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

Chapter 1: Fundamentals of Human Action 11
Technical Matters
1. One must distinguish between marginal product
and the value of marginal product. Rothbard
writes correctly that “the value assigned
to a unit of a factor of production is equal to
the value of its marginal product, or its marginal
productivity” (p. 34). In formal economics you
may often see, e.g., the marginal product of
labor defined as the derivative of the production
function with respect to labor, i.e., how
much more physical product will accrue if the
firm hires one more unit of labor. But this definition
is a physical one, not one based on
value. The value of the labor is the value
placed on this increment in physical output.
2. Strictly speaking, it is imprecise to define capital
goods as “produced factors of production.”
In Austrian theory, the purpose for classifying
goods as capital versus original is that,
in the ERE, only the original factors earn net
rents. Capital goods, in contrast, earn only a
gross return; their rental payments exactly correspond
to the payments for the factors used
in their construction (due account being made
for interest). Consequently, the better definition
of a capital good would be a reproducible
factor of production, in contrast with an original
factor, which is nonreproducible. (See Rothbard’s
Introduction to Frank A. Fetter’s Capital,
Interest, and Rent.)
3. Although Rothbard’s discussion of the ham
sandwich (pp. 8–9) is a useful introduction to