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Carl Menger (1840-1921) was the founder of the Austrian School of economics. Principles, first published in 1871, is the book that provided a new basis for the understanding value, utility, money, and the market process.

Menger Biography

Works by Menger

Austrian Study Guide

Carl Menger and the Methodology of the Austrian School Economists

The Monetary Writings of Carl Menger

Hardcopy available for purchase online

Complete Downloadable Text (in PDF)

This online version of Carl Menger’s Principles of Economics containscorrections to the 1976 New York University edition; the manuscript is otherwise the same. First printing in German, 1871. The first English translation was copyright 1950 by the The Free Press, with an introduction by Frank H. Knight; 1976 and 1981 by the Institute for Human Studies, published by New York University Press with an introduction by F.A. Hayek; 1994 by Libertarian Press (reprint of the 1976 edition). Online version is copyright 2004 by the Ludwig von Mises Institute.

Dedication

Editor’s Note

Introduction. By F.A. Hayek (p. 11)

Translators’ Preface (p. 37)

Author’s Preface (p. 45)

I. THE GENERAL THEORY OF THE GOOD (p. 51)

1. The Nature of Goods (p.51)

2. The Causal Connections Between Goods (p.55)

3. The Laws Governing Goods-character (p.58)

A. The Goods-Character of Goods of Higher Order is

Dependent on Command of Corresponding Complementary Goods (p. 58)

B. The Goods-Character of Goods of Higher Order is Derived From

that of the Corresponding Goods of Lower Order (p. 63)

4. Time and Error (p. 67)

5. The Causes of Progress in Human Welfare (p. 71)

6. Property (p. 74)

II. ECONOMY AND ECONOMIC GOODS (p. 77)

1. Human Requirements (p. 80)

A. Requirements for Goods of First Order (Consumption Goods) (p. 80)

B. Requirements for Goods of Higher Order (Means of Production) (p. 84)

C. The Time Limits Within Which Human Needs are Felt (p. 87)

2. The Available Quantities (p. 89)

3. The Origin of Human Economy and Economic Goods (p. 94)

A. Economic Goods (p. 94)

B. Non-Economic Goods (p. 98)

C. The Relationship Between Economic and Non-Economic Goods (p. 101)

D. The Laws Governing the Economic Character of Goods (p. 106)

4. Wealth (p. 109)

III. THE THEORY OF VALUE (p. 114)

1. The Nature and Origin of Value (p. 114)

2. The Original Measure of Value (p. 121)

A. Differences in the Magnitude of Importance of

Different Satisfactions (Subjective Factor) (p. 122)

B. The Dependence of Separate Satisfactions on

Particular Goods (Objective Factor) (p. 128)

C. The Influence of Differences in the Quality of Goods on Their Value (p. 141)

D. The Subjective Character of the Measure of Value. Labor and Value. Error (p. 145)

3. The Laws Governing the Value of Goods of Higher Order (p. 149)

A. The Principle Determining the Value of Goods of Higher Order (p. 149)

B. The Productivity of Capital (p. 152)

C. The Value of Complementary Quantities of Goods of Higher Order (p. 157)

D. The Value of Individual Goods of Higher Order (p. 162)

E. The Value of the Services of Land, Capital, and Labor in Particular (p. 165)

IV. THE THEORY OF EXCHANGE (p. 175)

1. The Foundations of Economic Exchange (p. 175)

2. The Limits of Economic Exchange (p. 181)

V. THE THEORY OF PRICE (p. 191)

1. Price Formation in an Isolated Exchange (p. 191)

2. Price Formation under Monopoly (p. 197)

A. Price Formation and the Distribution of Goods When There is Competition

between Several Persons for a Single Indivisible Monopolized Good (p. 199)

B. Price Formation and the Distribution of Goods When There is

Competition for Several Units of a Monopolized Good (p. 203)

C. The Influence of the Price Fixed by a Monopolist on the Quantity of a

Monopolized Good that Can Be Sold and on the Distribution of the Good

Among the Competitors for It (p. 207)

D. The Principles of Monopoly Trading (The Policy of a Monopolist) (p. 211)

3. Price Formation and the Distribution of Goods under Bilateral Competition (p. 216)

A. The Origin of Competition (p. 216)

B. The Effect of the Quantities of a Commodity Supplied by Competitors

on Price Formation; The Effect of Given Prices Set by Them on Sales;

And in Both Cases the Effect on the Distribution of the Commodity

Among the Competing Buyers (p. 218)

