Monetary Policy

Steven Baker continues his excellent series examining 'The Theory of Money and Credit', by Ludwig von Mises. Here's my response to the latest installment:

Jack Maturin April 2nd, 2010 at 09:39

Steven, it is brilliant that you are doing so much to publicise this remarkable book. With Mises publishing the first edition of ‘The Theory of Money and Credit’ in 1912, it is remarkable that after nearly 100 years of such prescience, that he is still such a relatively obscure figure, with Keynesian halfwits like Paul Krugman still dominating most of the economic roosts of the world.

Unfortunately, this is mainly because Mises wrote the original in German and main English-speaking intellectual gatekeeper of the time was a certain John Maynard Keynes, who was then editor of the Cambridge Economic Journal.

Keynes wrote a review which left ‘The Theory of Money and Credit’ in obscurity for two crucial decades. If Keynes hadn’t been so arrogant and condescending about the book, it may have gained much more traction in the English-speaking world and may possibly have helped prevent the turmoil and economic crashes of the time, which gave rise to the demagogues of the 1930s.

Keynes, alas, had other ideas and wrote a dismissive review, swiping Mises with the slur of being unoriginal (despite the book being the most original work in economics for 40 years). So why was Keynes so unimpressed? Well, it was mainly because he was incapable of reading original ideas in German, as he himself admitted in his own treatise on money, a few years later.

Here’s what Murray Rothbard wrote, on page 11 of his short monograph, ‘Keynes the Man’, about this incident:

“One striking illustration of Maynard Keynes’s unjustified arrogance and intellectual irresponsibility was his reaction to Ludwig von Mises’s brilliant and pioneering Treatise on Money and Credit, published in German in 1912. Keynes had recently been made the editor of Britain’s leading scholarly economic periodical, Cambridge University’s Economic Journal. He reviewed Mises’s book, giving it short shrift. The book, he wrote condescendingly, had “considerable merit” and was “enlightened,” and its author was definitely “widely read,” but Keynes expressed his disappointment that the book was neither “constructive” nor “original” (Keynes 1914). This brusque reaction managed to kill any interest in Mises’s book in Great Britain, and Money and Credit remained untranslated for two fateful decades. The peculiar point about Keynes’s review is that Mises’s book was highly constructive and systematic, as well as remarkably original. How could Keynes not have seen that? This puzzle was cleared up a decade and a half later, when, in a footnote to his own Treatise on Money, Keynes impishly admitted that “in German, I can only clearly understand what I already know—so that new ideas are apt to be veiled from me by the difficulties of the language” (Keynes 1930a: I, 199 n.2). Such unmitigated gall. This was Keynes to the hilt: to review a book in a language where he was incapable of grasping new ideas, and then to attack that book for not containing anything new, is the height of arrogance and irresponsibility.”

You can read the rest of Rothbard’s view on Keynes, here:

=> http://mises.org/etexts/keynestheman.pdf

Even better, you can listen to the audio version, via a speech by Uncle Murray himself. Go to 23:20 to hear Rothbard talking about the Keynes book review described above:

=> http://mises.org/media/2875

So keep up the great work, Steven. If only you had been around a century ago! :-)