3 The Problem of Economic Calculation
4 Economic Calculation and the Market
Chapter XII. The Sphere of Economic Calculation
1 The Character of the Monetary Entries
2 The Limits of Economic Calculation
3 The Changeability of Prices
4 Stabilization
5 The Root of the Stabilization Idea
Chapter XIII. Monetary Calculation as a Tool of Action
1 Monetary Calculation as a Method of Thinking
2 Economic Calculation and the Science of Human Action
PART FOUR CATALLACTICS OR ECONOMICS OF THE MARKET SOCIETY
Chapter XIV. The Scope and Method of Catallactics
1 The Delimitation of the Catallactic Problems
The Denial of Economics
2 The Method of Imaginary Constructions
3 The Pure Market Economy
The Maximization of Profits
4 The Autistic Economy
5 The State of Rest and the Evenly Rotating Economy
6 The Stationary Economy
7 The Integration of Catallactic Functions
The Entrepreneurial Function in the Stationary Economy
Chapter XV. The Market
1 The Characteristics of the Market Economy
2 Capital
3 Capitalism
4 The Sovereignty of the Consumers
The Metaphorical Employment of the Terminology of Political Rule
5 Competition
6 Freedom
7 Inequality of Wealth and Income
8 Entrepreneurial Profit and Loss
9 Entrepreneurial Profits and Losses in a Progressing Economy
Some Observations on the Underconsumption Bogey and on the Purchasing Power Argument
10 Promoters, Managers, Technicians, and Bureaucrats 300
11 The Selective Process
12 The Individual and the Market
13 Business Propaganda
14 The “Volkswirtschaft”
Chapter XVI. Prices
1 The Pricing Process
2 Valuation and Appraisement
3 The Prices of the Goods of Higher Orders
A Limitation on the Pricing of Factors of Production
4 Cost Accounting
5 Logical Catallactics Versus Mathematical Catallactics
6 Monopoly Prices
The Mathematical Treatment of the Theory of Monopoly Prices
7 Good Will
8 Monopoly of Demand
9 Consumption as Affected by Monopoly Prices
10 Price Discrimination on the Part of the Seller
11 Price Discrimination on the Part of the Buyer
12 The Connexity of Prices
13 Prices and Income
14 Prices and Production
15 The Chimera of Nonmarket Prices
Chapter XVII. Indirect Exchange
1 Media of Exchange and Money
2 Observations on Some Widespread Errors
3 Demand for Money and Supply of Money
The Epistemological Import of Carl Menger’s Theory of the Origin of Money
4 The Determination of the Purchasing Power of Money
5 The Problem of Hume and Mill and the Driving Force of Money
6 CashInduced and Goods-Induced Changes in Purchasing Power
Inflation and Deflation; Inflationism and Deflationism
7 Monetary Calculation and Changes in Purchasing Power
8 The Anticipation of Expected Changes in Purchasing Power
9 The Specific Value of Money
10 The Import of the Money Relation
11 The MoneySubstitutes
12 The Limitation of the Issuance of Fiduciary Media
Observations on the Discussions Concerning Free Banking
13 The Size and Composition of Cash Holdings
14 Balances of Payments
15 Interlocal Exchange Rates
16 Interest Rates and the Money Relation
17 Secondary Media of Exchange
18 The Inflationist View of History
19 The Gold Standard
International Monetary Cooperation
Chapter XVIII. Action in the Passing of Time
1 Perspective in the Valuation of Time Periods
2 Time Preference as an Essential Requisite of Action
Observations on the Evolution of the Time-Preference Theory
3 Capital Goods
4 Period of Production, Waiting Time, and Period of Provision
Prolongation of the Period of Provision Beyond the Expected Duration of the Actor’s Life
Some Applications of the Time-Preference Theory
5 The Convertibility of Capital Goods
6 The Influence of the Past Upon Action
7 Accumulation, Maintenance, and Consumption of Capital
8 The Mobility of the Investor
9 Money and Capital; Saving and Investment
Chapter XIX. The Rate of Interest
1 The Phenomenon of Interest
2 Originary Interest
3 The Height of Interest Rates
4 Originary Interest in the Changing Economy
5 The Computation of Interest
Chapter XX. Interest, Credit Expansion, and the Trade Cycle
1 The Problems
2 The Entrepreneurial Component in the Gross Market Rate of Interest
3 The Price Premium as a Component of the Gross Market Rate of Interest
4 The Loan Market
5 The Effects of Changes in the Money Relation Upon Originary Interest
6 The Gross Market Rate of Interest as Affected by Inflation and Credit Expansion
The Alleged Absence of Depressions Under Totalitarian Management
7 The Gross Market Rate of Interest as Affected by Deflation and Credit Contraction
The Difference Between Credit Expansion and Simple Inflation
8 The Monetary or Circulation Credit Theory of the Trade Cycle
9 The Market Economy as Affected by the Recurrence of the Trade Cycle
The Role Played by Unemployed Factors of Production in the First Stages of a Boom
The Fallacies of the Nonmonetary Explanations of the Trade Cycle
Chapter XXI. Work and Wages
1 Introversive Labor and Extroversive Labor
2 Joy and Tedium of Labor
3 Wages
4 Catallactic Unemployment
5 Gross Wage Rates and Net Wage Rates
6 Wages and Subsistence
A Comparison Between the Historical Explanation of Wage Rates and the Regression Theorem
7 The Supply of Labor as Affected by the Disutility of Labor
