#### Co-written by Grok-4, ChaptGPT-5 and [@atrasdoarwario](https://x.com/atrasdoarwario/status/1956360816216690782). Many thanks to [@PedroSoyer_](https://x.com/PedroSoyer_)'s discussions.

# The Subjective Foundations of Monetary Demand: Exchange Demand in Praxeological Terms

## Abstract

This paper revisits the subjective origins of monetary valuation in light of Carl Menger and Ludwig von Mises. While Misesian praxeology clarifies the purposive structure of action, Menger had already indicated that actors sometimes treat goods as "destined for exchange" — valuing them solely for later trading. By bringing this Mengerian insight into Mises's framework, the concept of *exchange demand* becomes explicit: the purposive demand for a good exclusively for subsequent exchange. This synthesis deepens the regression theorem, showing its trace runs back not only to the first indirect exchange but to the very first direct exchange out of the autistic economy, and it uncovers the notion of *self-indirect exchange.* In dialogue with Rothbard, Hoppe and Salerno, this approach clarifies the interplay of subjective anticipation and marketability in the emergence of media of exchange.

## Introduction: From Autistic Exchange to Cooperation

Human action, as Mises defined it, is purposeful substitution of one state for another deemed more satisfactory. In isolation, man acts through autistic exchange—solitary rearrangements like consuming gathered fruit. The transition to cooperation introduces new valuations: goods come to be demanded not only for direct use but for their anticipated role in interpersonal exchange.

Consider a fisherman who despises fish entirely—their taste, smell, texture, and handling—deriving no satisfaction from them for consumption or production. His sole desire is for apples, which he at first obtains by theft from an apple-grower, bearing the risks of confrontation. As these costs mount, he instead turns to fishing. Though he despises fish, he endures the activity to exchange them for apples with the grower who values them. Later, desiring oranges from a producer who accepts only apples, he acquires apples partly to trade them further.

At this point the fish's significance cannot be explained by the fisherman's industrial demand of fish alone. The fisherman's labor in fishing is purposive only because he anticipates trade. His demand for fish arises solely from their prospective role in exchange. This is *exchange demand.*

Mises, at least implicitly, captured this orientation:

> "A medium of exchange is a good which people acquire neither for their own consumption nor for employment in their own production activities, but with the intention of exchanging it at a later date against those goods which they want to use either for consumption or for production." (Mises, *Human Action,* [XVII.3][HA.XVII.3])

In his plan, fish fit this definition perfectly: repulsive in themselves, yet acquired solely to serve as a bridge to apples. This marks the subjective genesis of monetary-like valuation even before broad social convergence.

## Defining Exchange Demand and Its Relation to Misesian Categories

*Exchange demand* denotes the purposive acquisition of a good solely for later interpersonal exchange. It arises whenever an actor envisions cooperation in which the good serves as a bridge. Mises notes:

> "Action always is essentially the exchange of one state of affairs for another state of affairs. If the action is performed by an individual without any reference to cooperation with other individuals, we may call it autistic exchange." (Mises, *Human Action,* [X.1][HA.X.1])

Fishing for apples is thus not autistic but interpersonal action, since it presupposes the apple-producer's future cooperation. The fish are demanded by the fisherman only because of *exchange demand.* Extending the chain, apples acquired for oranges is composed of *industrial demand* and *exchange demand.*

Mises emphasized this composite character:

> "Thus the demand for a medium of exchange is the composite of two partial demands: the demand displayed by the intention to use it in consumption and production and that displayed by the intention to use it as a medium of exchange." (Mises, *Human Action,* [XVII.4][HA.XVII.4])

In all trade, the to-be-offered good is held, in the least partially and momentarily, under *exchange demand.* Without this, the very perception of benefit from the trade remains unperceived. Thus, every trade involves treating one's offering as a medium of exchange. Conversely, no autistic exchange is influenced by *exchange demand.*

## Menger's Reinforcement: Goods "Destined for Exchange"

At the stage where the fisherman trades apples not to consume but to acquire oranges, Menger's formulation applies:

