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Mises and the Moderns on the Inessentiality of Money in Equilibrium

24 Pages Posted: 3 Mar 2015 Last revised: 3 Jun 2015

William J. Luther

Kenyon College; American Institute for Economic Research

Date Written: March 1, 2015


The challenge of rendering monetary exchange intelligible within a Walrasian general equilibrium framework is well known. Perhaps less well known is the difficulty of integrating monetary and exchange economies in decentralized conceptions of equilibrium, of which the evenly rotating economy of Ludwig von Mises (1949) is an early example. After reviewing the prospect for money in the evenly rotating economy, I survey the modern literature on frictions that make money useful for exchange. While exploring techniques commonly used to generate a useful role for money in this environment, I make a distinction between exchange frictions and epistemic frictions. Although theoretical efforts have largely focused on exchange frictions, recent experimental evidence suggests that epistemic frictions warrant further attention. I conclude that Mises should be seen as a pioneer in this literature, though recent advances demonstrate that the set of frictions capable of rendering money useful is much larger than he envisioned.

Keywords: Austrian economics, epistemic frictions, evenly rotating economy, exchange frictions, experimental macroeconomics, general equilibrium, gift exchange, infinite games, matching, Mises, monetary economics, money, search, social norms

JEL Classification: B53, E00, E03, E40, E41, E42

Suggested Citation

Luther, William J., Mises and the Moderns on the Inessentiality of Money in Equilibrium (March 1, 2015). Available at SSRN: or

William Luther (Contact Author)

Kenyon College ( email )

Gambier, OH 43022
United States


American Institute for Economic Research

PO Box 1000
Great Barrington, MA 01230
United States

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