Remarks About the Popular Interpretation of the “Industrial Revolution”
8 Wage Rates as Affected by the Vicissitudes of the Market
9 The Labor Market
The Work of Animals and of Slaves
Chapter XXII. The Nonhuman Original Factors of Production
1 General Observations Concerning the Theory of Rent
2 The Time Factor in Land Utilization
3 The Submarginal Land
4 The Land as Standing Room
5 The Prices of Land
The Myth of the Soil
Chapter XXIII. The Data of the Market
1 The Theory and the Data
2 The Role of Power
3 The Historical Role of War and Conquest
4 Real Man as a Datum
5 The Period of Adjustment
6 The Limits of Property Rights and the Problems of External Costs and External Economies
The External Economies of Intellectual Creation
Privileges and Quasi-privileges
Chapter XXIV. Harmony and Conflict of Interests
1 The Ultimate Source of Profit and Loss on the Market
2 The Limitation of Offspring
3 The Harmony of the “Rightly Understood” Interests
4 Private Property
PART FIVE SOCIAL COOPERATION WITHOUT A MARKET
Chapter XXV. The Imaginary Construction of a Socialist Society
1 The Historical Origin of the Socialist Idea
2 The Socialist Doctrine
3 The Praxeological Character of Socialism
Chapter XXVI. The Impossibility of Economic Calculation Under Socialism
1 The Problem
2 Past Failures to Conceive the Problem
3 Recent Suggestions for Socialist Economic Calculation
4 Trial and Error
5 The Quasi-market
6 The Differential Equations of Mathematical Economics
PART SIX THE HAMPERED MARKET ECONOMY
Chapter XXVII. The Government and the Market
1 The Idea of a Third System
2 The Intervention
3 The Delimitation of Governmental Functions
4 Righteousness as the Ultimate Standard of the Individual’s Actions
5 The Meaning of Laissez Faire
6 Direct Government Interference with Consumption
Chapter XXVIII. Interference by Taxation
1 The Neutral Tax
2 The Total Tax
3 Fiscal and Nonfiscal Objectives of Taxation
4 The Three Classes of Tax Interventionism
Chapter XXIX. Restriction of Production
1 The Nature of Restriction
2 The Prize of Restriction
3 Restriction as a Privilege
4 Restriction as an Economic System
Chapter XXX. Interference with the Structure of Prices
1 The Government and the Autonomy of the Market
2 The Market’s Reaction to Government Interference
Observations on the Causes of the Decline of Ancient Civilization
3 Minimum Wage Rates
The Catallactic Aspects of Labor Unionism
Chapter XXXI. Currency and Credit Manipulation
1 The Government and the Currency
2 The Interventionist Aspect of Legal Tender Legislation
3 The Evolution of Modern Methods of Currency Manipulation
4 The Objectives of Currency Devaluation
5 Credit Expansion
The Chimera of Contracyclical Policies
6 Foreign Exchange Control and Bilateral Exchange Agreements
Remarks about the Nazi Barter Agreements
Chapter XXXII. Confiscation and Redistribution
1 The Philosophy of Confiscation
2 Land Reform
3 Confiscatory Taxation
Confiscatory Taxation and RiskTaking
Chapter XXXIII. Syndicalism and Corporativism
1 The Syndicalist Idea
2 The Fallacies of Syndicalism
3 Syndicalist Elements in Popular Policies
4 Guild Socialism and Corporativism
Chapter XXXIV. The Economics of War
1 Total War
2 War and the Market Economy
3 War and Autarky
4 The Futility of War
Chapter XXXV. The Welfare Principle Versus the Market Principle
1 The Case Against the Market Economy
2 Poverty
3 Inequality
4 Insecurity
5 Social Justice
Chapter XXXVI. The Crisis of Interventionism
1 The Harvest of Interventionism
2 The Exhaustion of the Reserve Fund
3 The End of Interventionism
PART SEVEN THE PLACE OF ECONOMICS IN SOCIETY
Chapter XXXVII. The Nondescript Character of Economics
1 The Singularity of Economics
2 Economics and Public Opinion
3 The Illusion of the Old Liberals
Chapter XXXVIII. The Place of Economics in Learning
1 The Study of Economics
2 Economics as a Profession
3 Forecasting as a Profession
4 Economics and the Universities
5 General Education and Economics
6 Economics and the Citizen
7 Economics and Freedom
Chapter XXXIX. Economics and the Essential Problems of Human Existence
1 Science and Life
2 Economics and Judgments of Value
3 Economic Cognition and Human Action
Index
INTRODUCTION
1. Economics and Praxeology
ECONOMICS is the youngest of all sciences. In the last two hundred years, it is true, many new sciences have emerged from the disciplines familiar to the ancient Greeks. However, what happened here was merely that parts of knowledge which had already found their place in the complex of the old system of learning now became autonomous. The field of study was more nicely subdivided and treated with new methods; hitherto unnoticed provinces were discovered in it, and people began to see things from aspects different from those of their precursors. The field itself was not expanded. But economics opened to human science a domain previously inaccessible and never thought of. The discovery of a regularity in the sequence and interdependence of market phenomena went beyond the limits of the traditional system of learning. It conveyed knowledge which could be regarded neither as logic, mathematics, psychology, physics, nor biology.