> "Men have been led, with increasing knowledge of their individual interests, each by his own economic interests, without convention, without legal compulsion, nay, even without any regard to the common interest, to exchange goods destined for exchange (their "wares") for other goods equally destined for exchange, but more saleable." (Menger, *The Origins of Money,* VI)

The fisherman sees the fish—and later the apples—as *already destined for exchange.* In Menger's phrasing, the good itself becomes marked by the actor's anticipation as a medium. This relates to Mises's indirect exchange:

> "Interpersonal exchange is called indirect exchange if, between the commodities and services the reciprocal exchange of which is the ultimate end of exchanging, one or several media of exchange are interposed." (Mises, *Human Action,* [XVII.1][HA.XVII.1])

When integrated, this yields a broader category: *self-indirect exchange.* Producing fish for the sole purpose of trading them, and holding them until trade, is already a supertype of indirect exchange—only the counterparty is not yet present. The actor exchanges labor and time against a good that he treats as a medium of exchange, in expectation of cooperation. Menger's insight thus makes explicit what remained only implicit in Mises. On the other hand, "self-direct exchange" is not distinct from "direct exchange" given the impossibility to intend to produce for cooperation while not acquiring a medium of exchange.

Thus *self-indirect exchange* applies to actions taken before and intending for an interpersonal exchange, including for intending to do a direct exchange. In an indirect exchange itself, that action continues to be *self-indirect exchange.*

## The Regression Theorem and Exchange Demand in Barter

Mises's regression theorem traces purchasing power—in the example, fish's apple-purchasing power and apple's orange-purchasing power—back through time:

> "The relation between the demand for money and the supply of money... determines the height of purchasing power. Today's money relation, as it is shaped on the ground of yesterday's purchasing power, determines today's purchasing power." (Mises, *Human Action,* [XVII.4][HA.XVII.4])

This applies not only to money but also to all media of exchange:

> "For all that is to be predicated of money is valid for every medium of exchange... The theory of money was and is always the theory of indirect exchange and of the medium of exchange." (Mises, *Human Action,* [XVII.1][HA.XVII.1])

The purchasing power is ultimately regressed to when a good first becomes a medium of exchange:

> "If we trace the purchasing power of money back step by step, we finally arrive at the point at which the service of the good concerned as a medium of exchange begins. At this point yesterday's exchange value is exclusively determined by the nonmonetary--industrial--demand which is displayed only by those who want to use this good for other employments than that of a medium of exchange." (Mises, *Human Action,* [XVII.4][HA.XVII.4])

By integrating Menger's "destined for exchange" with Mises's framework, the regression does not halt at the first indirect exchange. It regresses further, to the first cooperation itself: tied to the very first direct trade after the autistic economy, to the preparations for that trade themselves. Even when one party values an offered good only via *exchange demand,* this is still tied to his demand on what is being acquired, which must ultimately be industrial. Thus the theorem unravels to the moment cooperation begins.

## Nuances in Austrian Interpretations of the Regression Theorem

Later Austrians stressed or required preexisting demand stability or high marketability before a good becoming a medium of exchange:

> "For any commodity to become used as money, it must have originated as a commodity valued for some nonmonetary purpose, so that it had a stable demand and price before it began to be used as a medium of exchange." (Rothbard, *The Case for a Genuine Gold Dollar*)

> "Money *must* emerge as a *commodity* money because something can be demanded as a medium of exchange only if it has a pre-existing barter demand (indeed, it must have been a highly marketable barter commodity)." (Hoppe, *The Economics and Ethics of Private Property,* ch. "How is Fiat Money Possible?—or, The Devolution of Money and Credit")

> "The general medium of exchange originated on the market as the most saleable commodity in the pre-existing state of barter." (Salerno, *Money: Sound and Unsound,* "Comment on A Tale of Two Dollars")

And Mises himself:

> "As has been mentioned already, the obliteration of the memory of all prices of the past would not prevent the formation of new exchange ratios between the various vendible things. But if knowledge about money's purchasing power were to fade away, the process of developing indirect exchange and media of exchange would have to start anew. It would become necessary to begin again with employing some goods, more marketable than the rest, as media of exchange." (Mises, *Human Action,* [XVII.4][HA.XVII.4])

The synthesis weakens the requirement. Demand stability or high marketability makes, in general terms, more likely that a commodity will be generally recognized and adopted as a medium. But even an unstable and a low-marketability good, in a narrow context, can become a medium of exchange. From the onset when a good is traded and is thus a medium of exchange, industrial demand is no longer the only factor, *exchange demand* is also already present.

