ECON103: Principles of Austrian Economics I

Time

• Human action happens across time. All economic decisions take place across time. Production is a process that occurs across time.
• Being irreversible, time is a unique good.
• Scarcity gives value to time. Time is an economic good, because it is scarce.
• Opportunity cost exists because time is scarce. Even if resources were not a constraint, time is always a constraint. Choices about goods ultimately boil down to choices about time.
• Economics is ultimately about economizing the amount and subjective value of our time on earth.
• Economic scarcity is really the scarcity of time. With enough time we can make infinitely large quantities of anything we want.
• Julian Simon's The Ultimate Resource: human time can be used to make all other resources.
• All other resources are actually products of human time.
• If physical resources, like metals, were limited, then we would be running out of them, and their price would be rising.
• In reality, *real* prices of metals are constantly declining. In terms of human time, all resources keep getting cheaper.
• Quantities consumed rise, and prices drop. Even as we consume much more today than we did 50 years ago, we still manage to produce more, and at a lower price.
• Julian Simon bet with Paul Ehrlich.
• Ehrlich would look at proven reserves and compare them to consumption. But in reality consumption went up, and reserves went up even more. So that decades later, we have lower prices.
• As prices rise, people economize on these metals, and they find ways of producing more and more.
• Time on earth being finite means we always have a time preference: universal preference for earlier over later goods.
• Time preference is always positive. Utility today is always preferred to the same utility tomorrow. Individuals always prefer consuming or having a good today over next year.
• Security of property rights allows for time preference to drop. Natural disasters or crime increase it. But humans can defend against these. Government predation is systemic and harder to defend against.
• People value their time, and would like to spend it in good ways. People like good times, or leisure.
• You want your scarce time on earth to be long and subjectively valuable. Ideally you want to be spending it doing things you enjoy. Things you want to do, not things you have to do.
• Wanting leisure is a natural consequence of positive time preference. Wanting to enjoy life now.
• But... Living long and well requires provision. It needs food and shelter and many other scarce goods. The desire to live long creates a lower time preference.
• Man's reason leads him to realize he can provide for himself and improve his situation.
• Everyone would like to spend all their life in leisure. But since we are not eternal creatures living in the garden of Eden, too much leisure will inevitably mean an early death through starvation or the violent vagaries of nature. We cannot just enjoy leisure indefinitely, because we are always capable of conceiving of ways in which we can improve the quality and quantity of time we have on earth.

Labor

• Wanting leisure is a natural consequence of positive time preference. But humans don't just want to increasing the value of their time. They also want to increase the amount of time they have. Survival in the long run requires work and that incentivizes the lowering of time preference.
• Reason inevitably leads to an understanding that work can increase the life span of a human, and prevent death. This causes the progressive lowering of time preference.
• Man realizes he can catch a fish and eat it.
• You can't just lie down on the beach forever. You start getting hungry and you realize you can catch a fish that will end your hunger. You start acting. You work for the fish.
• The employment of the physiological functions and manifestations of human life as a means is called labor. Employing time in doing things that we don't value for their own sake, but for the outcomes they provide us.
• Labor is our first tool for increasing the amount and value of our time. All animals employ this. Unlike animals, we have others!