This document summarizes key points from Chapter 11 of Man, Economy, and State by Murray Rothbard regarding the supply and demand for money. It discusses how money serves as a medium of exchange, how the demand for money decreases as the price per monetary unit increases, and how individuals allocate money between consumption, investment, and cash balances. It also notes that money provides value even when simply being held as cash balances, and that any stock of money, once prices adjust, confers maximum social benefit with no social gain from an increased money supply.

1. Money, Monopoly &
Market Intervention
Robert P. Murphy
Mises Academy
October 19, 2011
Lecture 3: 1st
Third of Chapter 11 of
Man, Economy, and State

2. 1st
Third of
Chapter 11 of MES
1. Google Graph Fail!
2. Intellectual Property
3. Supply & Demand for Money
A. Price an Array…
…
IV. Changes in Supply & Demand
V. Important Law!

3. I. Google Graph Fail!

4. II. Intellectual Property

5. III. Supply & Demand for Money

6. A. “Price” of Money an Array

7. B. Use “Total Demand-Stock”
Framework for Money
●Everybody exchanges with money.
●New production relatively small
compared to existing stock.

8. C. Downward Sloping Exchange-
Demand Curve for Money
●“Vertical” demand curves in most
product markets—well, a little
confusing (RPM).
●Falling demand curve in labor
markets.
●Combine the two to get overall falling
demand curve for money, but we are
here talking about exchange demand,
not speculative demand.

9. D. Reservation Demand for Money
After acquiring (“buying”) money in the
pre-income phase, in the post-income
phase a person must allocate money to
three possible uses:
1.Consumption spending
2.Investment spending
3.Add to cash balance

10. E. Demand for Cash Balances Also
Downward-Sloping
People hold cash balances in order to
complete future purchases of real goods
and services. If the PPM goes up, then
people will (try to) spend some of their
cash away. If the PPM goes down, then
they will (try to) acquire larger cash
balances.

11. F. Bad Metaphor
Rothbard warns not to think of money
as “in circulation” as opposed to “in idle
hoards.” At any time, all money in the
community is in someone’s cash
balance. Money provides a service even
when it it “merely” being held.

12. G. Graphical Analysis

13. IV. Changes in Supply/Demand

14. Changes in Supply/Demand

15. V. Important Law!
Money (qua money) is valued solely
because of its purchasing power.
Therefore…
Any stock of money (once prices adjust)
confers the maximum social benefit.
There is no social gain from an increase
in stock of money. This is NOT the case
with any other good or service.