1 Max Weber and the State Theory of Money by Fiona Maclachlan* I ...

Max Weber and the State Theory of Moneyby Fiona Maclachlan *I hope for the approval of those who take the monetary system as a branch of politicalscience.--G.F. Knapp (1924, p. viii)Max Weber has left us with a rich legacy of suggestive insight into many issues insociology, economics, and political science. Of this legacy his reflections on issues inmonetary theory are among his least well known. The reason is not far to seek: Weberhimself did not devote much space to these reflections. In his two volume magnum opus,Economy and Society, for example, Weber’s discussion of monetary theory is containedin fewer than forty pages. Furthermore, his remarks in the sections devoted to monetarymatters are somewhat cryptic, relating to issues current at the time of his writing, andthus not easily accessible to the modern reader.Most of the discussion in Economy and Society revolves around Georg FriedrichKnapp’s famous book The State Theory of Money. Published originally in 1905, itcreated a stir among academics and policy makers, with proponents and critics botharguing forcefully about it. It was written at a time when monetary matters were in agreat flux. Throughout the world, countries debated the optimal metallic standard fortheir monetary systems. Should it be silver, gold, both in a fixed relation (bimetallism), acombination of the two (symmetalism), or should the selection of the standard be left tothe market? Knapp put the debate on new ground by suggesting that there need not be ametallic standard at all. Ideas about the desirability of unbacked paper money had beenpresented before but were never able to command academic respectability.At one end of the spectrum of opinion at the time were the members of the* Associate Professor, Economics and Finance, Manhattan College, Riverdale, NY 10471Draft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.1

when he writes: ““How strange that chartality of money, this achievement of exaltedwisdom, this precious flower of State-ruled life, should have sprung from so base a root!”(Knapp 1924, p. 88)What Knapp took to be his major thesis in The State Theory of Money, however,was that in the modern age, the only consideration important in a state’s administration ofa metallic standard is the maintenance of its foreign exchange rate. Knapp lookedforward to a time when a metallic standard would be obsolete even in internationalpayment systems—which, of course, came about in the post-Bretton Woods era. JohnMaynard Keynes was an important proponent of Knapp's ideas about the desirability ofchartal money. From his remark in The Tract on Monetary Reform (1923) that gold is abarbarous relic through his discussion of chartalism in his Treatise on Money (1976[1930], pp. 3-11) to his contribution to the Bretton Woods conference where he arguedfor an international exchange rate regime in which gold is replaced with the chartalbancor, Keynes’ views were in line with those of Knapp.Weber’s assessment of Knapp’s contribution was mixed. On the one hand, hecriticizes Knapp for downplaying the danger of inflation and notes that the treatment ofmonetary theory that he finds “most acceptable” (Weber 1978, p. 78) is that of Ludwigvon Mises, referring to his Theory of Money and Credit. But, on the other hand, Webergives Knapp’s book lavish praise. He says that in spite of its limitations, it is "otherwiseabsolutely correct and brilliantly executed, hence of permanently fundamentalimportance" (1978, p. 169), adding that it is "one of the greatest masterpieces of Germanliterary style and scientific acumen" (ibid., p. 179).Weber’s effusive praise is somewhat puzzling given his high opinion of Mises’Draft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.3

Theory of Money and Credit. Mises devotes an entire chapter in that work in criticism ofKnapp’s State Theory of Money. In this paper I explore Weber’s reaction to Knapp’sbook and attempt to unravel the puzzle. I begin by reviewing the aspects of Knapp’sbook about which Mises and Weber were in agreement and note that they relate mostly tojudgments about the potential of monetary authorities to behave in the public interest. Ithen examine the reasons why, unlike Mises, Weber maintained a highly favorableopinion of Knapp’s work. I argue that Weber stood closer to Knapp than Mises in theMethodenstreit and that from this position he could appreciate aspects of Knapp’scontribution that Mises neglected. Further, I argue that Mises’ neglect of thefundamental insights of The State Theory of Money has led to an ambiguity in his ownmonetary theory. This is turn has led to a division among his followers as they attempt toextend his theory.Weber’s Critique of Knapp’s State Theory of MoneyIn his critical commentary of Knapp, Weber indicates that he was writing in 1920.Besides being the last year of his abbreviated life (he died at the age of 56), it was a timeleading up to Germany’s hyperinflation. Weber (1978, p. 184) warned that Knapp’s bookcould be used to support irresponsible monetary expansion: "quite at variance with itsauthor's intentions, though perhaps not entirely without fault on his part, the workimmediately was utilized in support of value judgments. It was naturally greeted withespecial warmth by the Austrian lytric administration, with its partiality to paper money."Similarly Schumpeter (1954, p. 1091) notes that Knapp's theory during World War I was"widely used to 'prove' that the inflation of the currency had nothing to do with soaringDraft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.4

