Mises' Incomplete Theory of the Value of Money

Abstract

Ludwig von Mises introduced the concept of marginal utility into Austrian economics. He presented what he described as a complete theory of the value of money on the basis of the subjective theory of value and its peculiar doctrine of marginal utility. It is shown here that Mises’ theory of value is unclear for at least three reasons. Mises states that his theory of money is based on Menger’s theory of value, while in fact his theory refers to Jevons’ rather than to Menger’s. Secondly, the essence of Mises’ theory contradicts his earlier assumption on the immeasurability of the use value of money. Thirdly, Mises’ concept of continuity in the objective exchange value of money is not grounded in the subjective theory of value.