C. Menger’s theory of the value of money

Abstract

The aim of the article is a complex presentation of C. Menger’s theory of the value of money. The main method was the content analysis of his little-known articles devoted both to monetary theory and to practical issues of monetary reform in Austria-Hungary. In accordance with existing classifications, Menger’s theory of money may be defined as evolutionary according to the criteria of origin, functional according to the criteria of the nature of value, and psychological according to the criteria of factors of value change. It has been demonstrated that Menger’s initial view of the source of the value of money in line with the substantial approach can be explained by combining it with an evolutionary approach to the origin of money and opposition to nominalism based on a rationalistic approach. Later, in the works of the 1890s, there is a shift towards functional approach, due, among other things, to the emergence of new economic phenomena. Menger’s denial of the mechanistic version of the quantitative theory of money as inconsistent with the basic assumptions of the analysis is shown. Determining the essence of money by its position in the national economy, formed by the subjective actions of people, creates the basis for a psychological explanation of the change in the value of money. The article analyzes the concepts of the inner and outer value of money introduced by Menger into science and the reasons for refusing to consider the idea of a constant outer value. Maintaining a stable inner value of money by regulating its quantity in circulation requires careful analytical and statistical efforts, and Menger warns against arbitrary active government intervention in the sphere of money circulation. Research prospects are seen in the planes of analyzing the influence of the approaches to the theory of money laid down by Menger on the subsequent theories of various schools and the phenomenon of the seeming duality of Menger’s approach as a factor of the bifurcation of the Austrian economic school.