PART II

Market

CHAPTER 4

A Process,
Not a Factory

To help us understand what is going on in the economy, what is important is not the types and number of goods that sit on store shelves. It is why and how they got there.

CHAPTER 5

Production and
Entrepreneurship

Why do we produce? For the simple reason that nature doesn’t automatically satisfy all of our needs and wants. Wild animals, grains, and berries are not enough to sustain the world population. Computers, airplanes, and hospitals do not grow on trees.

CHAPTER 6

Value, Money, and Price

So far, our discussion about the economy has been exclusively from the perspective of value. Value is the ultimate goal of our actions and what motivates our behavior. It is personal—subjective—which means it comes from satisfying a want. If we are hungry, we consume food; if we feel lonely, we might visit a friend.

CHAPTER 7

Economic Calculation

Money, as we discussed in the previous chapter, makes lots of exchanges possible that are impractical or impossible under barter trade. We are better off as a result. But money has greater implications that are often overlooked or misunderstood. Chief among these is economic calculation, which is the process of determining how scarce resources should be used to produce the most valuable outcomes possible. Economic calculation is a core of any economy.

PART III

Intervention

CHAPTER 8

Monetary Intervention

THE BOOM-BUST CYCLE

The economy’s constant flux is not random change but adjustments to the production apparatus in the pursuit of creating value. Value is a moving target because consumers want change over time and innovations and new opportunities. The constant adjustments mean the market is best understood as a process.

CHAPTER 9

Regulatory Intervention

By regulations, we mean restrictions imposed on the economy by government: prohibitions, license requirements, quality or safety standards, price controls, quotas, and subsidies, etc. Although they differ in their specifics and in their stated purposes, they are all implemented to induce a change in the economy.

Conclusion:
Action and Interaction

Nothing about the market economy is magic. As I have attempted to show, the market is quite real and mundane. It functions in a certain and knowable way; it has a specific behavior, which emerges from and arises out of people’s actions and interactions.

We refer to this behavior as economic laws, which are laws in the same sense as the laws of physics. There is no way to escape them. They are immutable.

Further Reading

BOOKS FOR BEGINNERS

Ammous, Saifedean. Principles of Economics. Amman, Jordan: The Saif House, 2023.

Bastiat, Frédéric. That Which Is Seen and That Which Is Not Seen (1850). In vol. 1 of The Bastiat Collection, 1-48. Auburn, AL: Ludwig von Mises Institute, 2007.

Bylund, Per L. The Seen, the Unseen, and the Unrealized: How Regulations Affect Our Everyday Lives. Lanham, MD: Lexington Books, 2016.

Hazlitt, Henry. Economics in One Lesson. New York: Three Rivers Press, 1979.