Friday, July 1, 2016

The Regression Theorem

In his “Regression theorem,” Mises
overcame the “Austrian circle” in one of his most important theoretical
achievements; for he showed that logically one can push back this time
component in the demand for money until the ancient day when the
money commodity was not money but a useful barter commodity in
its own right; in short, until the day when the money-commodity (e.g.,
gold or silver) was demanded solely for its qualities as a consumable
and directly usable commodity. Not only did Mises thus complete
the logical explanation of the price or purchasing power of money,
but his findings had other important implications. For it meant that
money could only originate in one way: on the free market, and out of
the direct demand in that market, for a useful commodity. And this
meant that money could not have originated either by the government
proclaiming something as money or by some sort of one-shot social
contract; it could only have developed out of a generally useful and
valuable commodity.

--Murray Rothbard, The Essential von Mises