Chapter Summary

1. THE ULTIMATE SOURCE OF PROFIT AND LOSS ON THE MARKET

It is not true that one man’s profit is another man’s loss. In a market economy, those who earn entrepreneurial profits do so by better adjusting production so as to satisfy the desires of the consumers. It is not the existence of disease that generates earnings for doctors, but rather the doctors’ (perceived) ability to relieve sickness.

Part Five—Social Cooperation Without a Market

Chapter Summary

1. THE PROBLEM

To illustrate the central problem of socialism, consider the socialist director who wishes to construct a house. There are many different technical methods that may be used to achieve the construction of a house satisfying prespecified requirements (square footage, etc.). The director may have numerous physical and chemical facts, as relayed by his subordinates.

Part Six—The Hampered Market Economy

Chapter Summary

1. THE NEUTRAL TAX

If the government is to ensure the smooth operation of the market, it requires revenues and these are raised through taxation. We can imagine an evenly rotating economy and supplement it with the assumption of income equality. In such a world, head taxes and income taxes would be equivalent. In the real world, however, these methods of taxation will yield different outcomes. The goal of neutral taxation—where prices are not disturbed by the system of taxation—is unachievable.

Chapter Summary

1. THE NATURE OF RESTRICTION

This chapter deals with intentional government efforts to alter production from the pattern that would have emerged on the unhampered market. Its restrictions will also alter the pattern of consumption, but this is a side effect; the goal is to alter production.

Chapter Summary

1. THE GOVERNMENT AND THE AUTONOMY OF THE MARKET

The government interferes with the structure of the market by enforcing price floors or ceilings that deviate from the levels that would have obtained on an unhampered market. The particular price or wage may have an enforced maximum or minimum, depending on the circumstances and the political strength of the groups involved.

Chapter Summary

1. THE GOVERNMENT AND THE CURRENCY

Governments do not create money. However, in contractual disputes the courts must determine the meaning of certain phrases, and in this respect all governments must define what is “legal tender.” In addition, historically governments have served to certify the weight and fineness of the coins circulating as media of exchange.

Chapter Summary

1. THE PHILOSOPHY OF CONFISCATION

Contrary to popular belief, under capitalism there is not first a stage of production and then a separate stage of distribution. The two are in fact integrated: as production processes yield their outputs, they are owned by individuals. Acts of outright confiscation may be successful at seizing goods and distributing them to other individuals, but producers will consume their capital if they fear recurrent episodes of confiscation.

Chapter Summary

1. THE SYNDICALIST IDEA

Syndicalism can mean two different things. First, it can refer to revolutionary tactics used to achieve socialism. Rather than falling for the bourgeois catchwords of liberty, democracy, etc., labor unions should instead use violence to overthrow the capitalist institutions.