Prof. Antal E. Fekete: “advocating a return to Menger and his ‘quality theory of money’.”

Originally posted on Friday, January 18th, 2013

The work of Prof. Antal Fekete, and his critique of leading Austrians such as Hayek, Mises, and Rothbard is coming to increasing note.  He was discovered years ago by “the Sage of Mexico,” Hugo Salinas Price, who said of Fekete, in 2007, “When we met, Antal E. Fekete was hardly known. Today, he is read around the world, as he fully deserves to be. I am proud to call this man my friend. His thinking is as fresh and profound as ever; his erudition is classic, hard to be found in economic circles today.”

Carl Menger, courtesy of Wikipedia

A brief excerpt from Prof. Fekete’s recently issued CRITIQUE OF MAINSTREAM AUSTRIAN ECONOMICS, reportedly available in full at Lemetropolecafe.com.

I have always been an admirer of Ludwig von Mises (1881-1973) and have long considered him the greatest economist of the 20^th century. He was also a charming and a modest person. He would have never considered himself infallible. And he wasn’t. After a long study, soul-searching and hesitation I called attention to points where in my opinion Mises was wrong. With a great deal of diffidence and humility I am doing my best to defend my position vis-a-vis that of Mises.

Accentuating the negative

I have always felt that the theory of gold, as presented by Mises and even more so by Hayek, is a ‘negative theory’. Friedrich A. Hayek almost goes as far as saying that the gold standard is a necessary evil; there would be no need for it if the government were trustworthy. According to Mises it is the temptation to tamper with the value of the monetary unit that has made the gold standard indispensable. In this way growth in the stock of money is tied to the profitability of gold mining. Mises thought it was necessary to add that “the gold standard is not a perfect institution: there is no such thing as perfection in human affairs.” His argument is motivated by the Quantity Theory of Money. Consequently he fails to distinguish between the value and the purchasing power of gold.

Positive theory of gold

In my view there is no need to be apologetic about the gold standard. Rather, there is need for what I call in want of a better word a ‘positive theory’ of gold. I am offering such a positive theory, and my main criticism of Mises, Hayek, and many other great economic thinkers going all the way back to Ricardo, centers around the fact that they have all missed the point of contact between gold and interest. More specifically they have missed the point of contact between gold and the curse of aging. Man knows that his surplus of mental and physical powers will one day give way to deficit. He prepares for the day when he has to draw on his savings. …

In the view of most economists gold was hit upon by accident for reasons of being heavy, shiny; an ideal symbol of opulence. … I am merely advocating a return to Menger and his ‘quality theory of money’.