Mises Made Easier
Percy L. Greaves Jr.
Rajah, (Hindu). A Hindu chief, or prince, who ruled a territory, either independently or as a feudal lord owing allegiance to an overlord.
Rate of profit. An absurd expression based on the false assumption that there exists a relationship between profit (q.v.) and capital (q.v.). Profits are earned by superior foresight in adapting production to meet future shifts in consumer demand before competitors are aware of the need for such adaptation. Since profits cannot be related mathematically to superior foresight, there can be no meaningful "rate of profit."
Ratiocination. The mental process of reasoning or exact thinking with the implication of an extended process that passes through a number of steps before arriving at the logical conclusion.
Rational. Arrived at by the use of the peculiarly human mental processes by which man strives to connect his ideas as consciously, coherently and purposively as possible in order to plan the attainment of ends sought. In view of the human fallibility in selecting the best possible reasoning for attaining the ends sought, there is no implication as to the correctness or incorrectness of the reasoning. Consequently, all conscious human actions, whether or not appropriate for the ends sought, are rational.
EP. 31-35, 62-66, 135, 148; HA. 19-22,89-91,102-04,177-78,884; OG. 112-13; also PLG. 13-14.
Rationalism, eighteenth century. The fundamental thesis of rationalism is that man's actions are guided by reason. In the eighteenth century a growing movement stressed the use of reason to expose the fallacies of the myths, superstitions and witch burning of earlier times. The weakness of the movement was the false assumption that all men possessed the same reasoning capacity and thus any disagreement with generally accepted doctrines and ideologies was the result, of willful deceit.
HA. 16,146; TH. 269-70.
Rationalization. The substitution of a rational pretext for a real reason, with an implication of self-delusion or hypocrisy; the improvisation of a plausible reason for a human action when one either does not realize the real reason or seeks to keep it secret; the use of a false but reasonable justification or interpretation of an attitude or action, which appears to be unsatisfactory or contrary to accepted reasoning, when one is either ashamed or not aware of his actual motive.
HA. 78-79; TH. 280-82.
Realism. See "Nominalism."
Realpolitik, (German). Practical politics, in the sense that ideas and theories are unimportant and can be disregarded in the conduct of political affairs. The exponents of Realpolitik were unaware of the fact that their own power was also based on ideas and theories.
Real wage rates. Wage rates in terms of what they will buy or provide rather than in terms of monetary units whose purchasing power fluctuates. Real wages also take into account any nonmonetary advantages, disadvantages or withholdings that accompany the employment. See "Nominal wage rates" for contrast.
Reclusion. The seclusion of a hermit, recluse or anchorite (q.v.).
Refractory. Rebellious; stubborn; actively resisting.
Regression theorem. The theorem by which Mises applies the subjective theory of value to the objective-exchange value, or purchasing power of money. Objective-exchange values of all other goods and services are explained by the subjective theory of value, whereby the values are traced to the ultimate subjective use values of the marginal consumers who value such goods and services for their objective-use values which they expect to consume. This is not true for money because (1) money is not consumed in its use and (2) the subjective and objective use values of money coincide and are equal to its objective-exchange value, the estimated value of the goods and services for which it can be exchanged. Mises explains the origin of the objective-use value of money by tracing it back step by step from the point at which it is being valued to the point where the monetary good served only non-monetary uses, an essential point preceding the first use of anything as money. At this point, its objective-exchange value is explained by the general theory of subjective value and marginal utility.
HA. 408-11,426,610-11; M. 97-123; also PLG. 141-67. See also Murray N. Rothbard's Man, Economy and State (Princeton, N. J.: Van Nostrand, 1962; Los Angeles: Nash Publishing, 1970).
Regressus in infinitum, (Latin). Process of going back endlessly, i.e., tracing each happening to a preceding step.
Reichsbank. The central bank (q.v.) of Germany from 1875 until shortly after World War II.
HA. 552,570570; M. 55-56; PF. 81-82.
Reichswirtschaftsministerium, (German). German Government's Ministry of National Economy.
B. 64; PF. 77.
Relevance, judgments of. See "Judgment of relevance."
Relicta civitate rus habitare maluerit, (Latin). Deserted the cities, preferring to live in the country.
Renitent. Actively resisting; persistently opposed; recalcitrant; struggling in opposition.
Res extra commercium, (Latin). Thing or things outside of business or commercial transactions.
Retrogressing economy. An economy in which the per capita quota of invested capital is decreasing. This decrease in, or consumption of, capital goods results in a decrease in per capita real income. In a retrogressing economy total entrepreneurial losses will exceed total entrepreneurial profits. Since incomes and capital accumulation are incapable of measurement, the existence of a retrogressing economy can only be grasped by resorting to historical understanding.
HA. 251,294-99; PF. 123-25.
Retrospection. The act or faculty of looking back on the past.
Returns, law of. The law of returns provides that for the production of every economic good there is an optimum combination (or proportion) of the required factors of production (q.v.).
It also provides that in those cases where the desired economic good can be produced by other than the optimum combination, all factors but one remaining constant, increasing deviations in the quantities of the variable factor from the optimum quantity will produce proportional or greater than proportional decreases in the returns per unit of the variable factor (Law of diminishing or decreasing returns), while decreasing deviations in the quantities of the variable factor from the optimum quantity will produce proportional or greater than proportional increases in the returns per unit of the variable factor (Law of increasing returns).
