ECON103: Principles of Austrian Economics I

Chapter I

• The discovery of a regularity in the sequence and interdependence of market phenomena went beyond the limits of the traditional system of learning. It conveyed knowledge which could be regarded neither as logic, mathematics, psychology, physics, nor biology.
• Man is in a position to act because he has the ability to discover causal relations which determine change and becoming in the universe.
• Humans act purposefully because humans have reason, and are able to direct it to the meeting of their ends.

Chapter II

• All geometrical theorems are already implied in the axioms. The concept of a rectangular triangle already implies the theorem of Pythagoras. This theorem is a tautology, its deduction results in an analytic judgment. Nonetheless nobody would contend that geometry in general and the theorem of Pythagoras in particular do not enlarge our knowledge. Cognition from purely deductive reasoning is also creative and opens for our mind access to previously barred spheres.
• Those economists who want to substitute "quantitative economics" for what they call "qualitative economics" are utterly mistaken. There are, in the field of economics, no constant relations, and consequently no measurement is possible.
• Reason, understanding, and action.
• Deductive reasoning
• There is nothing new about all the government employees pretending to be economists that are constantly mocking free market and Austrian economics. The real economist is always the enemy of those who want to exploit their power over their others. Haters will hate, and Mises provides the best inspiration to not let them get to you: "tu ne cede malis sed contra audentior", (do not fear evil, procede ever more boldly against it).

Chapter IV

• The material world is like play dough we can mold with our hands into whatever we want. It is our mind and our ideas that give shape to the play dough. The matter on its own is dead and meaningless. Only through human understanding and action can it become useful and meaningful.
• Consumer goods, or first order goods: satisfy human wants directly, independent of other goods.
• Producers' goods, factors of production, or higher order goods: satisfy wants indirectly when combined with other goods.
• Exchange: Wilfully induced substitution of a more satisfactory state of affairs for a less satisfactory one.
• Price: what is given up in the exchange.
• Cost: The value of the price; the value of the satisfaction which one must forego in order to attain the end aimed at.
• Profit, gain, or net yield: The difference between the value of the price paid (the costs incurred) and that of the goal attained. Profit in this primary sense is purely subjective, it is an increase in the acting man's happiness, it is a psychical phenomenon that can be neither measured nor weighed.
• Production: Rothbard, MES: "it is the use by man of available elements of his environment as indirect means - as cooperating factors - to arrive eventually at a consumers' good that he can use directly to arrive at his end".
• Production needs: Time and Factors of production: Land, Labor, Technology (recipe, plan)

Chapter V

More in Lecture 3

Chapter VI

The fundamental deficiency implied in every quantitative approach to economic problems consists in the neglect of the fact that there are no constant relations between what are called economic dimensions. There is neither constancy nor continuity in the valuations and in the formation of exchange ratios between various commodities. Every new datum brings about a reshuffling of the whole price structure. Understanding, by trying to grasp what is going on in the minds of the men concerned, can approach the problem of forecasting future conditions. We may call its methods unsatisfactory and the positivists may arrogantly scorn it. But such arbitrary judgments must not and cannot obscure the fact that understanding is the only appropriate method of dealing with the uncertainty of future conditions.

Chapter VII

• It intuitively makes sense that things should be valued based on their utility. But then, why are more useful things cheaper than less useful things?
• Marginal Utility: We call that employment of a unit of a homogeneous supply which a man makes if his supply is n units, but would not make if, other things being equal, his supply were only n-1 units, the least urgent employment or the marginal employment, and the utility derived from it marginal utility.
• Law of marginal utility: marginal utility declines as the quantity of the good rises.
• The law of returns asserts that for the combination of economic goods of the higher orders (factors of production) there exists an optimum. If one deviates from this optimum by increasing the input of only one of the factors, the physical output either does not increase at all or at least not in the ratio of the increased input. This law, as has been demonstrated above, is implied in the fact that the quantitative definiteness of the effects brought about by any economic good is a necessary condition of its being an economic good.
• The employment of the physiological functions and manifestations of human life as a means is called labor.
• People work only when they value the return of labor higher than the decrease in satisfaction brought about by the curtailment of leisure. To work involves disutility.
• Man in considering an expenditure of his own labor investigates not only whether there is no more desirable end for the employment of the quantity of labor in question, but no less whether it would not be more desirable to abstain from any further expenditure of labor.
• The unique position which the factor labor occupies in our world is due to its nonspecific character.
• The substitution of more efficient methods of production for less efficient ones does not render labor abundant, provided there are still material factors available whose utilization can increase human well-being. On the contrary, it increases output and thereby the quantity of consumers' goods. "Labor-saving" devices increase supply. They do not bring about "technological unemployment".
• The creative accomplishment of the genius is an ultimate fact for praxeology. It comes to pass in history as a free gift of destiny. It is by no means the result of production in the sense in which economics uses this term.
• Production is alteration of the given according to the designs of reason. These designs - the recipes, the formulas, the ideologies - -are the primary thing; they transform the original factors - both human and nonhuman - into means. Man produces by dint of his reason; he chooses ends and employs means for their attainment. The popular saying according to which economics deals with the material conditions of human life is entirely mistaken. Human action is a manifestation of the mind.