owner of the property. If neither Mr. Jones nor the Queen is deemed to have a right of property in the land, then the court would declare the land unowned. The unowned land would then become the property of whoever first homesteaded it by mixing their labour with it; in other words, the person who was using the land most recently, the Queen. Therefore a libertarian, propertarian legal system would most likely determine that the Queen is indeed the just owner of most of the Crown lands, given that the original expropriation was so far back in history that it would be impossible to restore the land to the heirs of its rightful owners, meaning that the Queen has technically homesteaded it from an effectively unowned state.

Therefore, just because the monarchy first acquired the Crown lands unjustly, hundreds of years ago, it does not necessarily follow that the Queen is not the rightful owner of that land today. Assuming that she is the rightful owner of at least part of the Crown lands, it cannot therefore be argued from a libertarian perspective that she deserves to have the land taken away from her or out of her full control.

So in conclusion, upon further impartial investigation into this matter, I have determined that I was right all along, and everyone else is a idiot.

God save the Queen!


[edit: Some months after writing this, my friend Chris Calton messaged me to point out an error in my interpretation of Rothbard, in this post. I was happy to admit that Chris and Rothbard were right where I had been wrong, and subsequently wrote another post on this topic, in which I updated my views accordingly.]


My Successful Mises Fellowship Proposal

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This summer I have had the privilege of spending two months at the Mises Institute as a Fellow in Residence. The Institute’s Fellowship programme offers the opportunity for independent study and research, along with access to the Institute’s libraries and on-site academics, to around a dozen students each year, allowing them to either work on a chapter for their dissertation, an article for an academic journal, or some other such thing.

Most of the Fellows this year are Masters, PhD, and post-doc students in their 20s to early-30s, although admittance to the Fellowship programme is by no means exclusive to this age range, and I myself am a mere second-year undergraduate. I am currently around half way through my time at the Institute for 2017, which is the first time I’ve been a Fellow here, and it’s been the absolute time of my life; I’ve already made some great friends and wonderful memories, aside from getting some seriously good work done and improving my CV all at the same time.

However, when I was going through the application process a few months ago, I would have been grateful to have had a better idea of what sort of thing they were looking for in a successful application, as I hadn’t applied to this sort of thing before.

For anyone else out there who’s thinking about applying, but would feel more certain of their application if they were able to see a successful one first, I am including my research proposal for this year below, which formed the biggest part of my application. Obviously you won’t get far by simply copying my proposal, but it should at least help to give you an idea of the sort of thing they’re looking for in a successful application.

For more info about the Mises Institute’s summer Fellowship programme, go to https://mises.org/about-mises/fellowships



George Pickering

Mises Institute Fellowship in Residence 2017 Research Proposal

Competing views on the Origin of Money: A Critical Review of the Literature since Menger

I am applying for this 2017 Fellowship in Residence at the Mises Institute in the hope of conducting research on the topic of the origin of money; specifically on whether and to what extent the Mengerian/Austrian explanation of this topic could be complemented by, or is incompatible with, subsequent theories. My aim is not necessarily to conduct a comprehensive review of the literature, but rather to consider the major competing theories which have appeared since Menger’s On the Origin of Money, and assess the extent to which they are or are not compatible with Menger’s conclusions and methodology. While Menger’s explanation demonstrated that state intervention is not necessary in order for money to originate, I feel that an assessment of subsequent ‘State Theories’ of the origins of money might allow for a more full theoretical explanation of the process by which monies develop in cases when states do intervene. In particular, I am interested to consider the possible distortive effects of the institution of taxation on this process, a topic which I feel has not yet been fully explored in pre-existing Austrian literature on the origins of money.

In order to assess the compatibility of subsequent theories with the Mengerian/Austrian explanation, I intend to primarily use Menger’s own deductive methodology, (except, of course, in cases when comment is required on questionable empirical points raised by other authors.) I feel that this is an important and worthwhile topic of research not only due to the great importance of the concept of money to the study of economics, but also due to the ongoing significance of the economic forces which Menger identified as having led to the development of money. Menger’s explanation of the origins of money is not framed as a historical account of a series of events which took place by happenstance, but rather as a description of how still existing characteristics of human action could logically be expected to lead to the development of monies. As Menger’s himself stressed, inquiry into this topic is essential to a proper understanding of “not only the origin but also the nature of money” (Menger 2009, p.18). Indeed, a proper understanding of the origin of money is not only necessary to understand monetary history, but also to understand the forces still influencing monies and their related institutions in the present.


