Menger’s Nuanced View on the Origin of Money

Carl Menger’s writings on the origin of money contain a curious, but undeveloped, concession to chartalism.

First, there was this concession in Menger’s 1892 paper:

“It is not impossible for media of exchange, serving as they do the commonweal in the most emphatic sense of the word, to be instituted also by way of legislation, like other social institutions. But this is neither the only, nor the primary mode in which money has taken its origin.” (Menger 1892: 250).

Secondly, in Menger’s revised essay on money, published later in 1909, we have this:

“Commodities that have become generally used intermediaries of exchange, if only within certain geographical boundaries and possibly even only within certain segments of the population of a territory, are called money (livestock money, shell money, salt money, etc.) in scientific usage (not necessarily in everyday life!).

Like other social institutions, the institution of intermediaries of exchange, which serves the common good in the fullest sense of the term, may, as I shall explain later, emerge or be promoted, but also impeded, in its automatic development by the influence of authority (for example, public or religious) and especially by legislation. This manner of emergence of media of exchange, however, is neither the only nor the earliest one. Here, a relation exists similar to that between statute law and common law: media of exchange originally emerged and eventually, through progressive imitation, became generally used not by way of law or agreement but by way of 'custom', that is, through similar actions, corresponding to similar subjective impulses and similar intellectual progress, of individuals living together in society (as the unreflective result of specific individual strivings of the members of society) – a circumstance which subsequently, as with other institutions that arose in like manner, does not rule out, of course, their being established or influenced by government.” (Menger 2002: 33).

It would be a mistake, however, to press these cautious statements too far: Menger remained an advocate of the barter spot trade theory of money’s origins, although he was willing to concede what later Austrians have emphatically denied.

Nevertheless, there is a divide between Menger’s nuanced view of the origins of money and the stridency of Rothbard:

“[sc. Mises’s] Regression Theorem also shows that money, in any society, can only become established by a market process emerging from barter. Money cannot be established by a social contract, by government imposition, or by artificial schemes proposed by economists.” (Rothbard 2009: 61).

BIBLIOGRAPHY

Menger, C. 1892. “On the Origin of Money” (trans. C. A. Foley), Economic Journal 2: 238–255.

Menger, C. 1909. “Geld,” in J. Conrad et al. (eds.), Handwörterbuch der Staatswissenschaften (vol. 4; 3rd edn.). Fischer, Jena. 555–610.

Menger, C. 2002 [1909]. “Money” (trans. L. B. Yeager and M. Streissler), in M. Latzer and S. W. Schmitz (eds.), Carl Menger and the Evolution of Payments Systems. Edward Elgar, Cheltenham, UK. 25–108. [N.B. this is a translation of Menger 1909.].

Rothbard, M. N. 2009. The Essential von Mises. Ludwig von Mises Institute, Auburn, Alabama.