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Topic outline

    • Time: 23 hours
    • Free Certificate

    This course is designed to extend your knowledge of the principles of the Austrian school of economics. It is recommended that students complete ECON103: Principles of Austrian Economics I before this course to enhance their understanding. The course draws on the work of several scholars in the Austrian school tradition, mainly Ludwig von Mises, Murray Rothbard, Friedrich Hayek, and Hans Hermann Hoppe. It focuses on the concepts of economic calculation, time preference, interest rates, business cycle theory, the economics of security, and intellectual property. 

    ECON103 explained the main types of actions that humans undertake to economize; this course moves to discuss the features of an impersonal market economic order, beginning with one of the most critical concepts: economic calculation. For example, Mises explains how a market order, where economic production meets the demands of consumers, is only possible with the system of free enterprise and private property, as that is the only system in which the owners of capital are able to calculate the costs and benefits of their actions rationally. This point is one of Mises' most important contributions to economics and forms the essence of his devastating critique of socialist economic planning, which has not been refuted a century later. The course also introduces the work of Friedrich Hayek on the concept of spontaneous order and how it helps us understand economic phenomena as the emergent result of human action and not human design. The different conceptions of rationality in economics and how order can emerge rationally from individual action are then discussed.

    The bulk of the course explores the basics of the Austrian analysis of money, beginning with the concept of time preference, which could be considered the most important and useful concept to learn in economics. After explaining the importance and significance of time preference, how the Austrian school views time preference as the determinant of interest rates is analyzed. The concepts of credit and banking are introduced, followed by Mises' typology of money and the distinction between money and credit.

    With that background, the Austrian theory of the business cycle is introduced. As interest rates on the free market are a reflection of time preference, an increase in the supply of credit that is treated as money leads to the distortion of interest rates, and the price of money, causing economic miscalculation in the capital markets, leading to malinvestments. We study this highly important theory from the works of several economists to get a full picture over two lectures. Then, we examine the market for security and national defense, analyzing the fallacy that these goods can only be provided by a monopoly, illustrating how they can be, and in fact are, produced by the free market, and how problems of insecurity and conflict around the world can best be understood as a result of the absence of a free market for security.

    As we move toward the end of the course, the topic of intellectual property is discussed. We study the work of Stephan Kinsella, who argues that ideas and non-scarce goods cannot be property, and the attempt to treat them as such makes no sense economically or legally. The claim that intellectual property rights enhance innovation and economic well-being is scrutinized. Also, the connection between Austrian economics and Bitcoin is discussed. How does studying Austrian economics help us understand Bitcoin, and what does Bitcoin teach us about Austrian economics? We conclude with a discussion of the stock-to-flow numerical model of Bitcoin price and whether it poses a challenge to the Austrian method of economics. Ammous is a professor of Economics and the author of three books on the subject of economics.

    • BEFORE YOU START THE COURSE, READ THIS FOREWORD. It is a brief primer on the conceptual framework and the theoretical aspects of the Austrian school of economics , and it puts the school's main views in context of the broader economics discipline

  • In the first unit, we discuss the economic calculation problem as first described by Mises. We discover that the real problem with socialism is that there is no economic calculation without a market for capital goods. We then discuss why capital markets play an important role in allocating resources in an economy, and the different ways socialists have attempted to get around this problem are explored. Finally, we examine the failure of modern academia to understand the economic calculation problem.

    Completing this unit should take you approximately 2 hours.

  • In this second unit, Saifedean discusses Hayek's concept of spontaneous order. He starts off by explaining how distributed knowledge can lead to order, then discusses the different European philosophical thinking on this topic. Finally, Vernon Smith's work on Constructivist rationality vs. Ecological rationality is explored.

    Completing this unit should take you approximately 2 hours.

  • The third unit focuses on Time Preference. Time preference is an important element of the Austrian School of Economics and is used to understand the relationship between savings, investment, and interest rates. Saifedean discusses the work of Bohm Bawerk, Mises, and Hoppe. You will explore Bohm Bawerk's Positive Theory of Capital and discover how interest rates are formed through the lens of human action. Following a discussion of Mises' criticism of Bohm Bawerk's work, we conclude the unit by introducing Hans Hermann Hoppe's work on time preference and discuss how it impacts our daily life and society as a whole.

    Completing this unit should take you approximately 2 hours.

  • With the foundation laid in Unit 3, we can now look into how interest rates are formed. Focusing on the important role of time preference, Unit 4 discusses the work of Mises on originary interest and the distinct difference between interest and profit. The work of Murray Rothbard is then discussed with a focus on the capitalist's important role in production and the discounting of future vs. present goods. Finally, we take a look at the history of interest rates and the work of Joseph Schumpeter.

    Completing this unit should take you approximately 2 hours.

  • In unit 5 we focus on explaining and defining the concepts of money and banking as understood by Mises. His book, The Theory of Money and Credit, was written in 1912 and has formed the foundation of Austrian monetary theory for more than a century. In this unit you will explore the topology of money, followed by an in-depth discussion of fiduciary media and the consequences of its issuance by banks.

    Completing this unit should take you approximately 3 hours.

  • Austrian Business Cycle Theory (ABCT) has its roots in the work of Mises and Hayek. Hayek was awarded the 1974 Nobel Prize in Economic Sciences (jointly with Gunnar Myrdal) for some of his work on this theory. Unit 6 looks at the Austrian Business Cycle Theory as first described by Mises. In this theory, we see business cycles as a result of excessive growth in bank credit due to artificially low interest rates set by central banks. In this unit, Saifedean explains how the expansion of credit causes miscalculation, which leads to malinvestment in a boom cycle. This inevitably leads to an unavoidable bust. We end off by discussing the concept of a crack-up boom.

    Completing this unit should take you approximately 2 hours.

  • Unit 7 builds on Mises’ analysis of the business cycle by introducing the work of Professor Roger Garrison, who expanded on the work of Hayek in the 1930s and 1940s to build an excellent graphical exposition of the Austrian business cycle theory. In this unit, you will explore the theory in greater detail by looking at Garrison's presentation and discussing how saving through deferred consumption increases production.

    Completing this unit should take you approximately 2 hours.

  • In unit 8 you are challenged to think about security and defense in terms of spontaneous emergent order. Can they emerge in a market? Why and why not? We focus on the work of Hans-Hermann Hoppe and discuss the Hobbesian myth and the positive case for security as a private good. We question whether governments should have a monopoly on security and defense and explore other possible alternatives to this question.

    Completing this unit should take you approximately 2 hours.

  • Can you own an idea? This 9th unit looks at the concept of intellectual property from the Austrian perspective. Topics include libertarianism, self-ownership, property rights, and the state's role in legislating them. We discuss the work of Stephan Kinsella on patents and copyrights.

    Completing this unit should take you approximately 3 hours.

  • You have reached the final unit of the course - well done! In unit 10 we look at the relation between Bitcoin and Austrian Economics. Being a free market non-governmental money, Bitcoin's fixed supply is discussed. We conclude the unit by discussing the Stock-to-Flow Model (S2F) model.

    Completing this unit should take you approximately 3 hours.

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    If you come across any urgent problems, email contact@saylor.org.

  • Certificate Final Exam

    Take this exam if you want to earn a free Course Completion Certificate.

    To receive a free Course Completion Certificate, you will need to earn a grade of 70% or higher on this final exam. Your grade for the exam will be calculated as soon as you complete it. If you do not pass the exam on your first try, you can take it again as many times as you want, with a 7-day waiting period between each attempt.

    Once you pass this final exam, you will be awarded a free Course Completion Certificate.