The Austrian point of view has begun to seem rather obsessive to me, as it does to a friend of mine, a distinguished economist and one of the top Hayek authorities in the world (as well as a friend of Milton Friedman's).
The Mises Institute has turned into a cult and no longer represents the majority of Austrian leaning economists. BTW, your comments regarding the Shostak article were appreciated.
FYI, Rothbard, whose views hold a lot of sway over at the Mises “institute”, was an advocate of a hard money standard (commodity money – no fractional reserve banking) and held that anything else was a fraud perpetrated upon the public.
One comment on shostak:
Observe that, for the mainstream, the definition of money is established through an arbitrary mixing of various liquid assets and then correlating this mixture with another dubious statistic labeled national income. In other words, any mixture of liquid assets will be classified as money as long as this mixture passes the correlation test. Now, if any mixture of liquidity is accepted, why not include retail good inventories? After all, these inventories might be as liquid as stocks or bonds. Yet, no one would consider these inventories as part of the money supply (Rothbard 1978, p. 149). But no definition can be established by means of a correlation.
The “mainstream” stream does use a definition of money and here it is: money is anything that serves as a medium of exchange, a store of value, a unit of account, and a standard of deferred payment. Personally, I prefer the late 19th century American economist, F.A. Walker’s definition of money, “money is that money does.” This phrase illustrates that there is no “a priori” definition of what should, or could, be money.
I think shostak is attributing to mainstream economists the strict monetarist’s belief that all economic fluctuations are caused by changes in the money supply and thus the monetarist insistence on tracking all financial instruments that can serve as money, or alternately, that “economize” on base money. |
