Mises Daily Articles
Production Theory and the Market Process
I am pleased to announce that, starting July 20, I (and guest lecturer Peter Klein) will offer a Mises Academy class, Production and the Market Process. The course will focus on chapters 5–9 of Murray Rothbard's masterpiece, Man, Economy, and State.
The Scope of the Course
The course runs for eight weeks, from July 20 through September 13. As usual, we are keeping it very reasonably priced at $145. We will move methodically through the middle five chapters (a little more than 300 pages) of Rothbard's treatise. Ideally students will read his text in the original, but those who are able to make only a smaller time commitment can still benefit from the course if they rely on my (much shorter) study guide instead. Students who took my earlier class, Praxeology through Price Theory (covering chapters 1–4) will obviously fit right into this class, but the prior class is not a prerequisite. Anyone who is a frequent reader of Mises.org, or who has read any serious Austrian works already, will be able to jump into the discussion of production and the market process.
In Production and the Market Process, I will present in detail the Austrian conception of how a market economy works. This vision differs in crucial respects from the mainstream approach. We will carefully explain the Austrian conception of the structure of production, where production is broken down into stages, with the consumer goods at the base and "higher-order" capital goods resting on top and going back in time.
It's true, mainstream economists use a crude version of this notion — where wheat is harvested and sold to the miller, who in turn sells flour to the baker, and so on — in introductory books, often when discussing the formula for calculating gross domestic product. Yet those same mainstream textbooks quickly drop the structure of production when they move on to more "advanced" topics. But for the Austrians, the capital structure of the economy is one of the most important elements for an understanding of the role of saving and investment, and it's also a main ingredient in the Austrian theory of the business cycle.
After explaining a stationary equilibrium state, and how entrepreneurs are able to calculate the prices they should be willing to pay for various pieces of equipment, hours of workers' labor, and arable farmland, we then move on to the more interesting case of changes in these underlying variables. In particular, we will very carefully walk through Rothbard's discussion of how the capital structure responds when people in the community decide to increase their savings rate, and thus lower the rate of interest.
Here is Austrian economics at its finest, where
- the emphasis on "micro" foundations of macro analysis,
- the conception of the interest rate and the relationship to prices of inputs and outputs, and
- the role of entrepreneurs in moving prices back into equilibrium
all come together in a single analytical framework.
Once the student understands how output and the standard of living grow over time (in response to savings and investment), he or she will be able to understand how things get distorted and cause the boom-bust cycle, when the central bank artificially reduces interest rates through credit inflation.
Although the material will be deep, let me reassure the interested but intimidated student that Murray Rothbard is a wonderful writer. He assumes nothing on the part of his reader except dedication and a willingness to think through the implications of various economic principles. In this respect, Man, Economy, and State is a much better stand-alone text for learning Austrian economics than even Mises's Human Action, because at times Mises assumed that his reader was a Renaissance man well-versed in not only economics but also philosophy. Those students who work through the text will walk away with a solid understanding of core Austrian economics.
Structure of the Course
In a typical week of the course, I will give a live video broadcast on Wednesday from 9:00–10:30 p.m. EDT. (For those students currently taking my class on Keynes, note that there is no conflict.) I will spend the first 75 minutes lecturing on that week's material, and then I will field questions from students for the remaining time. In addition, on Saturday I will have "office hours" (the times varying from week to week to cater to different students), meaning that I will be available on a live video broadcast to answer questions from any students who tune in.
Note that the Saturday sessions are purely for the students' convenience, and are not mandatory. Also, all broadcasts will be recorded and available to enrolled students, so that people who have a scheduling conflict can still take the class if they wish.
As a special treat, the lecture for week 4 (covering chapter 7) will be given by Peter Klein. Peter handles this material, dealing with the pricing of the factors of production, during the Rothbard Graduate Seminar, so I invited him to share his expertise with us in this online Academy class.
If a student wishes, he or she can simply "audit" the class. This was a popular option for many adults who took my classes on the business cycle and the Federal Reserve, because they had a busy work schedule and would only watch my lectures but couldn't keep up with the reading.
However, students may also take the class for a grade. These students will take a multiple choice quiz each week, in addition to a final exam. Although the Mises Institute is not accredited, we will present certificates of completion and a formal grade at the end of the class to those students who desire it.
The Future of the Mises Academy
Whether it is in one of my classes or those offered by other instructors, I strongly encourage you to participate in the Mises Academy if you haven't already done so. Because of the economies of scale, we are able to provide top-flight instruction at a fraction of the cost of a typical university online class. As the awareness and popularity of the Mises Academy grows, we can offer an expanding list of courses from an expanding stable of superb instructors.
For those who are interested in the idea of taking online classes, but worry about the actual implementation, here are some comments from my students in the online business cycle class:
"Murphy was fantastic in both lectures and Q&A. … Dr. Murphy's clarity, candor, and focus were really showcased in the extended Q&A sessions after lectures and during the office hours. He is very precise in his use of language, thinks quickly, and gives complete and patient answers."
"I loved the lectures and how open professor Murphy was with answering questions. He was able to switch from addressing introductory level questions to much more in-depth questions without talking down to anyone or talking too much over anybody's head."
"I love Dr. Murphy's practical approach to teaching, the selection of reading, podcast, and PowerPoint materials were outstanding, the lectures were well-organized and conversational in tone, and the course itself was seamlessly integrated into a coherent whole. The online venue is also well-organized and easy to navigate. … [N]ot one of the classes I have taken in [a university online] program even remotely compares in quality to this class on the business cycle. … From literally every standpoint — quality of materials, teacher involvement and interaction with students, discussion forums, and use of multimedia, Mises wins hands down, and at a small fraction of the cost. I couldn't be more satisfied. Thank you for a wonderful learning experience — seriously."
Whether you are new to Austrian economics or a decades-long fan who was intimidated by the classic works, this class will provide you with a solid foundation in the Austrian vision of the market process. I hope to see you in a couple of weeks!