Two Problems of Regression Theorem
Matúš Pošvanc · New Perspectives on Political Economy · 2021
For Mises ([1912], 1953), it is impossible to explain the objective exchange value of money entirely by reference to its monetary utility. He never applied directly the law of diminishing marginal utility to money, even though it is the diction of the theory of subjective value once we explain the price of goods. He claimed that to explain the purchasing power or price of money is possible only indirectly. This is why he developed the Regression Theorem. The Theorem should overcome the problem with the direct application of the law of diminishing marginal utility to money and should explain the essence of the price of money. It will be shown that in doing so, Mises used the objectivist approach per se. The argument will be demonstrated, based on two of Mises´s mistakes: first, on the mixing of the use and exchange value of goods, so the non-proper differentiation of the concepts of marketability and moneyness and second, a core mistake, by using past prices as the base concept for the derivation of new prices, money included.