Production Theory

The bargains the firm makes with its workers are nobody else's business.

"No benefit results from the mere expenditure of the money [on public works], nor the employment of the workmen employed on its construction; for, if this money had remained in the hands of the contributors, it would either directly or indirectly have put in activity an equal quantity of industry."

"The ability of most market indicators is found to be weak, while the ability of the skyscraper index to predict severe changes in the business cycle is strong."

This middle chapter on production theory goes into detail on factor pricing and discounted marginal value product. The way Rothbard developed every aspect of production theory is unique. As the economy becomes more specialized and complex, the importance of this market process becomes greater.

The mental constructs of the evenly rotating economy and of specific factors of production are discussed. Distinguishing between interest and profits and a construct of slow change are revealed through the ERE as Rothbard considers the final state of rest.The ERE construct is simply a useful, unrealizable, mental tool.

Rothbard's approach to money prices is not as a barter exchange system. Instead, he made money prices the common denominator for all exchange ratios. You can now engage in economic calculation.

Entrepreneurs see the future better than others and go and make money off it. Profits are an index that maladjustments are being met and combatted by the profit-making entrepreneurs. Capital does not beget profits. Only wise entrepreneurial decisions do that.

Whatever your feeling on the need to improve state roads, do not let the myth of "job creation" and a "boost to the economy" be the rationale.

Recorded at Mises University 2008.

Recorded at Mises University 2008.