In the very first chapter “the Functions of Money”, of his book, Mises provides a step by
step process of the origin of money. Misses significantly acknowledged the contribution of his
reference Carl Menger 1871, who is designated as a founder of Austrian Economics and gave for
the first time a satisfactory explanation on the origin of money. Menger contrived a step by step
evolution of money rather than assuming it a decree or an edict from a king or a government
(Mises, 1953b). Mises and his Austrian predecessors, whom he refers to generously, worked out
a logical explanation to the measurement of value. Referred to as Subjectivist/Marginal
Revolution, Mises and others explained the prices of commodity goods by the interplay of
subjective valuations in the market, which in turn explained the prices of producer goods that
are required to produce them. This was a breakthrough in valuing commodities as it negated
the classical economists’ labor theory of value, which explained the price of a good by the
amount of labor used in its production or cost of producing that good.
Mises goes forward in explaining that a government can never force a particular good (be it the
commodity money or fiat money) to command a specific purchasing power in the market. If the
government alters the value of the circulating money, the market will react by altering prices in
the opposite direction (Mises, 1953c). Mises was the first one to discuss the social consequences
of changes in the value of money, he discussed that inflation or monetary value reduction can
make businesses overestimate their profits which eventually lead to Capital Consumption. The
increased influx of money of any kind (be it gold or fiat currency) does not make the society
richer, its circulation spreads unevenly, benefiting only certain circles of the society which
remain primary beneficiaries on whom the money is spent first of all. Other segments of society
stand at the losing end, as they do not directly see increase in the income instead the value of
their savings is already deteriorated due to falling value of the money (Mises, 1953d).