Austrian Economics Overview

Two important questions to be answered: (1) What is inflation? What causes it? What are the effects? Inflation is an increase in the quantity of money available caused by an increased in the production of gold and silver, or an over-issuance of paper money. Prices rise. Purchasing power falls.

The monetary problem – the market problem – is the medium of exchange. The illusion is that one would be better off if only one had more money. Everybody should have more money. Therefore, make more money. This creates the system of inflation.

Human beings are collaborators with each other. Socialism is one kind of cooperation of people. One thing determines the socialist organization. It is the lack of freedom and the complete obedience to a Fuehrer (leader). Not surprisingly, everyone considers themselves to be part of the ruling group, forcing others to submit.

Division of labor and an exchange economy are the basis of society. Various commodities competed for being money, but gold prevailed as the medium of exchange, without any interference by governmental authorities. We should have again a gold standard all over the world.

From a practical point of view, the supply of money is very different from the supply of any other good. An increase in other goods, like shoes or meat, is a welcome event, but an increase in the supply of money dilutes the purchasing power of each money unit.

The doctrine in favor of the balance-of- payments is the worst illusory idea. Governmental interventions that seek to regulate international monetary flows to provide the necessary quantities of money for the economy are superfluous.

Human cooperation means that everybody tries to contribute to the improvement of human conditions. It is in the market that I give something in order that you give something. Exchange leads to higher standards of living. Voluntary exchanges create civilization.

"Are the interests of the American wage earners in conflict with those of their employers, or are the two in agreement?" The affluence of the rich in a capitalistic economy is not at the expense of the poor. Profits are plowed back into enterprise, benefiting the common man.

The private seminars that Mises held, and which were so successful in Vienna beginning in 1919, were actually separate from the University. Mises here remembers many of his seminar participants, like Hayek, Haberler, Schütz, and Machlup. He was glad to have contributed to the development of international cooperation among so many economists.