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Biography of Wilhelm Röpke (1899-1966): Humane Economist

BooksAugust 1, 2007
"I champion an economic order ruled by free prices and markets...the only economic order compatible with human freedom." Wilhelm Röpke devoted his scholarly career to combating collectivism in economic, social, and political theory. As a student and proponent of the Austrian School, he...

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The New Despotism

BooksMarch 16, 2010
When the modern political community was being shaped at the end of the 18th century, its founders thought that the consequences of republican or representative institutions in government would be the reduction of political power in individual lives.

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The Moral Case for the Free Market Economy

BooksJuly 6, 2006
Tibor Machan makes the case for the free market system of economics based on the view of human beings as moral agents with the legal system of a good community as designed to nurture this moral agency.

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How to Keep Our Liberty

BooksJuly 17, 2009
"Individualities may form communities, but it is institutions alone that can create a nation." This was a comment by Benjamin Disraeli a century ago when he was beginning the task of building the Conservative Party, a party that still lives a lusty, constructive life...

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The Return to Laisser Faire

BooksJune 5, 2009
Government means, or should mean, the right ordering of all. Modern government has degenerated into tinkering with the wants or rights or liberties of classes or sections or groups, and it is rare, in these days, to hear a political discussion which takes adequate account of the interests of the...

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The De Moneta of Nicholas Oresme and English Mint Documents

BooksFebruary 14, 2009
Nicole Oresme has been called the most brilliant scientist of the 14th century: mathematician, musicologist, physicist, philosopher, and economist. On top of that, he was a Bishop and a theologian. His writings of money bear much in common with Carl Menger. Oresme's treatise on money, De Moneta...

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13. The Fallacy of the Equation of Exchange

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The basis on which we have been explaining the purchasing power of money and the changes in and consequences of monetary phenomena has been an analysis of individual action. The behavior of aggregates, such as the aggregate demand for money and aggregate supply, has been constructed out of their individual components. In this way, monetary theory has been integrated into general economics.

4. Terms of Exchange

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Before analyzing the problem of the terms of exchange, it is well to recall the reason for exchange—the fact that each individual values more highly the good he gets than the good he gives up. This fact is enough to eliminate the fallacious notion that, if Crusoe and Jackson exchange 5,000 berries for one cow, there is some sort of “equality of value” between the cow and the 5,000 berries.

9. Risk, Uncertainty, and Insurance

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Entrepreneurship deals with the inevitable uncertainty of the future. Some forms of uncertainty, however, can be converted into actuarial risk. The distinction between “risk” and “uncertainty” has been developed by Professor Knight.

8. Factors of Production: Labor versus Leisure

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Setting aside the problem of allocating production along the most desired lines and of measuring one product against another, it is evident that every man desires to maximize his production of consumers’ goods per unit of time. He tries to satisfy as many of his important ends as possible, and at the earliest possible time. But in order to increase the production of his consumers’ goods, he must relieve the scarcity of the scarce factors of production; he must increase the available supply of these scarce factors.

4. The Economics of Location and Spatial Relations

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One very popular subdivision of economics has been “international trade.” In a purely free market, such as we are analyzing in the bulk of this work, there can be no such thing as an “international trade” problem. For nations might then possibly continue as cultural expressions, but not as economically meaningful units. Since there would be neither trade nor other barriers between nations nor currency differences, “international trade” would become a mere appendage to a general study of interspatial trade.

3. Direct Effects of Intervention on Utility

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In tracing the effects of intervention, we must explore both the direct and the indirect consequences. In the first place, intervention will have direct, immediate consequences on the utilities of those participating. On the one hand, when the society is free and there is no intervention, everyone will always act in the way that he believes will maximize his utility, i.e., will raise him to the highest possible position on his value scale.

5. Determination of Price: Equilibrium Price

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One22 of the most important problems in economic analysis is the question: What principles determine the formation of prices on the free market?

12. Conclusion: The Free Market and Coercion

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We have thus concluded our analysis of voluntary and free action and its consequences in the free market, and of violent and coercive action and its consequences in economic intervention. Superficially, it looks to many people as if the free market is a chaotic and anarchic place, while government intervention imposes order and community values upon this anarchy. Actually, praxeology—economics—shows us that the truth is quite the reverse. We may divide our analysis into the direct, or palpable, effects, and the indirect, hidden effects of the two principles.

2. The Emergence of Indirect Exchange

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The tremendous difficulties of direct exchange can be overcome only by indirect exchange, where an individual buys a commodity in exchange, not as a consumers’ good for the direct satisfaction of his wants or for the production of a consumers’ good, but simply to exchange again for another commodity that he does desire for consumption or for production. Offhand, this might seem a clumsy and roundabout operation. Actually, it is indispensable for any economy above the barely primitive level.

4. The Monetary Unit

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We have seen that every good is “in supply” if it can be divided into units, each of which is homogeneous with every other. Goods can be bought and sold only in terms of such units, and those goods which are indivisible and unique may be described as being in a supply of one unit only. Tangible commodities are generally traded in terms of units of weight, such as tons, pounds, ounces, grains, grams, etc. The money commodity is no exception to this rule. The most universally traded commodity in the community, it is bought and sold always in terms of units of its weight.

Appendix B: "Collective Goods" and "External Benefits": Two Arguments for Government Activity

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One of the most important philosophical problems of recent centuries is whether ethics is a rational discipline, or instead a purely arbitrary, unscientific set of personal values. Whichever side one may take in this debate, it would certainly be generally agreed that economics—or praxeology—cannot by itself suffice to establish an ethical, or politico-ethical, doctrine. Economics per se is therefore a Wertfrei science, which does not engage in ethical judgments.

5. Money Income and Money Expenditures

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In a money economy, each individual sells goods and services that he owns for money and uses the money to buy desired goods. Each person may make a record of such monetary exchanges for any period of time. Such a record may be called his balance of payments for that period.

2. The Money Relation: The Demand for and the Supply of Money

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Money is a commodity that serves as a general medium of exchange; its exchanges therefore permeate the economic system. Like all commodities, it has a market demand and a market supply, although its special situation lends it many unique features. We saw in chapter 4 that its “price” has no unique expression on the market. Other commodities are all expressible in terms of units of money and therefore have uniquely identifiable prices.

15. Business Fluctuations

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In the real world, there will be continual changes in the pattern of economic activity, changes resulting from shifts in the tastes and demands of consumers, in resources available, technological knowledge, etc. That prices and outputs fluctuate, therefore, is to be expected, and absence of fluctuation would be unusual. Particular prices and outputs will change under the impact of shifts in demand and production conditions; the general level of production will change according to individual time preferences.