14. The “Volkswirtschaft”
The market economy as such does not respect political frontiers. Its field is the world.
In a market economy a major service that money provides is that of the medium of exchange. Producers exchange their goods for money and then exchange money for other goods.
As production of goods and services increase this results in a greater demand for the services of the medium of exchange (the service that money provides).
Conversely, as economic activity slows down, the demand for the services of money follows suit.
In an excellent article for The New Republic, April 6, 2015, “Rand Paul Will Break Republican Hearts, Just Like Reagan Did,” the Canadian journalist Jeet Heer displays a knowledge of libertarianism rare among mainstream journalists. Heer points out that Rand Paul’s bellicose foreign policy statements will make him lose support among libertarians.
Part Four: Catallactics or Economics of the Market Society
Chapter XIV. The Scope and Method of Catallactics
1. The Delimitation of Catallactic Problems
There have never been any doubts and uncertainties about the scope of economic science. Ever since people have been eager for a systematic study of economics or political economy, all have agreed that it is the task of this branch of knowledge to investigate the market phenomena, that is, the determination of the mutual exchange ratios of the goods and services negotiated on markets, their origin in human action and their effects upon later action.
2. The Method of Imaginary Constructions
The specific method of economics is the method of imaginary constructions.
3. The Pure Market Economy
The imaginary construction of a pure or unhampered market economy assumes that there is division of labor and private ownership (control) of the means of production and that consequently there is market exchange of goods and services. It assumes that the operation of the market is not obstructed by institutional factors. It assumes that the government, the social apparatus of compulsion and coercion, is intent upon preserving the operation of the market system, abstains from hindering its functioning, and protects it against encroachments [p. 238] on the part of other people.
4. The Autistic Economy
No other imaginary construction has caused more offense than that of an isolated economic actor entirely dependent on himself. However, economics cannot do without it. In order to study interpersonal exchange it must compare it with conditions under which it is absent. It constructs two varieties of the image of an autistic economy in which there is only autistic exchange: the economy of an isolated individual and the economy of a socialist society.
5. The State of Rest and the Evenly Rotating Economy
The only method of dealing with the problem of action is to conceive that action ultimately aims at bringing about a state of affairs in which there is no longer any action, whether because all uneasiness has been removed or because any further removal of felt uneasiness is out of the question. Action thus tends toward a state of rest, absence of action.