Annotated Bibliography

While the number of citations will undoubtedly increase before the paper is completed, the list included here is intended to present a selection of those sources which will be most central to the argument I anticipate making, either as key selections from the literature under review, or as important supporting documents. For this reason, I have grouped them here in a way that relates to their places in the structure of the paper, rather than listing them alphabetically.

i) Menger’s Theory of the Origin of Money:

I intend to begin by presenting the theory of the origin of money out of barter, as laid out by Menger (2009). Due to the central place of Menger’s explanation in the framework of Austrian economics, not to mention its early date and great influence on later theories of the origins of money, I plan to consider these subsequent theories in the context of how far they are compatible with or contrary to Menger’s explanation and methodology. The later adumbrations of Menger’s explanation by Mises (1998 and 2009) and Rothbard (2009), will be considered as complements to Menger’s theory, particularly given the development of the terminology surrounding this field by Mises (2009). Luther (2014) and Latzer and Schmitz (2002) will be used to provide context to Menger’s explanation, both in terms of its consistency with Menger’s methodology, and by highlighting a selection of its subsequent iterations and extensions.

  • Menger, Carl. [1892] 2009. On the Origin of Money. Auburn, Ala.: Ludwig von Mises Institute
  • Mises, Ludwig von. [1949] 1998. Human Action: A Treatise on Economics, The Scholar’s Edition. Auburn, Ala.: Ludwig von Mises Institute
  • ——. [1912] 2009. The Theory of Money and Credit. Auburn, Ala.: Ludwig von Mises Institute
  • Rothbard, Murray N. 2009. Man, Economy, and State with Power and Market, Scholar’s Edition, second edition. Auburn, Ala.: Ludwig von Mises Institute
  • Sennholz, Hans. 1992. “The Monetary Writings of Carl Menger”. in The Gold Standard: Perspectives in the Austrian School. edited by Llewellyn H. Rockwell Jr. Auburn, Ala: Ludwig von Mises Institute
  • Luther, William J., 2014. Preface to On the Origins of Money by Carl Menger, Available at SSRN: https://ssrn.com/abstract=2446645
  • Latzer, Michael, and Stefan W. Schmitz. ed. 2002. Carl Menger and the Evolution of Payments Systems: From Barter to Electronic Money, Edward Elgar Publishing Ltd


ii) The State Theory of Money:

Having outlined the Mengerian/Austrian explanation of the origin of money, I plan to contrast it with literature which emphasises the role of the state in that process. As well as addressing the theories presented in the literature, I hope to consider whether and to what extent the existing, non-Austrian descriptions of the influence of the state on the development of money might complement the Austrian theory. To the extent that the ‘State Theories’ can provide insights into how state action can influence the development of monies, while still accepting that Menger’s theory correctly describes characteristics of human action which propel that process, the question then arises of which of those two forces tends to exert the greater influence, and whether that is a matter for theoretical or empirical enquiry. Furthermore, how much can be said from a theoretical perspective about the necessary outcomes of state intervention per se, into the process of the development of a monetary commodity out of media of exchange, or is this an empirical question dependent upon the specifics of each given intervention? The literature on this subject is naturally extensive, but I anticipate that the history of these ideas presented by Wray (2014) will provide a very valuable aid in the writing of this section.

