Annie Lowrey: Just When You Think Slate Could Not Get More Pointlessly Stupidly Contrarian...

But… But… But…: Dealing with von Mises Department

Daniel Kuehn:

Facts & other stubborn things: Brad DeLong issues a challenge to Austrians: [M]y interpretation of Mises is somewhat different from [Brad's]. Mises, following Menger, clearly doesn't have a cost of production theory of value. It's really much simpler than that. It's not that gold mining is more genuine because you have to work at it. It's simply that gold represents a fixed measure of value. And for Mises, not only is that acceptable - it's preferable. Otherwise, adjustments of the money supply create the illusion of artificial wealth, which for Mises would distort market signals…

But… but… but… If the cost of mining gold falls and we mine more gold and have more gold coins, the money stock has increased and we have the illusion of artificial (non-gold) wealth, which for von Mises ought indeed to distort market signals. Improved gold mining technology ought, for von Mises, to be as bad a thing as running a printing press.

But it very clearly isn't. I have found nothing anywhere in the Austrian corpus about the baneful effects of improvements in gold mining technology, and how they invariably lead to an Austrian boom-bust cycle--how a gold discovery distorts market signals and creates the illusion of artificial wealth just as any other monetary expansion does.

The point is that gold is not a fixed measure of value. Value is stuff that keeps you fed, warm, dry, and entertained. You can't eat gold. It doesn't keep you warm. (You could hammer it into a tent, I suppose--and it does serve as a source of amusement.) The price of gold in terms of commodities that yield utility varies--just as the price of fiat money in terms of commodities that yield utility varies.