Conclusion
According to Mises’s theory of the business cycle, the free market is not the source of economic contraction, namely, recessions and depressions. The source is the fractional reserve banking system, which is favored by the State. The State licenses a monopolistic central bank—fractionally reserved—which sets monetary policy by buying or selling debt. The commercial banks lend in terms of the reserves created by central bank debt holdings. The central bank and the government protect commercial banks from bank runs by depositors.
Index
action, 18
as exchange, 18
America’s Great Depression (Rothbard), 111
Austrian School of economics, 10, 32, 97, 127
Austrian Theory of the Trade Cycle and Other Essays, The (Mises), 114–15
Bank for International Settlements, 126
banking, 69–95
cartels, 86–87, 93
free banking, 85–87, 95
functions of, 80–81
bankruptcy, 87, 110
Economics for Real People
Economics for Real People
Economics for Real People
An Introduction to the
Austrian School
2nd Edition
Title Page
Economics for Real People
An Introduction to the
Austrian School
2nd Edition
Gene Callahan
Copyright Page
Copyright 2002, 2004 by Gene Callahan
All rights reserved. Written permission must be secured from the publisher to use or reproduce any part of this book, except for brief quotations in critical reviews or articles.
Published by the Ludwig von Mises Institute, 518 West Magnolia Avenue, Auburn, Alabama 36832-4528.
ISBN: 0-945466-41-2
Acknowledgments
Dedicated to Professor Israel Kirzner, on the occasion of his retirement from economics.
My deepest gratitude to my wife, Elen, for her support and forbearance during the many hours it took to complete this book.
Special thanks to Lew Rockwell, president of the Ludwig von Mises Institute, for conceiving of this project, and having enough faith in me to put it in my hands.
Introduction: Stayin’ Alive
WHY READ THIS BOOK?
PERHAPS, AT SOME point, you have heard about the Austrian School of economics and are curious as to what it is. Or you may be discouraged by the economics you have encountered in textbooks and newspapers, and are searching for a more realistic view of economic life. The dominant school of economics, often referred to as the Neoclassical School, seems to describe people behaving in ways that are hard to relate to the human activity we see around us every day.
Part I: The Science of Human Action
Chapter 1: What’s Going On?
[Economics] is universally valid and absolutely and plainly human.
—LUDWIG VON MISES, HUMAN ACTION