prices."Weber was skeptical of Knapp's view that the state would carry out its monetarypolicy with the maintenance of its foreign exchange rate as its primary consideration. Ifthis were true, states would not allow inflations to occur since they lead to a depreciationof the currency. But Weber points out that the state might allow a depreciation of thedomestic currency if it has large debts to pay. Entrepreneurs, insofar as they may seetheir product prices rising without an equivalent rise in input prices, might welcome aninflation, as well. Finally, Weber notes that in the interest of stimulating the economy,the state has still another reason to allow an inflation to go forward.Weber understood well the complexity of the relationship between changes in themoney supply and the changes in money prices, labelling older forms of the quantitytheory "incredibly primitive" (Weber 1978, p. 172). After enumerating the reasons thatan accurate forecasting of the effect of a monetary expansion is impossible, he makes theperhaps overly generous remark that "it is thus understandable that, all things considered,Knapp should have entirely neglected the possibility of inflationary price policies beingused in the modern market economy as a deliberate rational policy comparable tomaintenance of foreign exchange stability" (Weber 1978, p. 89). But Weber goes on tonote that inflationary policies on the part of governments are a historical fact. Inconfessing that "the formulation of monetary theory, which has been most acceptable tothe author, is that of von Mises" (1978, p.78), Weber suggests a sympathy with theCurrency School.Weber identifies what he believes a serious error in Knapp's justification fordownplaying the danger of inflation in Knapp's insistence that everyone is equally aDraft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.5

debtor and a creditor. Knapp makes use of the accounting truism that for everytransaction the debits must equal the credits. His argument is that the real effect of a risein prices should be minimal, since nominally both sides of the balance sheet are affectedequally. About this line of argument, Weber (1978, p.193) correctly notes that "we nowall know now from personal experience" that it is erroneous.In his fundamental assumptions about the behavior of the state, Weber was closerto Mises than Knapp. Like Mises he was skeptical that monetary authorities could besafely entrusted with the management of the money supply. Knapp, more like Keynes,had faith in the potential wisdom and integrity of the monetary authorities. His thesis thatmonetary authorities would concern themselves mainly with the maintenance of theforeign exchange rate was based on the assumption that they would behave in thenational interest. Weber was unwilling to make that assumption going as far as to saythat the money interest and public interest are rarely in unison (1978, p. xx).Money as a Creature of the StateWeber's enthusiasm for Knapp’s book was most likely directed at the doctrine forwhich Knapp is usually remembered: the doctrine that money is a creature of the state, oralternatively put that money is a creature of the law. His ideas about monetary authoritiesformulating monetary policy only with a view to stability in foreign exchange rates areoften neglected in summaries of his major contributions, although it is clear that he,himself, took these ideas to be central to The State Theory of Money.The notion of money as a creature of the state was sharply criticized by Mises(1980, ch. 4; 1963, pp. 405-408). Mises regarded money, rather, as a creature of theDraft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.6

market. Carl Menger (1892), the father of the Austrian School of Economics with whichMises is identified, had expounded a theory about the origin of money in which he showsthat it is the unintended consequence of the pursuit of self-interest within the context of afree market. It is an example of a "spontaneous order", the elucidation of which is one ofthe key features of the work of the Austrian School. To assert that money is a creature ofthe state is in clear violation of the vision of a money arising spontaneously within theworking of a market economy.Mises labels his economic theory praxeology maintaining that within apraxeologic approach, it is possible to formulate exact laws. The spontaneous emergenceof money in an exchange economy is one of those laws:The praxeological method traces all phenomena back to the actions ofindividuals. If conditions of interpersonal exchange are such that indirectexchange facilitates the transactions, and if and as far as people realize theseadvantages, indirect exchange and money come into being ...The historical question concerning the origin of indirect exchange and money isafterall of no concern to praxeology. The only relevant thing is that indirectexchange and money exist because the conditions for their existence were and arepresent. If this is so, praxeology does not need to resort to the hypothesis thatauthoritarian decree or a covenant invented these modes of exchanging. Theétatists may if they like continue to ascribe the "invention" of money to the state,however unlikely this may be (Mises 1963, pp. 406-407).In Mises' complaints about a state theory of money, hints of the Methodenstreitare evident. Knapp was part of the German Historical School and at the time there was aDraft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.7

