Gottfried Haberler, Kritische Bemerkungen zu Schumpeters Geldtheorie. Zur Lehre vom „objektiven“ Tauschwert des Geldes (1925)

Haberler’s article connects a critique of Schumpeter’s monetary equation with an examination of the “objective” exchange value of money. Its methodological concern is the distinction between accounting identities and causal explanations, and between conceptual abbreviations and independently existing economic magnitudes. His criticism begins with explicit appreciation:

„Das Sozialprodukt und die Rechenpfennige“ ist sicher eine der geist- und lehrreichsten Arbeiten, die die Geldtheorie aufzuweisen hat.

English translation: "Das Sozialprodukt und die Rechenpfennige" is surely one of the most ingenious and instructive works that monetary theory has to show.

Sections I–IV reconstruct the equation (E=MU=\sum p_i m_i). Haberler argues that its terms express the same purchases of final consumption goods in different forms. Income, understood here as expenditure on consumed goods, equals their aggregate money price by definition. Money multiplied by an appropriately specified velocity represents that same transaction total. The equation alone therefore does not establish how one magnitude determines another.

The definition of velocity is decisive. Haberler separates the expenditure mediated by individual monetary units from the number of their actual transfers. Under Schumpeter’s construction, intermediate transactions do not count: only the final purchase by the consumer enters the calculation.

Die Umlaufsgeschwindigkeit in dem Sinne, wie Schumpeter sie versteht, ist jedoch in beiden Fällen dieselbe; denn bei ihrer Berechnung wird ja nur der letzte Händewechsel, dort, wo die Ware endgültig in die Hand des Konsumenten übergeht, in Betracht gezogen.

English translation: The velocity of circulation in the sense in which Schumpeter understands it is, however, the same in both cases; for in its calculation only the last change of hands, where the commodity passes definitively into the hand of the consumer, is taken into account.

This restriction explains why broadening the definition of the money stock need not alter the expenditure total. Hoarded money and money used exclusively in capital markets contribute nothing to the relevant velocity-weighted sum. Haberler can consequently include all means of exchange without changing the identity:

Wir verstehen unter M einfach die Tauschmittel der Volkswirtschaft, ohne Rücksicht darauf, ob sich diese Tauschmittel am Genußgüter- oder Kapitalmarkt befinden, ob sie zirkulieren oder gehortet sind.

English translation: By M we understand simply the means of exchange of the economy, without regard to whether these means of exchange are on the consumption-goods market or on the capital market, whether they are circulating or hoarded.

Bookkeeping settlements further expose the distinction between money as an actual means of exchange and money as the unit in which transactions are reckoned. Such purchases can be included by imputing a monetary amount with velocity one. This preserves the accounting relation but supplies no independent causal explanation.

Section V challenges Schumpeter’s treatment of changes in individual prices and quantities. A sum of products cannot remain unchanged when one term changes unless another movement compensates for it. Haberler states the correction directly:

Richtig muß der erste Satz Schumpeters lauten: Jede Veränderung eines Summanden der Produktensumme bedeutet eine Veränderung der Summe — es sei denn, daß diese Veränderung durch eine andere kompensiert wird.

English translation: Correctly, Schumpeter's first proposition must read: every change in one addend of the sum of products means a change in the sum — unless this change is compensated by another.

The explanatory question is when and why compensation occurs, not whether the equality can be maintained. Haberler also distinguishes total expenditure from an average price level: conclusions about a sum of price-times-quantity products cannot simply be transferred to purchasing power.

Sections VI–VII extend the critique to monetary value itself. Haberler initially treats purchasing power as the reciprocal of the price level while rejecting separate “inner” and “outer” objective values of money. Monetary and commodity-side causes can affect the same exchange relations without creating two distinct objects of measurement. He then questions whether a general price level is a uniquely measurable magnitude. Particular prices are observable, but their aggregation depends on the purpose and construction of an index. Monetary value remains useful shorthand for combinations of prices, provided it is not treated as an independent entity causing interest movements or crises.

The underlying distinction is between subjective valuation and market price. Subjective value orders goods within an individual’s system of ends; it supplies no absolute psychic measure permitting interpersonal comparison. Haberler’s criticism of arguments for progressive taxation based on differences in marginal utility illustrates the danger of importing normative judgments into explanatory theory.

His discussion of Wieser and B. M. Anderson likewise challenges attempts to insert a social value between individual valuations and prices. Social influences can shape individual wants without making society a single valuing subject. Claims that prices express goods’ importance to society require explanation through the economic mechanism. The article reserves fuller discussion of purchasing-power theories and index-number methods for a subsequent essay. Its central contribution is a linked critique of causal overinterpretation of monetary equations and the reification of monetary aggregates.