Nominal Values Should Never Change, Ever


I really enjoy listening to the narrator from the conspiracy theory video Zeitgeist. It’s not that the video makes any sense, but it is really just a pleasure to hear him speak. I feel the same way about Hans-Hermann Hoppe. Unfortunately what he says never seems to make any sense.

The infamous Mish, who certainly has an outsized influence on the internet, has a post that has made the rounds which features a video of Hoppe claiming that the proper way to argue with Keynesians is to feign incredulity.

Hoppe seems to take the view that the most important role of money is as a store of value. He doesn’t seem to understand that money’s primary purpose is to coordinate expectations (medium of exchange)…from this and other talks, it isn’t even clear that Hoppe understands that money is a medium of exchange. However, a key feature of intertemporal coordination is coordination failure.

Fortunately it is very easy to dispel this confusion. The fact is that under certain circumstances — namely elevated demand to hold exchange media — peoples’ coordination failures are making the group as a whole poorer. In this instance, simply giving people pieces of paper does, in fact, make them richer as they get more stuff in the aggregate by trading than by personal production and trying to increase their money balances. Presumably Hoppe wouldn’t reject the notion that the end goal of economic activity is consumption of goods and services? Perhaps he would.

Hoppe is obviously a rather dogmatic Austrian “economist” — and I put that in quotes in order to not disparage other Austrian economists — but unfortunately this sort of crude reasoning is the flavor of Austrianism that has become lore on the internet. I, personally, don’t agree with Paul Krugman’s prescription for fiscal stimulus, and it is certainly fine to disagree…but it is important to have a coherent alternative story to tell.

Side question, does Hans-Hermann Hoppe think that a mature market economy can sustain a large, persistently negative risk-free real interest rate?

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2 thoughts on “Nominal Values Should Never Change, Ever

    1. Indeed, many Austrians justify their insistence on returning to a gold standard by point to the stable (if slightly deflationary) price level under the regime as helping savers.

      But saving in cash (as in, physical cash with a zero nominal interest rate) is a horrible strategy in general, not just under an inflationary regime. It’s extremely risky, and offers relatively little return under actually-having-existed expansionary deflations.

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