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“The Definition of Inflation According to Mises: Implications for the Debate on Free Banking” (Libertarian Papers)

Latest Libertarian Papers article: “The Definition of Inflation According to Mises: Implications for the Debate on Free Banking,” by Nicolás Cachanosky.

Abstract: The discussion of what is and what is not inflation has become central among the Austrian economists in their debate between free banking with fractional reserves versus banking with 100-percent reserve. Many Austrians also turn to the writings of Mises to find out what the dean of Austrian Economics thought about inflation, but there is no agreement on the interpretation of his writings either. This article tries to contribute to the interpretation of Mises’ concept of inflation.

[Mises blog cross-post]

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  • Emil Suric October 30, 2009, 11:19 am

    It seems that Mises and the free banking sect of Austrian economics (masonomics) share the same definition of inflation. But at the same time, it seems that Mises believes that any change in the money supply must cause relative price distortions and a misallocation of resources (arbitrary shift in the structure of production), leading to an inevitable crises (cluster of error). I think this is in line with a position put forth by Hayek (I don’t know if it’s entirely his position), where he states that directly giving newly created money to consumers would cause a contraction in the structure of production (automatic recession, as opposed to the boom-bust associated with increasing producer credits). So whether it’s called inflation or not seems to be quite useless; rather, we should focus on how it causes inter-temporal disequilibrium.

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