This discussion of Rothbard's work is a fitting way to end our discussion of the two forms of monetary disequilibrium. This chapter and the previous one have emphasized the way in which monetary disequilibria are both intertwined with the market for time and spill over into the markets for non-money goods and services. Our main argument has been that the relative price effects caused by injections or extractions of money, along with the imperfect flexibility of prices, especially downward, turn monetary disequilibria into economy-wide misallocations and/or idling of resources. Inflation and deflation are problematic because they undermine the microeconomic discovery process by diminishing the communicative power of money prices. Once some prices become separated from the underlying real variables, further misallocation or idling of resources will surely follow. Monetary disequilibria are a likely source of such distortions in the pricing process.

One of the advantages of a Mengerian approach to microeconomics is that it can illuminate these points more powerfully than can standard general equilibrium theory. By emphasizing the disequilibrium role of prices in the process of monetary calculation, both ex ante and ex post, and by reminding us of the importance of prices in prompting discovery in an uncertain and imperfectly informed world, Austrian microfoundations can make clearer the real costs of both inflation and deflation, namely their disruption of the entrepreneurial discovery process of the market. Because it focuses almost exclusively on the informational properties of equilibrium prices, general equilibrium theory, including the imperfect information variants thereof, misses the effects of monetary disequilibria on disequilibrium market processes. In the next chapter we will look a bit more at the role of prices, especially wages, in potentially generating economy-wide disturbances, even when monetary equilibrium is being maintained.

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