Fritz Machlup, “Rezension: H. Oswalt, Grundzüge der Geldtheorie” (1930)

Fritz Machlup’s review welcomes Oswalt’s monetary primer as a theoretically informed extension of his earlier introduction to economics. That introduction had treated economic life in real rather than monetary terms, seeking explanations applicable across isolated, communist, and modern exchange economies. The supplement brings money into the analysis without sacrificing pedagogical clarity. Machlup moves from praise of this achievement through the foundations of monetary acceptance and value to a specific theoretical objection and the distinction between money creation and credit.

Trust is Oswalt’s starting point, but Machlup carefully distinguishes its role in sustaining acceptance from an explanation of purchasing power. Distrust of trust-based monetary theories is justified when they derive purchasing power from the degree of confidence in money. Oswalt avoids that mistake: reciprocal confidence in general acceptance corresponds to Wieser’s and Mises’s accounts of habitual monetary use.

Die Höhe der Kaufkraft des Geldes wird bei Oswalt vollkommen richtig historisch erklärt.

English translation: The level of the purchasing power of money is explained by Oswalt quite correctly in historical terms.

This endorsement locates Oswalt within a historical explanation of purchasing power, rather than treating confidence as its independent quantitative determinant. Machlup likewise approves his treatment of monetary value through utility and scarcity. Money’s utility lies in its exchange function, which itself depends on relative scarcity. The apparent circle—money circulates because it has value and has value because it circulates—is answered by tracing both to the shared expectation that valuable goods can be obtained for it.

Mises’s influence is generally beneficial, but Machlup objects to the section on money as a measure of value. Oswalt treats value as a quantity and attempts to reconcile his position with Mises by invoking goods’ money-denominated “objective exchange value.” For Machlup, this does not establish a distinct magnitude of value:

Daß der „objektive Tauschwert“ einer Ware aber nur eine Duplikation des Preisbegriffes ist, wurde schon von verschiedenen Seiten erkannt.

English translation: That the "objective exchange value" of a commodity is, however, merely a duplication of the concept of price has already been recognised from various quarters.

The objection marks the limit of Machlup’s otherwise strong approval: describing prices does not resolve the conceptual problem of measuring value. He also endorses Oswalt’s criticism of the state theory of money for beginning with payment capacity rather than exchange capacity.

The review’s final substantive emphasis concerns banking. The close connection between interest and monetary theory arises partly because banks perform two functions: creating money and granting loans. Machlup particularly values Oswalt’s distinction between money being created for credit and being created by credit. This preserves the difference between commercial commodity credit and bank credit, with consequences for responsibility for additional purchasing power:

(Wenn jeder Kredit — also auch der Warenkredit des Kaufmannes — Geld, also neue Kaufkraft schaffen würde, dann könnten die Banken ihre Verantwortung für die „zusätzliche Kaufkraft“ leicht auf die ganze Wirtschaft abwälzen.)

English translation: (If every credit — hence also the merchant's commodity credit — were to create money, and thus new purchasing power, then the banks could easily shift their responsibility for the "additional purchasing power" onto the economy as a whole.)

Machlup concludes by endorsing the primer’s deliberately limited aim: theoretical clarity about money’s nature. The review’s significance lies in its discriminating approval—praising accessible exposition while insisting on distinctions between acceptance and purchasing power, price and value, and lending and monetary creation.