— ————————————
Common sense economic lessons for the interested layman. How a free market economy works, from an Austrian School perspective.
————————————
Lesson Three: Direct Exchange.
An overview of the possibilities of interpersonal interaction with a specific focus on mutual exchange of goods between individuals. An elaboration of price theory – what are prices, how are they determined, supply & demand analysis, and more analytical tools. A discussion of markets, their allocative efficiency, the benefits of free trade, and how markets are self-correcting. All of this done abstracting away from money and complexities in order to comprehend the nature of exchange and the market – skills to be applied to all future lessons and analyses.
Continue reading »
[This paper was originally written for ECON 3499 - Independent Study in Austrian Economics]
Two Theories of the Entrepreneur in Austrian Economics
The role of the entrepreneur is one of the most pivotal elements in the economic theories of the Austrian School. The entrepreneurial nature of the market cited by Austrians is alone sufficient to distinguish their theories from orthodox economics. Instead of a set of static equilibrium models with pristine assumptions, the Austrians elucidate an emergent market revolving around the dynamic actions of entrepreneurs in an uncertain environment, a perpetual state of disequilibrium. Professors Joseph Schumpeter and Israel Kirzner, two of the most prominent entrepreneurial theorists, both agree on the fundamental role of the entrepreneur in the market process, and that economics ought to focus on disequilibrium. However, they interpret the function and purpose of the entrepreneur in two starkly contrasting ways. Schumpeter argued that it is a small cluster of entrepreneur-innovators that cause disequilibrium in the market with revolutionary new inventions, and that this unstable process will ultimately morph capitalism out of existence. Kirzner both incorporates the entrepreneurial nature of the market to a broader range of human action, and takes an optimistic approach, arguing that the entrepreneur instead alleviates disequilibrium and brings the market closer to equilibrium and economic harmony.
Continue reading »
A.R.J. Turgot as Austrian Grandfather
by Ryan Safner
[This essay was originally written for ECON 3462 - History of Economic Thought]
Anne-Robert Jacques Turgot’s brief but brilliant writings on political economy portray him as a major intellectual precursor to the modern Austrian school of economics. Many of his primitive yet revolutionary insights into the nature of a free market bear striking resemblance to major Austrian tenets. None is so crucial and so well-developed, however, as his vision of a dynamic and emergent market order. Turgot’s shining brilliance and foresight into this area illuminates the voids of the sycophantic mercantilists and the comparative statics of the classical school. This grandiose vision would be lost for a century until it was recovered, quite independently, by the original Austrian, Carl Menger. If Menger is the father of the Austrian school, Turgot would certainly qualify as the estranged grandfather. Turgot’s prolific vision of market-based progress can be seen through a proto-Austrian lens based upon two key concepts he elucidated – the great role of the capitalist-entrepreneur and that of time. Turgot observed that it is the entrepreneur, or “undertaker,” who forecasts future conditions and undertakes a profitable venture in the context of ubiquitous risk and uncertainty. In particular, it is the capitalist-entrepreneur who forwards the money from his saved capital at a future profit to make such an undertaking possible. Since entrepreneurial action necessitates present action based on future speculation, Turgot is one of the first to highlight the immensely important and often neglected role of time in production and investment. Their combination makes for an economy where entrepreneurs act as the great equibrilators to the constant flux of market dynamics. Their actions, as well as their accumulation of capital, allow for the optimistic possibility of an ever-progressing society.
Continue reading »
Understanding Economics Series
————————————
Common sense economic lessons for the interested layman. How a free market economy works, from an Austrian School perspective.
————————————
Lesson Two: Land, Labor, & Capital.
An overview of the process of production, and an analysis of the three factors of production – land, labor, and capital. The definition, importance, and function of each of the factors. Also, an extended example of a single-man economy (Robinson Crusoe) and how the process of production involves the cooperation of land, labor, and capital. Also, the importance of capital accumulation for economic growth and prosperity.
Continue reading »
