he publication of the first English Translation of Schumpeter’s posthumous Treatise on Money has been awaited with much anticipation, even if though as rumored it misses rough drafts of three chapters.
I still await it from Amazon although i have read Jo Mitchells review and am intrigued how he seems to have adopted a flow of funds type model and is sharply critical of Chartism.
The following quote was striking:
“to speak of a quantity of existing units of account would make as much sense as to say that a certain number of units of length exist with which everything that has that length must be measured” (p. 244)
It is unfair to criticise a quote without having read the original so I risk of unfairness I think this is a bad and rare mistake by the great man.
We today measure today length in metres which was estimated (badly) as 1 millionth of the diameter of the earth. The choice of 1 million was arbitary but we still measure length in estimates of ‘earths’. Everything we measure we measure in relative units of something else and multiplied by some scaling factor.
One of the great problems with Walrasian theory is that it has no definition of the measure of the unit of account. There is no money. 3 ice creams in New York in April may equal 2 Ice Cream in Boston in July but it does not define the scale of price according to the unit of account. An can produce an equation which results in a price of Xn, but what is n?
There is no problem in counting a unit of account if that unit of account is a physical thing. If the unit of account of a currency was cowrie shells presumably Schumpeter would not have had a problem.
Here I think Schumpeter’s hostility to Knapp and Chartelism led him to error. Lets say an ancient state creates a debt equivalent to the price of 5 days labour to produce food and requires that debt (tax) to be paid in a currency of its own printing. That money is given to an army to buy food. It can either buy the food or pay people to labour to produce the food. Those to whom money circulates can pay others to labour to produce the food to sell to pay for the tax instead. Ultimately the setting of the unit of account as a debt depends on the physical equivalent of work needed to pay the tax.
Hence it is possible to speak in terms of an actual physical measure of the unit of account in terms of the goods equivalent of public spending and how that unit of account expands and contracts depending on the net changes between the amount unit of account created when a state spends and destroyed when the debt is cancelled (tax paid).