Tuesday, 21 October 2014

The fallacy of the Equation of Exchange (MV=PT)

"What we have in this (Fisher) equation, in short, is two money sides, each identical with the other. In fact, it is an identity and not an equation. All that this equation tells us about economic life is that the total money received in a transaction is equal to the total money given up in a transaction – surely an uninteresting truism. Things cannot determine prices, only individual actors can."
Murray N. Rothbard (Man, Economy, and State)