The law of returns, in all its parts, applies equally to all factors of production.
EP. 155; HA. 127-31.
Revolution, American (1776-1783). After repeated attempts to obtain the rights of freemen, representative government, and relief from the discriminatory taxes and despotism of King George III (1738-1820), representatives of the thirteen American colonies, assembled in the Second Continental Congress, declared their independence from England on July 4, 1776. In the subsequent war, the armies of the former colonies, with French help, were able to repulse and finally defeat (1781) the British armies and their mercenaries. The Peace Treaty signed in Paris on September 9, 1783, recognized the full independence of the United States of America.
Revolution, French (1789-1799). Violent political upheaval primarily caused by the growing financial difficulties of the absolute Bourbon Kings of France and the rise of liberal ideas. Faced with financial bankruptcy, King Louis XVI (1754-1793) called the ?tats-G?n?raux (q.v.) to meet on May 1, 1789. The Third Estate (q.v.), refusing to accept one vote out of three, illegally organized itself into a Constituent National Assembly for drafting a constitution which the King was later forced to accept. Meanwhile, Royal troop movements and food shortages led to worker uprisings in Paris and, on July 14, 1789, to the storming of the Bastille prison. The Assembly adopted a Declaration of the Rights of Man, abolished feudal dues and church tithes, while confiscating church property, against which it issued assignats (see "Mandats territoriaux"). The clergy were ordered to swear allegiance to the new order which the Pope forbad them to do. This led to domestic disorders at the same time that attempts of foreign royalty to aid the French nobility led to war. Paris masses were aroused against the King who was deposed, tried and beheaded. A newly formed Republic (1792) led to Civil War and a "Reign of Terror" during which those in power constantly murdered all suspected opponents. War, inflation and price controls led to a Revolutionary Government which prepared the way for the rise of Napoleon I (1769-1821) as First Consul (1799) and Emperor (1804). However, feudalism remained abolished.
Revolution of 1688, English. An almost bloodless revolution, sometimes called "The Glorious Revolution." It arose as the result of religious conflicts and the King's practice of dispensing with judges and Parliamentary laws that did not meet with his favor. King James II (1633-1701), a Roman Catholic and the last of the absolute English rulers, was forced to flee to France (1688) before Dutch forces that Tory and Whig leaders had asked the Protestant Prince William of Orange to bring to England. A special Parliament offered the throne to William and his wife, Protestant daughter of James II, and they became William III and Mary, joint rulers with powers limited by a Bill of Rights which later became a model for the American Bill of Rights. The revolution marked the ascendancy of the House of Commons over the House of Lords as well as the rise to power of the Whig Party over the Tory Party. It also marked the beginning of cabinet government, independence of judges, regular meetings of Parliament, the freedom of religious worship, Parliamentary budget control of taxes and expenditures and, later (1695), the freedom of the press.
Ricardian. Pertaining to the theories of the classical economist, David Ricardo (1772-1823). His chief work was The Principles of Political Economy and Taxation (1817). Ricardo endorsed the division of labor and social cooperation as beneficial to all (see "Comparative cost, law or theory of"), established the fact that political interference with free trade (tariffs) must curtail consumer satisfaction and that marginal land receives no rent for its use. This last contained the germ for the later developed theory of marginal utility which forms the basis for the subjective-value theory. Ricardo's chief weaknesses were his endorsement of the labor theory of value, the domestic use of fiduciary money, the "Ricardo effect" (q.v.) and the idea that the economic problem is concerned with the distribution of shares of the final product to land, labor and capital.
Ricardo effect, the. A proposition of David Ricardo (1772-1823) that an increase in wage rates will lead to a replacement of labor by machines and vice versa, an increase in machinery costs will lead to the use of more labor. This proposition is often cited by interventionists who claim that raising wage rates will increase the use of machinery and thus total production. The argument confuses cause and effect; it is the increased use of capital goods that raises wage rates. Unless increased savings become available, any increase in the use of capital goods by one industry merely reduces the quantity of capital goods available for other industries. When interventionism takes the form of higher than market wages in one firm or industry, it merely produces a shift in the use of the available supplies of capital goods. It thus reduces the marginal productivity of both labor and capital and results in a drop in total production and consumer satisfaction, as existing capital is shifted to where it is less productive than in a free or unhampered market.
Ricardo's law of association. See "Comparative cost, law or theory of," the better known term. Mises prefers the term, "Ricardo's law of association" because the same principle applies not only to international trade, with which it is usually identified, but also to all other social relations.
Roundabout methods of production. A term devised by the Austrian economist, Eugen von Böhm-Bawerk (1851-1914), to describe the capitalistic, production process whereby capital goods are produced first and then, with the help of the capital goods, the desired consumer goods are produced. Since "roundabout methods" imply a circuitous indirectness that is more time consuming than is necessary for the ends sought, Mises stresses the fact that the capitalistic method of production is the shortest, quickest, most direct and most economic method known for attaining the ends sought?greater consumer satisfaction.
Russian pattern of socialism. See "Socialism of the Russian pattern."