Intro: There are some imaginary dialogues here, of living people talking to the dead, the dead responding, fictional characters debating real ones, and such like. To make sure we are all on the same page, actual quotes from actual writings are presented in italics.
Ludwig von Mises is the giant of the Austrian school, but his position on certain economic matters is distasteful to some. The bitcoiners don’t like his regression theorem. Others don’t like his defense of the gold standard. Having failed so far to refute his impeccable arguments, they have decided to appeal to authority. Menger was Mises’s mentor, and Menger disagreed with Mises about money, they claim. That being the case, we’re going with Menger, they say. Today we will look at one of these new fangled theories.
Devil’s Advocate: I’ve been reading their stuff, Dave, and they have you dead to rights. Let me quote from one of the websites:
Daily Bell: What’s the difference between Mises and Menger when it comes to gold?
Antal Fekete: The obvious difference is the apparent blindness of Mises to what Menger sees very clearly that money must be not just a commodity; it must be the most marketable commodity…
Devil’s Advocate: Blind, I say! Blind! That blind old Mises plumb forgot that money is not just a commodity; it is the most marketable commodity.
Mises: Ahem. Here’s what I wrote in Money and Credit:
Whenever a direct exchange seemed out
of the question, each of the parties to a transaction would naturally
endeavour’ to exchange his superfluous commodities, not merely
for more marketable commodities in general, but for the most market-
able commodities; and among these again he would naturally
prefer whichever particular commodity was the most marketable
And in Human Action:
Money is a medium of exchange. It is the most marketable good
which people acquire because they want to offer it in later acts of
Antal Fekete: Ooopsie. Guess I missed at least three places where you said it in black and white. I must have been blind. But it matters not. You, Mises, have no clue what the most marketable commodity means. Let me quote myself:
Menger sees very clearly that money must be not just a commodity; it must be the most marketable commodity, the marginal utility of which is virtually constant.
Devil’s Advocate: Say what?
Fekete: Mises categorically stated that constant marginal utility is contradictory in that it indicates infinite demand. Mises would be right only if interest as an obstruction to infinite demand would not play a part in all this. But it does. Mises ignored the nexus between gold and interest altogether.
…gold was not just ‘a commodity’, but it was ‘the most marketable commodity’, the marginal utility of which was declining more slowly than that of any other. Alternatively, the most marketable commodity could be characterized as one for which the spread between the asked price and the bid price increases more slowly than that for any other as ever larger quantities of it are offered in the markets.
DA: What does all that even mean?
SD: Here’s what Menger says, almost word for word the same as Fekete:
Thirdly, there are commodities for which a lively and well
organized speculation exists that absorbs every portion of the
available quantity of the commodities coming to market at any
time, even though in excess of current requirements.
There are other commodity markets in which speculation is not carried on,
or at least not to the same extent, and in which, if they become
oversupplied with commodities, either prices fall rapidly, or the
commodities brought to market must be taken away unsold.
Goods of the first kind can generally be sold in any quantity actu-
ally available at a given time with little sacrifice in price, while the
owner of a commodity for which no speculation exists can sell
quantities exceeding current requirements only with very severe
losses or not at all.
I gave an example of this last class of commodities earlier
when I cited the marketability of books written for specific
groups of scholars. More important in this regard are commodi-
ties that have no independent use and are wanted only as parts
of other commodities. Whatever the price of watch springs or
the price of pressure gauges for steam engines may be, require-
ments for them are determined almost exactly by the number of
watches or steam engines to be produced, and a considerably larger
quantity of the former goods could not be sold at any price.
On the other hand, gold and silver, and several other commodities
whose narrowly limited available quantities stand opposite almost
unlimited requirements, can be sold in any quantity whatsoever.
There is no doubt that a quantity of gold a thousand times as large
as that presently available, and a quantity of silver a hundred
times as large, would still find buyers if brought to market.
Such increases in the available quantities of these metals would cause
them to fall severely in price, and they would then doubtless be
used by persons of little wealth for utensils and ordinary plate, and
even by poorer people for adornment. But even if they were
brought to market in such enormously increased quantities, it
would not be in vain. They could still be sold. A similar increase,
however, of the best scholarly work, of the most excellent optical
instruments, or even of such important commodities as bread and
meat, would make them literally unsaleable.
From these considerations, it follows that a possessor of gold and silver can very readily
sell any portion of the quantity of these goods available at any
time, in the worst case with a small loss in price. But the sudden
accumulation of most commodities usually leads to a much greater
fall in price, and there is always the possibility that they cannot be
sold at all under such conditions.
DA: There it is, Dave. Exactly what Fekete was saying.
DA: What do you mean, no? It’s all there, the ever larger quantities being offered in the market, everything.
SD: So you think that was Menger defining what most marketable means?
DA: As Fekete said, the most marketable commodity could be characterized as one for which the spread between the asked price and the bid price increases more slowly than that for any other as ever larger quantities of it are offered in the markets.
SD: What does characterize mean?
DA: To describe the character or quality of.
SD: Synonyms for characterize?
SD: So you would characterize something by saying “Thirdly….”
DA: Ermm, no.
SD: If you read Menger in context, he is not defining most marketable in that quoted section. He is not even characterizing it.
DA: So what is he doing?
SD: He is assuming you know what most marketable means, and is in the middle of giving a list of causes of something being marketable.
DA: So Fekete is confusing a cause and a characterization? And choosing one of three at that?
SD: Oh, there are more than three. Another one in that list of causes of marketability is how dependent is a sale on who the seller is? Dirty laundry will not be very marketable if a homeless person is trying to sell it, but his gold will still be, making gold more marketable than dirty laundry.
DA: Seriously, Dave, Menger said that?
Menger: I sure did, and here’s the quote:
Some commodities have almost the same marketability in the
hands of every economizing individual. Gold nuggets extracted
from the sands of the Aranyos River by a dirty Transylvanian
gypsy are just as saleable in his hands as in the hands of the owner
of a gold mine, provided the gypsy knows where to find the right
market for his commodity. Gold nuggets can pass through any
number of hands without any decrease whatsoever in marketabil-
But articles of clothing, bedding, prepared foods, etc., would be
suspect and almost unsaleable, or at any rate of greatly depreci-
ated value, in the hands of the gypsy, even if they had not been
used by him, and even if he had, from the beginning, acquired them
only with the intention of passing them on in exchange. However
saleable commodities of this kind may be in the hands of their pro-
ducers or certain merchants, they lose their marketability altogether,
or at any rate in part, if even a suspicion arises that they have
already been used or only been in unclean hands. They are therefore
not suited in economic exchange to circulation from hand to
Devil’s Advocate: So Mises is still wrong! Most marketable means you would buy it off a homeless person. That’s what characterizes most marketable!
SD: Devil, don’t you see? Menger is giving us a long list of what makes something more or less marketable. It’s a list of causes. You can’t pick one thing off that list at random and say that’s the definition of most marketable. None of them are the definition. They are all causes.
DA: So bottom line, Mises and Menger are in agreement?
SD: Sure are. Bottom line, a money is what almost everyone covets, what almost everyone will accept as payment for their cow, and the reason they will use it as money is because it is the most marketable good, meaning the one easiest to sell [as is clear from that last Menger quote]. What makes a thing easy to sell? Many factors, which Menger lists with great charm, all of which make sense and are easy to understand, all of which Mises agreed with, none of which contradict anything Mises wrote.