major clash between the Historical School who believed that economic truth could onlybe ascertained through studying the pecularities of history and real world institutions, andthe Austrian School, of which Menger and Mises were part, who argued that exact lawscomparable to those in the physical sciences could be formulated. Oversimplifying a bit,one might say it was a struggle over whether economics was to be an empirical ortheoretical discipline.That Mises and Knapp were on different sides of the Methodenstreit may explainthe unsympathetic reading that Mises gave The State Theory of Money. A more carefulreading would have shown that there is nothing in Knapp's exposition that is inconsistentwith the account of the evolution of commodity money given by Menger (1892). Knappadmits that commodity money to which state money is historically linked arises from thefree play of economic interests, as economic agents seek a better means of exchange thanbarter. The only difference would be that Knapp might claim that Menger's story isproperly regarded as an historical account. 1The regression theorem is an important contribution to Austrian monetaryeconomics made by Mises. Again, something very similar can be found in Knapp, thedifference being that he would not label his account as anything as grandiose as atheorem. Mises attempts to resolve the puzzle of why money has exchange value somuch greater than its intrinsic value. Why can a piece of paper that may cost a few centsto produce command a hundred dollars in purchasing power? Mises says that one needsto consider that paper money is historically linked to a commodity and that if one1 Recently, Max Alter (Alter & White 1990) made precisely this claim saying that Menger's theory of theorigin of money is a "truly historicist analysis." His statement provoked a reply from Lawrence H. White(ibid.), a prominent modern Austrian economist, denying any affinities between Menger and historicists(or institutionalists as they are known today).Draft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.8

egresses far back enough to the beginnings of indirect exchange, one will find acommodity used as money whose exchange value and instrinsic value were the same. InHuman Action, Mises addresses the issue of whether his "theorem" is really more of anhistorical observation. He says that "to explain an event historically means to show howit was produced by forces and factors operating at a definite date and a definite place. . ..To explain a phenomenon theoretically means to trace back its appearance to theoperation of general rules which are already comprised in the theoretical system" (1963,p. 410).Menger's theory of the origin of money and Mises's regression theory provideevidence that the two sides in the Methodenstreit may not have been that far apart onsubstantive issues in economic theory. In doing economics they reached the sameconclusions; it was just in their account of what they were doing when doing economicsthat they clashed.Weber cannot be easily classified within the Methodenstreit. His first attemptedwork in methodology was a critque of two members of the older German HistoricalSchool, Roscher and Knies (Max Weber 1975). But in his inaugural lecture as Professorof Economics and Finance at the University of Freiburg he identified himself as a“younger” representative of the historical school (Weber 1989). In Human Action, Mises(1963, p. 126) cites approvingly Weber’s comments on economic method but qualifieshis approval with the remark: “Max Weber, it is true, was not sufficiently familiar witheconomics and was too much under the sway of historicism to get a correct insight intothe fundamental of economic thought.” Further complicating the task of classifyingWeber within the Methodenstreit, are the views of modern Austrian economist, LudwigDraft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.9

Lachmann (1906-1990). Lachmann, a student in Berlin of close Weber colleague WernerSombart, believed that Weber’s ideas of interpretative understanding provide a usefulfoundation for Austrian economics (e.g., Lachmann 1971).Weber believed in the possibility of economic theory but saw it emerging in theform of a causal explanatory model in which human motives were the causaldeterminants. About these motives a social scientist has a unique type of knowledgewhich Weber called Verstehen: "We can accomplish something which is never attainablein the natural sciences, namely the subjective understanding of the action of thecomponent individuals" (Weber 1978, p. 15). In place of the exact laws of the Austrianschool, Weber proposed that we need a special type of theoretical construct. FollowingGeorg Jellinek (Marianne Weber 1975, p. 314), he called these constructs ideal types.These abstractions may never occur perfectly in the real world but allow the analyst tostructure his observations.The ideal type is not a presentation of reality, but it aims at providing thepresentation with clear means of expression … It is not a hypothesis, but it aims atdirecting the formation of hypotheses. It is not historical reality or a scheme intowhich it is to be integrated, but a border concept by which reality is measured toelucidate certain significant components of its substance and with which it iscompared. (ibid.)Weber could be seen as transcending both sides of the Methodenstreit and thiswould explain why he could accept Mises’ Currency School insights but, at the sametime, also recognize something important in Knapp's contribution. Weber’s respect forhistorical analysis and his ability to see economic relations embedded in a broader socialDraft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.10