Philosophers had long since been eager to ascertain the ends which God or Nature was trying to realize in the course of human history. They searched for the law of mankind’s destiny and evolution. But even those thinkers whose inquiry was free from any theological tendency failed utterly in these endeavors because they were committed to a faulty method. They dealt with humanity as a whole or with other holistic concepts like nation, race, or church. They set up quite arbitrarily the ends to which the behavior of such wholes is bound to lead. But they could not satisfactorily answer the question regarding what factors compelled the various acting individuals to behave in such a way that the goal aimed at by the whole’s inexorable evolution was attained. They had recourse to desperate shifts: miraculous interference of the Deity either by revelation or by the delegation of Godsent prophets and consecrated leaders, preestablished harmony, predestination, or the operation of a mystic and fabulous “world soul” or “national soul.” Others spoke of a “cunning of nature” which implanted in man impulses driving him unwittingly along precisely the path Nature wanted him to take.
Other philosophers were more realistic. They did not try to guess the designs of Nature or God. They looked at human things from the viewpoint of government. They were intent upon establishing rules of political action, a technique, as it were, of government and statesmanship. Speculative minds drew ambitious plans for a thorough reform and reconstruction of society. The more modest were satisfied with a collection and systematization of the data of historical experience. But all were fully convinced that there was in the course of social events no such regularity and invariance of phenomena as had already been found in the operation of human reasoning and in the sequence of natural phenomena. They did not search for the laws of social cooperation because they thought that man could organize society as he pleased. If social conditions did not fulfill the wishes of the reformers, if their Utopias proved unrealizable, the fault was seen in the moral failure of man. Social problems were considered ethical problems. What was needed in order to construct the ideal society, they thought, was good princes and virtuous citizens. With righteous men any Utopia might be realized.
The discovery of the inescapable interdependence of market phenomena overthrew this opinion. Bewildered, people had to face a new view of society. They learned with stupefaction that there is another aspect from which human action might be viewed than that of good and bad, of fair and unfair, of just and unjust. In the course of social events there prevails a regularity of phenomena to which man must adjust his action if he wishes to succeed. It is futile to approach social facts with the attitude of a censor who approves or disapproves from the point of view of quite arbitrary standards and subje
ctive judgments of value. One must study the laws of human action and social cooperation as the physicist studies the laws of nature. Human action and social cooperation seen as the object of a science of given relations, no longer as a normative discipline of things that ought to be—this was a revolution of tremendous consequences for knowledge and philosophy as well as for social action.
For more than a hundred years, however, the effects of this radical change in the methods of reasoning were greatly restricted because people believed that they referred only to a narrow segment of the total field of human action, namely, to market phenomena. The classical economists met in the pursuit of their investigations an obstacle which they failed to remove, the apparent antinomy of value. Their theory of value was defective, and forced them to restrict the scope of their science. Until the late nineteenth century political economy remained a science of the “economic” aspects of human action, a theory of wealth and selfishness. It dealt with human action only to the extent that it is actuated by what was—very unsatisfactorily— described as the profit motive, and it asserted that there is in addition other human action whose treatment is the task of other disciplines. The transformation of thought which the classical economists had initiated was brought to its consummation only by modern subjectivist economics, which converted the theory of market prices into a general theory of human choice.
For a long time men failed to realize that the transition from the classical theory of value to the subjective theory of value was much more than the substitution of a more satisfactory theory of market exchange for a less satisfactory one. The general theory of choice and preference goes far beyond the horizon which encompassed the scope of economic problems as circumscribed by the economists from Cantillon, Hume, and Adam Smith down to John Stuart Mill. It is much more than merely a theory of the “economic side” of human endeavors and of man’s striving for commodities and an improvement in his material wellbeing. It is the science of every kind of human action. Choosing determines all human decisions. In making his choice man chooses not only between various material things and services. All human values are offered for option. All ends and all means, both material and ideal issues, the sublime and the base, the noble and the ignoble, are ranged in a single row and subjected to a decision which picks out one thing and sets aside another. Nothing that men aim at or want to avoid remains outside of this arrangement into a unique scale of gradation and preference. The modern theory of value widens the scientific horizon and enlarges the field of economic studies. Out of the political economy of the classical school emerges the general theory of human action, praxeology.1 The economic or catallactic problems2 are embedded in a more general science, and can no longer be severed from this connection. No treatment of economic problems proper can avoid starting from acts of choice; economics becomes a part, although the hitherto best elaborated part, of a more universal science, praxeology.
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