Study Guide to Man, Economy, and State with Power and Market

108 Study Guide to Man, Economy, and State with Power and Market
A business owner’s gross income consists of: (a) interest on
capital invested, (b) (implicit) wages for his managerial tasks, (c)
rents of ownership-decision, and (outside the ERE) (d) entrepreneurial
profit or loss.
If a hypothetical firm were to merge with all other firms,
there would no longer be a market for the various factors and
hence its owner(s) could not calculate the relative profitability
of various lines. Socialism is just a special case of this more general
phenomenon.
The same price will emerge for the “same” good, but this is
defined from the point of view of the consumers. Thus an
orange-in-Florida is not the same good as an orange-in-New-
York, and hence the prices for oranges may differ in the two
regions.
In contrast to the approach of the classical economists, modern
economics recognizes that there is not a two-fold process in
which goods are first produced and then “distributed.” Rather,
goods are produced and distributed at the same time; if one alters
the incentives facing producers (such as who gets to consume
what), then this may upset the total size of the “pie” overall.
Consumer valuations determine the marginal utility of consumer
goods, which ultimately determine the prices of these
goods. The rental prices of land, labor, and capital factors are
then determined on the basis of these prices by computing the
DMVP of a productive factor. The pure rate of interest is determined
by the time preference schedules of individuals, and this
rate is used to compute the asset prices of durable goods, based
on their known future rental prices.