Ludwig von Mises: Untitled Contribution (1933)

Ludwig von Mises’s untitled edited-volume essay examines whether better knowledge of the business cycle will actually prevent recurrent crises. Its central distinction is between explaining economic consequences and determining political conduct: understanding how credit expansion produces a boom and subsequent downturn does not ensure that governments and banks will abandon it. Moving from the political appeal of stabilization through the mechanisms and expectations involved in monetary stimulus, Mises concludes by identifying falling prices as an inadequately resolved problem for economic theory.

The opening surveys competing hopes for eliminating cyclical fluctuations. Some observers defend booms because they leave lasting productive achievements despite subsequent losses. Supporters of stabilization, meanwhile, include both defenders of capitalism, who wish to spare it repeated crises, and opponents who believe that eliminating uncertainty would make entrepreneurs dispensable. Behind these divergent judgments lies a shared assumption: improved causal knowledge will produce more stable economic life. Mises challenges that inference:

Auf diese Frage kann die nationalökonomische Theorie keine Antwort geben. Hier liegt kein Problem der Theorie, vielmehr ein Problem der Wirtschaftspolitik oder, richtiger, der Wirtschaftsgeschichte vor.

English translation: Economic theory can give no answer to this question. What lies here is not a problem of theory, but rather a problem of economic policy or, more precisely, of economic history.

Theory can explain the consequences of renewed credit expansion; it cannot determine whether policymakers will undertake it despite knowing those consequences. Mises maintains that the circulation-credit theory already commands broad acceptance, even among advocates of competing explanations. In his account, contemporary stimulus proposals implicitly concede its logic when they defend credit creation as merely moderate or carefully dosed rather than contesting the connection between expansion and crisis.

The essay next explains why knowledge has failed to change policy. Cheap credit has long enjoyed political favor, whereas higher interest rates have scarcely found defenders. Public attitudes toward commodity prices are more divided: producers seek higher prices, consumers lower ones, and political parties accommodate whichever constituency or immediate circumstance matters most. This creates an asymmetry. Authorities resist credit restriction because it raises interest rates, while credit expansion promises both cheaper borrowing and relief from falling prices.

Daß die Senkung des Zinsfußes durch Kreditausweitung zu Preiserhöhungen führen muß, hat man dabei in der Regel nicht beachtet. Doch wenn man es auch gewußt hätte, man hätte von der Politik billigen Geldes nicht gelassen.

English translation: As a rule, no attention was paid to the fact that lowering the interest rate through credit expansion must lead to price increases. Yet even if this had been known, the policy of cheap money would not have been abandoned.

This is an argument about the durability of political preferences, not simply economic ignorance. Mises treats contemporary proposals to reverse or arrest falling prices as repetitions of older monetary demands. His accompanying footnote extends the diagnosis to public sympathy for debtors, observing that hostility toward creditors survives changes in the social forms of saving and lending.

The analysis then shifts from aggregate prices to uneven adjustment. Apart from changes in monetary obligations, Mises locates the social consequences of changes in money’s value in the fact that prices do not move simultaneously or proportionately. He attributes the depression’s persistence chiefly to union wage policy and price-support measures that prevent particular costs and prices from adjusting. On his account, efforts to maintain wages above their unhampered-market level produce lasting mass unemployment. Inflationary remedies seek to bypass resistance to nominal wage reductions by raising other prices first. But their success assumes that money wages will remain stable while prices rise—an assumption he considers incompatible with the continuing political commitment to wage intervention.

His criticism of limited stimulus introduces expectations explicitly. Lower borrowing costs encourage otherwise unprofitable projects only if entrepreneurs expect those costs to remain low long enough to justify their calculations.

Man kann nicht durch Kreditexpansion „ankurbeln“, wenn man dabei schon von der künftigen Restriktion spricht.

English translation: One cannot “stimulate” through credit expansion while already speaking of future restriction.

An announced early termination therefore undermines the investment response the policy seeks. Mises distinguishes general knowledge that expansion must eventually end from an official warning that its end is imminent. He interprets recent unsuccessful stimulus attempts through that distinction: borrowers will hesitate to undertake projects whose financing conditions are publicly expected to disappear.

The conclusion both credits earlier theory and defines its unfinished task. Mises argues that the Currency School had already supplied much of the practically relevant understanding of credit expansion and cyclical reversal. He nevertheless recognizes its limitation: its reasoning addressed nationally bounded expansion rather than coordinated expansion across countries. More urgently, economists must examine the widespread belief that falling money prices are incompatible with increasing production, capital accumulation, and prosperity. The essay closes:

Zu lösen bleibt das Problem sinkender Preise.

English translation: The problem of falling prices remains to be solved.

This ending qualifies the essay’s confidence in monetary cycle theory. For Mises, explaining the boom–bust mechanism is insufficient while rising prices retain their reputation as indispensable to progress. The work’s distinctive contribution is to connect causal theory with political incentives and entrepreneurial expectations, while making the evaluation of falling prices central to the prospects of lasting stabilization.