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

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Chapter 3: The Pattern of Indirect Exchange 35 Technical Matters 1. Rothbard uses the terms barter and direct exchange interchangeably (p. 187). However, some economists use the term barter economy to refer to any economy without money. Technically, then, if we had an economy with media of exchange but not a commonly accepted medium, these economists would call it a barter economy while Rothbard would not. 2. In the discussion above, we used the example of building a house to illustrate the immense drawbacks of direct exchange. However, even if all of the listed obstacles were overcome, it is not clear whether the situation would even then be an example of direct exchange. By hypothesis, such a builder would have traded his goods away to workers, lumber owners, etc., with the intention of trading away the product of their surrendered goods to another party, i.e., the future home buyer. Thus, our hypothetical builder would still be engaging in indirect exchange. Indeed, the emergence of indirect exchange is so natural that it is hard to even imagine an economy of purely direct exchange. 3. In discussing marketability (or “saleability”), Menger says that a marketable good is one that can be quickly sold at an “economic” price. This is an important point, because often people think that an “unmarketable” good is one that cannot be sold. But if the asking price is low enough, virtually any good can be sold. Even so, there is certainly a sense in which a telescope (say) is much less marketable than wheat: the person selling the telescope (in barter) can get a much
36 Study Guide to Man, Economy, and State with Power and Market better price if he is willing to spend weeks looking for prospective buyers, whereas the seller of wheat will probably find his best offer within hours. 4. Although in general it is certainly true that a neoclassical model has no role for a medium of exchange (because of perfect foresight and limited types of goods), there have been a few attempts to model the process captured by Menger’s verbal description. In particular, Kiyotaki and Wright (“On Money as a Medium of Exchange,” Journal of Political Economy 97, no. 4 [August 1989]: 927–54) devise a model with goods of varying marketability and actually cite Menger’s pioneering work. 5. On page 204, Rothbard writes that money income equals money expenditures plus net additions to the cash balance minus net subtractions from the cash balance. This is somewhat confusing, because normally the term net would mean that the different episodes of adding and subtracting to the cash balance had already been compiled into one total figure. This is why, in the summary above, we have dropped the last term from the equation.
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Chapter Summary Consumer preference
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Chapter 10: Monopoly and Competitio
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Chapter 1: Defense Services on the
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Chapter Summary Society is composed
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Index 251 Equilibrium, 47, 104 macr
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Index 253 Medium of exchange, 27, 3
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Index 255 See also Economy, Evenly
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