Galtland Index

Joseph T. Salerno

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Joseph T. Salerno

Joseph T. Salerno is an Austrian-school monetary economist in the Mises-Rothbard tradition — Academic Vice President of the Mises Institute and Professor Emeritus of Economics in Pace University’s Lubin School of Business (he was Professor of Economics there during the 1987–1993 work cited below). Best known for the 1987 formalization of the True Money Supply (TMS) — see Monetary Aggregates and Credit Expansion — for the 1993 dehomogenization argument distinguishing the Mises and Hayek paradigms within contemporary Austrian economics, and for sustained essay-form work collected in Money, Sound and Unsound (2010).

Principal contributions

  • True Money Supply (TMS). Salerno’s 1987 paper (Ch. 3 of Money, Sound and Unsound) formalized Rothbard’s broad money-supply criterion (from America’s Great Depression (America’s Great Depression) Ch. 4 and The Mystery of Banking (The Mystery of Banking)) into a specific aggregate. TMS comprises currency in the hands of the nonbank public + demand deposits + other checkable deposits (NOW accounts) + savings deposits at commercial banks and thrifts + MMDAs + overnight RPs + overnight Eurodollars + U.S. Savings Bonds at redemption value, plus memorandum items (U.S. government demand deposits at the Fed and commercial banks, and foreign official + foreign commercial-bank demand deposits in the U.S.). TMS excludes money market mutual funds (MMMFs), term RPs, small-denomination time deposits and CDs (treated as loans to banks), large CDs, and short-term Treasury securities. The Mises Institute publishes a TMS series.
  • The 2010 essay collection. Money, Sound and Unsound is organized in five parts and 26 chapters:
    • Part 1 — Foundations of Monetary Theory: two traditions (John Law vs Turgot), Mises’s monetary theory, the TMS paper (Ch. 3), a theory of money prices, international monetary theory, a comment on Yeager.
    • Part 2 — Inflation, Deflation and Depression: coordination in Austrian macroeconomics, Mises on inflation and expectations, war and the money machine, an Austrian taxonomy of deflation, a comment on Tullock (Ch. 11).
    • Part 3 — The Gold Standard: the 100 percent gold standard proposal, true vs false gold standards, an analysis of recent gold-standard proposals (Ch. 14), the international gold standard.
    • Part 4 — Applications: money and gold in the 1920s–30s, a reply to Timberlake on inflation and money (Ch. 17), a monetary explanation of the 1987 stock-market crash, sound money for ex-communist Europe, currency board vs currency principle for currency-crisis prevention.
    • Part 5 — Commentary: Greenspan critiques (Chs. 21–22), gold in the Great Depression, a comment on Greenfield/Rockoff on currency competition (Ch. 24), “Money Matters No More?” (Ch. 25), deflation/depression links (Ch. 26).
  • Application of monetary calculation to post-communist reform. Money, Sound and Unsound Ch. 19 (“Beyond Calculational Chaos”) applies the Mises-Rothbard monetary-calculation framework to the transition out of communist central planning: private property, free exchange, and sound money are jointly necessary for economic calculation; Rothbard’s “calculational chaos” diagnosis is invoked directly. This is one of the clearer empirical demonstrations of the Mises-Rothbard line on calculation at work.

Position in the Austrian tradition

Salerno’s “Mises and Hayek Dehomogenized” (1993) is the canonical statement of his positioning argument: contemporary Austrian economics encompasses two distinct paradigms, not one, and the post-1970s revival conflated them. The paradigms diverge on multiple axes:

  • Source lineage. The Mises paradigm develops Böhm-Bawerk. The Hayek paradigm develops Wieser.
  • Equilibrium and the market process. The Mises paradigm treats equilibrium as an analytical construct used to isolate the entrepreneurial-profit residual; the Hayek paradigm treats the market as a coordinating process whose informational properties are the central object of study.
  • The socialist-calculation debate. The Mises paradigm rests on the impossibility of monetary calculation in the absence of genuine factor prices, which themselves require markets — i.e., exchanges — in the higher-order means of production. The Hayek paradigm rests on the impossibility of centralized aggregation of dispersed knowledge. Salerno argues these are distinct (not equivalent) impossibility arguments.
  • Modern carriers of the Hayekian paradigm. Salerno names Israel M. Kirzner as the principal carrier of the Hayekian paradigm in modern Austrian economics, with the modern free-banking school via Lawrence H. White as a macroeconomic outgrowth on the same trunk. He does not pair this with a symmetrically-named “Mises-Rothbard carrier”; the paper’s structure is about what gets misattributed to Mises, not a head-to-head carrier roster.

The 1993 paper is explicit about what the dehomogenization argument does not claim. The two paradigms share Mengerian common ground and substantial overlap; the contributions of Kirzner and White are named as excellent within the Hayekian paradigm. The objection is to homogenization — attributing Hayekian positions to Mises and reading Mises through Wieserian/Kirznerian lenses — not to either paradigm in isolation.

Money, Sound and Unsound Ch. 8 (“Mises on Inflation and Expectations”) cites this 1993 paper directly when it traces the divergence in monetary contexts; Ch. 19 (“Beyond Calculational Chaos”) applies the Mises-Rothbard calculation frame to the post-communist transition. Pure-time-preference theory of interest — sometimes used in the secondary literature as a discriminator between the two paradigms — is not a clean discriminator in Salerno’s own text: Ch. 9 references PTPT and cites Kirzner approvingly as a defender alongside Rothbard, Mises, and Garrison.

Selected works

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