Introduction to Austrian Economic Analysis

1. Scarcity, Choice, and Value

Austrian Economics OverviewValue and Exchange

The causal realist approach began with Carl Menger, but diminished in the 1920s. Keynesianism took over with mathematics by the 1950s. Economics was definitely on the wrong track. Salerno explores the causal realist approach which Austrians embrace.

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2. Exchange and Demand

Austrian Economics OverviewValue and Exchange

All action is exchange, even forced exchange like slavery, taxes, eminent domain and conscription, where only one party gains. The Law of Marginal Utility tells us how many exchanges will be made.

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3. The Determination of Prices

Austrian Economics OverviewCapital and Interest TheoryPrices

What principles determine the formation of prices on the free market? The equilibrium price between supply and demand determines prices according to the value scales of sellers and buyers and their elastic or inelastic positions.

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4. Price Controls: Case Studies

Austrian Economics OverviewInterventionism

The immediate effect of price controls or any government intervention upon the market is shortage of goods. Price controls discourage production just when it is needed most. The economy approaches full socialization. Rent control is the easiest way to destroy a city besides bombing it.

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5. Profit, Loss and the Entrepreneur

The EntrepreneurAustrian Economics OverviewEntrepreneurship

Capitalist-entrepreneurs must anticipate supply and demand conditions of future market conditions. It is the future price - the appraisement – that must be compared to the costs of factors of production (land, labor, and capital)...

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6. Pricing of the Factors of Production and the Labor Market

Austrian Economics OverviewPricesProduction Theory

Factors of Production are economic goods: scarce means used to achieve an individual’s ends. They are land, labor and capital. Each is examined. Incomes are earned by factor owners as production takes place. There is no separated production and distribution...

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7. Capital, Interest and the Structure of Production

Austrian Economics OverviewCapital and Interest TheoryProduction Theory

All action takes time. Humans use time as a tool. Time preference ranking is now, not later, although time preferences will differ over time and for different people, like children who want things right now.

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8. Competition and Monopoly

Austrian Economics OverviewMonopoly and Competition

Naturally occurring monopolies do not last long. Competition emerges to upset them. The sovereignty of the individual defines the free market. The only monopolies that do persist are those maintained by government interventions.

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9. Money and Prices

Money and BanksAustrian Economics OverviewMoney and BankingPrices

Barter – direct exchange- is inefficient because of the lack of a double coincidence of wants. Some third medium was sought to solve this. It is called money. Exchanges are not equal, they are win-win, with each party gaining more than he is giving or the exchange would not be made...

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10. Banking and the Business Cycle

Booms and BustsMoney and BanksAustrian Economics OverviewBusiness CyclesMoney and Banking

Loan banking is non-inflationary. Interest rates on loans are merely reflective of price spreads. All speculation, on the free-market, is self-correcting and speeds adjustment, rather than cause economic trouble.

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