Money, Bank Credit, and Economic Cycles - The Ludwig von Mises ...

530 Money, Bank Credit, and Economic CyclesIt is interesting to note that one of today’s most prominentmonetarists, David Laidler, is forced to resort to Keynesianarguments in a fruitless attempt to criticize the Austrian theoryof economic cycles. Nevertheless the author himself correctlyrecognizes that from the standpoint of the Austrian theory, thedifferences between monetarists and Keynesians are merelytrivial and mostly apparent, since both groups apply very similar“macroeconomic” methodologies in their analyses. 30The above reflections on monetarism (its lack of a capitaltheory and the adoption of a macroeconomic outlook whichmasks the issues of true importance) would not be completewithout a criticism of the equation of exchange, MV=PT, onwhich monetarists have relied since Irving Fisher proposed itin his book, The Purchasing Power of Money. 31 Clearly thisWhat the Austrian remedy—increasing voluntary savings—amounts to is nothing but a change of data which will turn datawhich originally were purely imaginary—entrepreneurs’profit expectations induced by the low rate of interest—intoreal data. (Lachmann, “On Crisis and Adjustment,” Review ofEconomics and Statistics [May 1939]: 67)30 David Laidler, The Golden Age of the Quantity Theory (New York: PhilipAllan, 1991). Laidler specifically concludes:I am suggesting, more generally, that there is far less differencebetween neoclassical and Keynesian attitudes to policyintervention, particularly in the monetary area, than is commonlybelieved. The economists whose contributions I haveanalyzed did not regard any particular set of monetaryarrangements as sacrosanct. For most of them, the acid test ofany system was its capacity to deliver price level stability andhence, they believed, output and employment stability too.Laidler adds:The consequent adoption of Keynesian policy doctrines, too,was the natural product of treating the choice of economicinstitutions as a political one, to be made on pragmaticgrounds. (p. 198)Laidler’s book is essential for understanding current monetarist doctrinesand their evolution.31 Irving Fisher, The Purchasing Power of Money, esp. pp. 25ff. in the 1925edition. Mises, with his customary insight, points out that defenders ofthe quantity theory of money have done it more damage than their