Ludwig Von Mises: The Austrian Business Cycle Theory
Ludwig von Mises broke this circularity with a regressive theorem of money, put forth in his Theorie des geldes und der Umlaufsmittel, translated as Theory of Money and Credit (1912). He illustrated how money originated in the market, and how its value is determined by its usefulness as a commodity for exchange. Mises had closed the Austrian “circle,” and integrated, for the first time in history, the theory of money into the theory of value. In addition, the solution had a very important implication: once the value of money had been shown to depend on the market, the state could not release money and determine its value at will. Today, as governments all over the world inflate their money supply, this idea seems strange. The Austrian Business Cycle Theory (ABCT), developed from combining Mises’s work on the value of money and Menger and Bohm-Bawerk’s capital theory, stands in direct opposition to the notion of currency inflation and its associated benefits.
With his book on money began a long career as an author. In 1919, Mises published another
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He was a highly respected economist in Austria, but the University of Vienna four times refused to make him a paid professor, and for 14 years he conducted a prestigious Vienna seminar without a salary. For most of the quarter-century that he conducted a seminar in New York, his salary was paid by private individuals. The sessions began at seven in the afternoon in his office of the Chamber of Commerce and usually ended up in a café at one in the morning. According to Future Nobel Laureate F. A. Hayek, the seminar "was not only the center of the Austrian School, but attracted students from all over the world." Murray Rothbard, another disciple of Mises, stated that it would become "the outstanding seminar and forum in all of Europe for discussion and research in economics and the social sciences" (Rothbard 1999,
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