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

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Chapter 4: Prices and Consumption 49 Notable Contributions • Rothbard’s devastating critique of measuring psychic surpluses (pp. 258–60) is still relevant. • Mises was the first economist to fully incorporate money into the subjectivist, marginal utility approach that economics had developed for the case of barter. His regression theorem evaded the apparent problem of circularity that had stumped earlier theorists. Before Mises, economists used “micro” analysis to explain barter exchange ratios, and then superimposed money prices using a “macro” approach involving “the price level” and the total stock of money. (See Rothbard’s footnote 19 on pp. 269–70.) • Figure 38 (p. 274) depicts the temporal elements of gold prices, during a state of first direct exchange and then indirect exchange. • Rothbard ingeniously deals with the famous example of Buridan’s ass (p. 310), which was placed equidistant between two equally attractive oases and dies of thirst. Rather than illustrating the relevance of indifference, this example merely shows its silliness. Only an ass would be unable to choose in such a situation, because to stand still would really be “choosing” to die of thirst, and this is clearly an inferior option.
50 Study Guide to Man, Economy, and State with Power and Market Technical Matters 1. A barter economy with n goods would in principle require n(n-1)/2 different prices, one for each pair of commodities. (A barter economy with 20 different goods, for example, would require 190 different prices.) In contrast, a money economy with n goods only requires n prices, and the (money) price of the money commodity itself is of course always 1. 2. Mainstream economists no longer believe that diminishing marginal utility necessarily implies the Law of Demand. (Their argument would lie beyond the scope of this text.) Austrians should therefore take care when making this point to mainstream peers. 3. On page 252, Rothbard’s first reason for holding a good is “(a) the anticipated later sale of the same good for a higher money price.” Note that this “speculative” demand must also include the desire to hold certain commodities as a store of wealth, e.g., someone who buys rubies or even shares of stock with the intention of selling them later on may not necessarily anticipate a higher future money price. 4. As Rothbard points out in footnote 21 (p. 273), the “crucial stopping point” in the regression argument is not the point at which the money commodity ceases to be a universal medium of exchange, but rather the earlier point at which the commodity ceases to be a medium of exchange at all.
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STUDY GUIDE TO MAN, ECONOMY, AND ST
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CONTENTS INTRODUCTION . . . . . . .
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In June of 2004, I became convinced
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Page 50 and 51: Chapter Summary In a money economy,
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Chapter 8: Production: Entrepreneur
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Chapter Summary Consumer preference
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Chapter 10: Monopoly and Competitio
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Chapter Summary Like all goods, the
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Chapter 11: Money and Its Purchasin
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Chapter Summary Economists often ta
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Chapter 1: Defense Services on the
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Chapter Outline 1. Types of Interve
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Chapter 2: Fundamentals of Interven
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Chapter Summary Society is composed
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Chapter 4: Binary Intervention: Tax
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Chapter Summary There has been litt
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Apriorism, 1, 9 Ability-to-pay prin
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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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