structure gave him an appreciation for Knapp’s theory that others lacked. One could viewKnapp’s contribution to the theory of money as a brilliant construction of an “idealtype.” With his innovative explanation of what constitutes money, he is able to resolvemuch of the confusion at the root of many controversies in monetary theory.Knapp summarizes his delineation of money as follows:"What forms part of the monetary system of the State and what does not? Thecriterion cannot be that the money is issued by the State, for that would excludekinds of money which are of the highest importance; I refer to bank-notes: theyare not issued by the State, but they form a part of its monetary system. Nor canlegal tender be taken as the test, for in monetary systems there are very frequentlykind of money which are not legal tender ... We keep most closely to the facts ifwe take as our test, that the money is accepted in payments made to the State'soffices. ... On this basis it is not the issue, but the acceptation, as we call it, whichis decisive" (1924, p. 95).Knapp's thesis has a rare quality in economics of being both not obvious and notobviously incorrect. The Misesian view of money as a purely market phenomenonmisses out on a role for the state. In his aversion to making statements that could beconstrued as non-theoretical, Mises may have neglected an important part of the truth.Knapp's historicism helps one understand how money evolves in interaction with thestate.Modern accounts of Knapp’s chartalism (e.g., Wray 1999) emphasize Knapp’sconclusion that money is that which is used to pay taxes, but without putting it in thecontext of the historicist analysis that leads to this conclusion. Knapp puts significanceDraft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.11

on the historical fact that banks and states will collaborate in times of war. Banks willmake loans to the state which may violate the principles of prudent lending: “certainly indoing so the bank has overstepped the limits prescribed for its business, but its guardian,the State, has compelled it” (Knapp 1924, p. 142). The bank’s credit money is used bythe state to make payments in its war efforts which leads to an important juncture in theevolution of money:Since the courts cannot compel my subjects to pay in other ways than those inwhich I, the State, make payment, these notes are legal tender for all paymentsamong private persons (ibid., p. 142).Knapp notes a “great change” (ibid., p. xx) has occurred. At one point the statewould accept only specie money for the payment of taxes and would enforce contracts inspecie money. But because of its financial exigencies relating to military expenditures,bank money, based on fractional reserves, gains a legitimacy within the economy that itdid not have previously.Knapp’s ideal type allows us to easily resolve the conundrum of when credit ismoney. Economists have long observed that exchanges are often made with promises topay. In business to business transactions paying on credit is the norm. Furthermore,these promises to pay can sometimes take the form of a note which can be transferred to athird party, who could transfer it to a forth party, and so on. It is natural to wonder ifthese notes should not be included as money. Knapp would say simply, no--not unlessthe government starts accepting them for payment of taxes. Thus bank deposits aremoney and commercial paper is not. Construed as an ideal type, Knapp’s concept ofmoney “is not a presentation of reality, but it aims at providing the presentation with clearDraft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.12

means of expression” (Marianne Weber, 1975, p. 314).Contrary to Mises’ interpretation of Knapp’s theory implicit in his critique (1966,pp. 405-408), it is not the legal tender laws which are essential to what is or is not money:the laws “merely express a pious hope” (Knapp 1924, p. 111). Knapp recognizes thatmoney cannot be determined by decree. Rather it arises out of an interaction of theeconomic agents and the state as a payor and payee of money.Later in his discussion, Mises presents an explanation of the transition from acommodity money to bank money that echoes Knapp’s treatment in important ways. Heagrees with Knapp that the motive for the state using bank money is to increase itsresources. He makes the additional point that it is not the intention of the state to movefrom a commodity money to unbacked credit money. It is an unintended consequence:“This result has always come to pass against the will of the state, not in accordance withit” (1980, p. xx).In the modern literature based on Mises’ monetary economics, there are twodistinct groups that have formed, both clashing to claim the Misesian mantle (see Hoppe1994 vs. Selgin & White 1996; also Hülsmann 2003 vs. White 2003). The side of Hoppeand Hülsmann, which we could call an extreme libertarian position, insists that, in theabsence of government intervention, money would be a commodity (most likely gold)and fully backed claims to that commodity. Credit money, such as bank deposits basedon fractional reserves, they claim, is a fraud and that without government protections,would be rightly exposed to be so. This line of reasoning was argued forcefully byMises student, Murray Rothbard (e.g., Rothbard 1990).Selgin and White take a more moderate libertarian position. They maintain that aDraft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.13