  • Knapp, George Friedrich. 1924. The State Theory of Money. London: Macmillan & Company Limited
  • Lerner, Abba P., 1947. Money as a Creature of the State. The American Economic Review, Vol. 37, No. 2
  • Desan, Christine A., 2013. Creation Stories: Myths About the Origins of Money. Harvard Public Law Working Paper No. 13-20.
  • ——. 2014. Making Money: Coin Currency and the Coming of Capitalism. Oxford University Press
  • Wray, L. Randall. 2014. From the State Theory of Money to Modern Monetary Theory: An Alternative to Economic Orthodoxy. Levy Economics Institute of Bard College. Working Paper No.792


iii) The Effect of Taxation on the development of a Money out of Media of Exchange

During my assessment of the state theories of the origins of money, I am particularly interested to consider the influence of the institution of taxation, when introduced to the chain of events described in Menger’s theory. It is true to say that the economic forces described in Menger’s framework are logically sufficient to explain the development of monies (i.e. generally accepted media of exchange). However, given that states stand to benefit by restricting the number of commodities accepted in payment of taxation, they can thus be expected to accelerate and influence the process by which a single money eventually develops out of media of exchange. This is so because, if a state stipulates that taxation must be paid in a particular commodity, citizens who expect they will be forced to pay those taxes will tend to wish to acquire that commodity more strongly than would otherwise be the case. To the extent that this increases the valuation of that commodity by a large part of the population within that state’s borders, and therefore makes that commodity more saleable, the desirability of using that commodity as a medium of exchange would also increase, other things being equal. For this reason, the institution of taxation can be expected to distort the process by which a money develops out of media of exchange, away from what would have taken place if that process had developed along exclusively Mengerian lines. The selection of chartalist literature outlined by Wray (2014) could provide valuable insights into the impacts on the development of money when states restrict the number of commodities accepted in payment of taxation. Furthermore, Tilly (1982) provides an interesting illustration of the process by which taxation likely developed in early societies, through the nature of coercion and obligation.

  • Tilly, Charles. 1982. Warmaking and Statemaking as Organized Crime. University of Michigan CRSO Working Paper No.256


iv) The Credit Theory of Money:

I also hope to consider a range of theories which emphasise the importance of credit in pre-monetary societies, to the development of money. Wray (2004) collects several interesting contributions to this literature, including by A. Mitchell Innes and Geoffrey W. Gardiner, (as well as chapters relevant to the state theory of money.) However, I am particularly eager to consider the chapter “The Myth of Barter” by Graeber (2011), which directly and forcefully attacks theories such as that of Carl Menger (whom Graeber apparently confuses with Karl Menger, the mathematician). Concerningly, Graeber seems to take issue with the very idea that economists should use hypotheticals or thought experiments in their analysis of this issue, and therefore dismisses descriptions of barter in his opponents’ explanations as “faraway fantasylands” (Graeber 2011, p.25). Given the lengths Graeber goes to in his attempt to dismiss barter theories of the origins of money, it is less clear whether credit theories such as his own would be at all compatible with Menger’s explanation.

  • Wray, L. Randall. ed. 2004. Credit and State Theories of Money. Edward Elgar Publishing Ltd
  • Graeber, David. 2011. Debt: The First 5000 Years. New York: Melville House Publishing
  • Watson, Michael V. Szpindor. “A Cheer for Innes: Incorporating Inter-temporal Barter into Menger’s Account on the Emergence of Money.” Presented to the Austrian Economics Research Conference, March 10-11, 2017. (Due to the very recent date of this paper, I have not yet been afforded the opportunity to fully consider how closely it will relate to my own line of inquiry. However, I suspect that my work on this topic will be benefitted by an assessment of Watson’s insights.)


Other sources of interest:

  • Galbraith, John Kenneth. 1975. Money: Whence it came, where it went. London: André Deutsch Limited

While it does not necessarily present a systematic theoretical explanation of the causes of the development of money, Galbraith’s work nevertheless provides an interesting account of the history of the development of money.



While Menger’s pathbreaking work brilliantly demonstrated that state intervention is not necessary in order for money to originate, he himself nevertheless recognised the distortive influence which “state recognition and state regulation” (Menger 2009, p.51) could have on the process by which monies develop. I feel that a sound assessment of the competing theories of the origins of money since Menger, particularly of the extent to which they are compatible with the praxeological method, could prove to be a valuable resource in the development of a theoretical explanation of the impacts of state intervention on the origins of money. Not only would such an explanation expand the scope of sound, Austrian economic theory, but it would also provide valuable insights into the nature of the forces which still influence the monetary landscape of the world today. In the event that I am fortunate enough to be offered the opportunity to pursue this topic as a Fellow in Residence at the Mises Institute, it is my hope that the resultant research might go some way toward developing a better understanding of this important topic.