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Mises and the moderns on the inessentiality of money in equilibrium

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  • William J. Luther

    () (Kenyon College)

Abstract

Abstract The challenge of rendering monetary exchange intelligible within a Walrasian general equilibrium framework is well known. Perhaps less well known is the difficulty of integrating monetary and exchange economies in decentralized conceptions of equilibrium, of which the evenly rotating economy of Ludwig von Mises (1949) is an early example. After reviewing the prospect for money in the evenly rotating economy, I survey the modern literature on frictions that make money useful for exchange. While exploring techniques commonly used to generate a useful role for money in this environment, I make a distinction between exchange frictions and epistemic frictions. Although theoretical efforts have largely focused on exchange frictions, recent experimental evidence suggests that epistemic frictions warrant further attention. I conclude that Mises should be seen as a pioneer in this literature, though recent advances demonstrate that the set of frictions capable of rendering money useful is much larger than he envisioned.

Suggested Citation

  • William J. Luther, 2016. "Mises and the moderns on the inessentiality of money in equilibrium," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 29(1), pages 1-13, March.
  • Handle: RePEc:kap:revaec:v:29:y:2016:i:1:d:10.1007_s11138-015-0321-0
    DOI: 10.1007/s11138-015-0321-0
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    Cited by:

    1. William Luther, 2014. "Evenly rotating economy: A new modeling technique for an old equilibrium construct," The Review of Austrian Economics, Springer;Society for the Development of Austrian Economics, vol. 27(4), pages 403-417, December.
    2. repec:jpe:journl:1460 is not listed on IDEAS

    More about this item

    Keywords

    Austrian economics; Epistemic frictions; Evenly rotating economy; Exchange frictions; Gift exchange; Infinite games; Matching; Mises; Monetary economics; Money; Search; Social norms;

    JEL classification:

    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System

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