monetary system based on fractional reserve banking is consistent with the absence ofgovernment involvement in the monetary system. They envision the possibility, at leastin theory, of a libertarian state in which there exists a commodity standard with banksproviding money to the system on a fractional reserve basis.Ironically given Knapp’s advocacy of unconstrained state intervention in themonetary system, his state theory of money leads one to accept the argument behind themore extreme libertarian position.Knapp’s hypothesis is that fractional reserve bankmoney comes into general use only because the state needs it to finance its activities. In alibertarian world with no state activities to finance, fractional reserve bank money wouldnever come into existence. So we find the Rothbardians and Knapp in agreement aboutthe issue of why bank money is included in the money supply. Both agree that,fundamentally, bank money is a creature of the state, and not as the free banking theoristswould have it, a creature of the market.ConclusionIn praising The State Theory of Money, Weber (1978, p. 78) notes that Knapp“solves the formal problem brilliantly.” But it is not clear from his discussion exactlywhat that formal problem is. We might speculate that it was the same problem that hasplagued economists ever since they began to formalize their thoughts about money. Howdo we draw the line between various means of indirect exchange to clearly specify whatis and what is not money? Conflicting definitions of money have led to many pointlessdebates in economics and progress would move forward more easily if a single definitioncould be established.Draft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.14

Knapp’s contribution could be seen as the construction of a kind of “ideal type.”Money is that which is accepted at government pay offices. Knapp is abstracting fromall other means of exchange to isolate this one type. Within his theoretical constructionof money, unlike those often assumed by economists, the state plays a crucial role. But itis important to remember Knapp’s historicist analysis and understand the state does notselect the thing in which it wants to be paid in total disregard for market usage. Knapp’sanalysis is entirely consistent with the account of the origin of money presented byMenger (1892, 1981).In his discussion of Knapp, Schumpeter (1954, p. 1090) draws an analogybetween the statement that money is a creature of the law with the statement thatmarriage is a creature of the law. Marriage customs existed long before the state began toplay a role but in understanding what it means to be married today, one cannot abstractfrom the state—similarily with money. As Keynes (1976, p. 5) notes in his Treatise ofMoney, in addition to enforcing contracts that specify payment of the thing officiallynamed money, the state “claims the right to determine and declare what thingscorrespond to the name, and to vary its declaration from time to time—when that is tosay, it claims the right to re-edit the dictionary.”As an “ideal type” Knapp’s construction serves to clarify thinking aboutmonetary matters. Purely economic concepts of money such as the one proposed byMises can lead the analyst into difficulties when tackling policy oriented questions. Anexample is the question of what type of monetary system is consistent with a libertarianstate. Followers of Mises are divided on this issue. One group believes the absence ofgovernment intervention in the monetary system would lead to the use of a commodityDraft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.15

money (most likely gold) and fully backed claims to it. While another group claims thatit is consistent in a libertarian state to have a system of fractional reserve banking inwhich banks are able to create money through the money multiplier process. I argueabove that an appreciation of Knapp’s analysis leads one to side with the former group.Weber recognized as the major limitation of The State Theory of Money itsoptimistic assumption that the state could be trusted to properly manage a fiat moneysystem. Writing in Germany in 1920, Weber’s skepticism was well placed. Yet Webercontinued to maintain that despite its limitations, Knapp’s book is of “permanentlyfundamental importance” (1978, p. 169). This comment serves to guide the readerbeyond the inflationist fallacies of some of Knapp’s practical proposals and examine inmore depth his original and distinctive claim—the claim that to understand money in themodern world, one cannot ignore that it is a “creature of the state,” and no longer a purelyeconomic phenomenon.ReferencesAlter, Max and Lawence H. White. 1990. What Do We Know about Menger?—Comment/ Reply. History of Political Economy. 22: xx (xxx), xx-xx.Bonar, J. 1922. Knapp’s Theory of Money. Economic Journal. 32: 125 (Mar), 39-47.Conant, Charles A. 1909. The Gold Exchange Standard in Light of Experience. EconomicJournal. 19:74 (Jun), 190-200.Cowen, Tyler and Randall Kroszner. 1987. The Development of the New MonetaryEconomics. Journal of Political Economy. 95:3, (Jun ), 567-590.Hoppe, Hans-Hermann. 1994. How is Fiat Money Possible?—or, the Devolution ofMoney and Credit. Review of Austrian Economics. 7 (2): 49-74.Hülsmann J. G. 2003. Has Fractional-Reserve Banking Really Passed the Market TestThe Independent Review. 7: 3 (Winter), 399-422.Draft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.16