## Conclusion

Menger had already seen that men sometimes exchange goods *destined for exchange.* Mises gave the praxeological framework to analyze such action. Joined, they make explicit the role of *exchange demand,* showing that every trade involves valuing the relinquished good as a medium.

This clarification strengthens rather than departs from Mises: the purposive anticipation of exchange is already contained in the structure of action he described. Making it explicit allows for two extensions. First, the regression theorem regresses further than often recognized, to the very first cooperation after the autistic economy. Second, the notion of *self-indirect exchange* clarifies the status of preparatory acts that anticipate interpersonal exchange, enabling *exchange demand* alongside industrial demand in barter.

The implication is that monetary theory rests not only on marketability but on subjective anticipation itself. This matters for debates over fiat money, localized exchange goods, and the role of expectation in sustaining monetary use. *Exchange demand* thus provides a sharpened tool for interpreting the genesis and persistence of media of exchange within praxeology.

## References

- Hoppe, Hans-Hermann. *The Economics and Ethics of Private Property.* Auburn, AL: Ludwig von Mises Institute, 2006. [`<https://mises.org/library/book/economics-and-ethics-private-property>`][EEPP].
- Menger, Carl. *The Origins of Money.* Auburn, AL: Ludwig von Mises Institute, 2009 [1892]. [`<https://mises.org/library/book/origins-money>`][OM].
- Mises, Ludwig von. *Human Action: A Treatise on Economics.* Auburn, AL: Ludwig von Mises Institute, 1998 [1949]. [`<https://mises.org/library/book/human-action>`][HA].
- Rothbard, Murray N. *The Case for a Genuine Gold Dollar.* Auburn, AL: Ludwig von Mises Institute, 1962. [`<https://mises.org/mises-daily/case-genuine-gold-dollar>`][CGGD].
- Salerno, Joseph. *Money: Sound and Unsound.* Auburn, AL: Ludwig von Mises Institute, 2010. [`<https://mises.org/library/book/money-sound-and-unsound>`][MSU].

[HA]: <https://mises.org/library/book/human-action> "Human Action"

[OM]: <https://mises.org/library/book/origins-money> "The Origins of Money"

[CGGD]: <https://mises.org/mises-daily/case-genuine-gold-dollar> "The Case for a Genuine Gold Dollar"

[EEPP]: <https://mises.org/library/book/economics-and-ethics-private-property> "The Economics and Ethics of Private Property"

[MSU]: <https://mises.org/library/book/money-sound-and-unsound> "Money: Sound and Unsound"

[HA.X.1]: <https://atras-do-arwario.github.io/liberty-knowledge-base/viewer.html?file=content%2Fmarkdown%2Fmises-institute%2FHuman_Action.md#1-autistic-exchange-and-interpersonal-exchange> "Human Action X.1"

[HA.XVII.1]: <https://atras-do-arwario.github.io/liberty-knowledge-base/viewer.html?file=content%2Fmarkdown%2Fmises-institute%2FHuman_Action.md#1-media-of-exchange-and-money> "Human Action XVII.1"

[HA.XVII.3]: <https://atras-do-arwario.github.io/liberty-knowledge-base/viewer.html?file=content%2Fmarkdown%2Fmises-institute%2FHuman_Action.md#3-demand-for-money-and-supply-of-money> "Human Action XVII.3"

[HA.XVII.4]: <https://atras-do-arwario.github.io/liberty-knowledge-base/viewer.html?file=content%2Fmarkdown%2Fmises-institute%2FHuman_Action.md#4-the-determination-of-the-purchasing-power-of-money> "Human Action XVII.4"