Man, Economy, And State
A TREATISE ON ECONOMIC PRINCIPLES
Chapter 1. Fundamentals Of Human Action
Chapter Summary
Praxeology is the scientific study of human action, which is purposeful behavior. A human acts whenever he uses means to achieve an end that he or she subjectively values. Human action is thus teleological or intentional; a person acts for a reason. Therefore not all human behavior is action in the praxeological sense: purely reflexive or unconscious bodily movements (such as coughing when exposed to tear gas) are not examples of action.
Chapter 2. Direct Exchange
Chapter Summary
Direct exchange involves trades where the goods received are of direct use to the recipient. These “direct uses” can be for production; i.e., a person can engage in direct exchange of higher-order goods. However, if a person desires a good with the intention to trade it away to someone else, then he is engaged in indirect exchange, the subject of the next chapter.
Chapter 3. The Pattern Of Indirect Exchange
Chapter Summary
Although beneficial to all participants, the scope of direct exchange is very limited. Unless there is a “coincidence of wants”—where Paul wants to obtain and use X and is willing to give up Y for it, while Mary wants to obtain and use Y and is willing to give up X for it—direct exchange cannot occur. Under direct exchange, there is little room for the division of labor and capitalistic production processes.
Chapter 4. Prices And Consumption
Chapter Summary
In a money economy, the money commodity is on one side of every transaction, and hence reduces the number of relevant prices. The direct exchange ratio between any two commodities can easily be computed from their respective money prices. The “price” or purchasing power of money is the array of goods and services for which a unit of money can be exchanged.
Chapter 5. Production: The Structure
Chapter Summary
The evenly rotating economy (ERE) is an important tool in Misesian economics. The ERE is a fictitious construct where the future is certain, a world where economic activities repeat themselves indefinitely.
Chapter 6. Production: The Rate Of Interest And Its Determination
Chapter Summary
In the evenly rotating economy (ERE), capitalists must earn the same rate of return per time period, regardless of the good or the stage in which they invest. (Outside the ERE, arbitrage brings about a tendency for this result.)
Chapter 7. Production: General Pricing Of The Factors
Chapter 8. Production: Entrepreneurship And Change
Chapter Summary
Entrepreneurial profit occurs when someone buys factors at a certain price and sells the resulting product for a certain price, such that he reaps a higher rate of return than the prevailing rate of interest. Such an entrepreneur has taken advantage of a general undervaluation of the particular factors; had others generally been aware of the future sale price of the product, they too would have entered into this market (to earn the higher rate of return).
Chapter 9. Production: Particular Factor Prices And Productive Incomes
Chapter Summary
This chapter analyzes specific factor prices in light of a changing economy. Rent is the price paid for the hire of unit services of a factor; the price for a durable factor in its entirety is (in the ERE) equal to the present discounted value of its future rents. In the ERE, only land and labor factors earn net rents. A wage is simply the hire price of a unit of labor service.