Knapp, George Friedrich. 1924. The State Theory of Money. Abridged edition, translatedby H. M. Lucas and J. Bonar. London: Macmillan and Co.Keynes, John Maynard. 1923. A Tract on Monetary Reform. London: Harcourt, Brace &Co.---------------------------. 1976 [1930]. A Treatise on Money. Volume I: The Pure Theory ofMoney. New York: Harcourt Brace Jovanovich.Lerner, Abba P. 1947. Money as a Creature of the State. American Economic Review,37:2 (May), Papers and Proceeding of the Fifty-ninth Annual Meeting of the AmericanEconomic Association, 312-317.Lachmann, Ludwig von. 1971. The Legacy of Max Weber. Berkley: The GlendessaryPress.Laidler, David. 1984. Misconceptions about the Real-Bills Doctrine: A Comment onSargent and Wallace. Journal of Political Economy. 92:1 (Feb), 149-55.Menger, Carl. 1892. On the Origins of Money. Economic Journal, 2:x (Xxx), 239-255.----------------. 1981. Principles of Economics. New York: New York University Press.Mises, Ludwig von. 1909. The Foreign Exchange Policy of the Austro-Hungarian Bank.Economic Journal. 19:74 (Jun ), 201-11.----------------------. 1966. Human Action: A Treatise on Economics. 3 rd rev. ed. Chicago:Henry Regnery.----------------------. 1980. The Theory of Money and Credit. H.E. Batson, trans.Indianapolis: Liberty Classics.Pearson, Heath. 1999 Was there really a German Historical School of Economics.History of Political Economy. 31:3 (Fall), 547-562.Rothbard, Murray. 1990. What Has Government Done to Our Money? 4 th ed. AuburnAla: Ludwig von Mises Institute.-------------------. 1992. Aurophobia: or, Free Banking on What Standard? Review ofAustrian Economics. 6 (1), 97-108.Schumpeter, J. A. 1954. History of Economic Analysis. New York: Oxford UniversityPress.Draft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.17

Selgin, George and Lawrence H. White. 1996. In Defence of Fiduciary Media—or, Weare Not Devo(lutionists), We are Misesians! The Review of Austrian Economics. 9 (2):83-107.Skaggs, Neil T. 1999. Changing Views: Twentieth-Century Opinion on the BankingSchool-Currency School Controversy. History of Political Economy. 31:2 (Summer),361-391.Weber, Marianne. 1975. Max Weber: A Biography. Translated from the German andedited by Harry Zohn. New York: John Wiley and Sons.Weber, Max. 1975. Roscher and Knies: The Logical Problem of Historical Economics,translated by G. Oakes. New York: Macmillan.---------------. 1978. Economy and Society: An Outline of Interpretative Sociology.Volume 1. Edited by Guenther Roth and Claus Wittich. Berkeley: University ofCalifornia Press.-------------. 1989. The National State in Economic Policy in Reading Weber edited by K.Tribe. London: Routledge.White, Lawrence H. 2003. Accounting for Fractional-Reserve Banknotes and Deposits—or, What’s Twenty Quid to the Bloody Midland Bank? The Independent Review. 7(3)Winter 2003.Wray, L. Randall. 1998. Money and Taxes: The Chartalist. Working Paper No. 222,Jerome Levy Economics Insitute, January 1998.-------------------. 1999. Understanding Modern Money: The Key to Full Employment andPrice Stability. Edward Elgar Publishers.Draft , do not quote without permission, comments welcome. fiona.maclachlan@manhattan.edu 2/23/03.18