C. The Effect of Competition in the Supply of a Good on the Quantity

Sold and on the Price at Which it is Offered (The Policies of Competitors) (p. 220)

VI. USE VALUE AND EXCHANGE VALUE (p. 226)

A. The Nature of Use Value and Exchange Value (p. 226)

B. The Relationship Between the Use Value and the Exchange Value of Goods (p. 228)

C. Changes in the Economic Center of Gravity of the Value of Goods (p. 231)

VII. THE THEORY OF THE COMMODITY (p. 236)

1. The Concept of the Commodity in its Popular and Scientific Meanings (p. 236)

2. The Marketability of Commodities (p. 241)

A. The Outer Limits of the Marketability of Commodities (p. 241)

B. The Different Degrees of Marketability of Commodities (p. 248)

C. The Facility with Which Commodities Circulate (p. 254)

VIII. THE THEORY OF MONEY (p. 257)

1. The Nature and Origin of Money (p. 257)

2. The Kinds of Money Appropriate to Particular Peoples and to

Particular Historical Periods (p. 262)

3. Money as a “Measure of Price” and as the most Economic Form for

Storing Exchangeable Wealth (p. 272)

4. Coinage (p. 280)

APPENDICES (p. 286)

A. Goods and “Relationships” (p. 286)

B. Wealth (p. 288)

C. The Nature of Value (p. 292)

D. The Measure of Value (p. 295)

E. The Concept of Capital (p. 303)

F. Equivalence in Exchange (p. 305)

G. Use Value and Exchange Value (p. 306)

H. The Commodity Concept (p. 308)

I. Designations for Money (p. 312)

J. History of Theories of the Origin of Money (p. 315)

Index (p. 321)

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The Quotable Mises

Ludwig von Mises: "Big business depends entirely on the patronage of those who buy its products: the biggest enterprises loses its power and its influence when it loses its customers." - Economic Policy

Outlook for Freedom by Leonard E. Read

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Two Essays by Ludwig von Mises (Middle of the Road Leads to Socialism; Liberty and Property) by Ludwig von Mises

Prices and Production by Friedrich A. Hayek

Complete Libertarian Forum (1969-1984) by Murray N. Rothbard

Individualism and Economic Order by Friedrich A. Hayek

Economic Policy: Thoughts for Today and Tomorrow by Ludwig von Mises

The Tip of the Financial Iceberg by Mark Thornton

More Bank Runs in Our Future? by Joseph T. Salerno

Unintended Consequences of NSA Spying by Mark Thornton

'The Myths of Anti-trust' 40th Anniversary by Richard Wilcke

'The Myths of Anti-trust' 40th Anniversary by Randall G. Holcombe

'The Myths of Anti-trust' 40th Anniversary by Thomas J. DiLorenzo

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The Tip of the Financial Iceberg by Mark Thornton

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"Big business depends entirely on the patronage of those who buy its products: the biggest enterprises loses its power and its influence when it loses its customers."

— Ludwig von Mises, in Economic Policy

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Principles of Economics

Clarification and Proposal

In the beginning there is Econ 101 that introduces students to the "Principles of Economics". Many introductory textbooks use this term in their title (see eg. the widely used books by Gregory Mankiw and by Frank & Bernake). There appear to exist several dozens of books with this title.

.

.

Not surprisingly, the meaning of the term "Principles of Economics" varies. There are two main concepts of "Principles":

Economic Principles*, referring to the idea of "principles of economic life". Mankiw's list of 10 principles (below) is a good example of this notion. These are principles of how the economy works (or should work), hence, they refer to the economy or economic actors. They are thought to parallel the principles or laws in natural science.

Principles of Economics, referring to the basic methods and concepts economists use when doing economics, hence to economic analysis. In this view the term "economics" refers to the discipline, not to the economy. This type of principles is often interwoven with the first type in the textbooks. Lists of principles of doing economics are harder to find. I propose such a list below in order to clarify the basic concepts that make up and shape the analysis and the thinking of economists.

*) Taken literally, the principles are not thought to be "economic" themselves --- though, of course, the employment of "economic principles" can often be economical.

.

Mankiw's "Ten Principles of Economics"

-

.

How People Make Decisions

People Face Tradeoffs. To get one thing, you have to give up something else. Making decisions requires trading off one goal against another.

The Cost of Something is What You Give Up to Get It. Decision-makers have to consider both the obvious and implicit costs of their actions.

Rational People Think at the Margin. A rational decision-maker takes action if and only if the marginal benefit of the action exceeds the marginal cost.

People Respond to Incentives. Behavior changes when costs or benefits change.

How the Economy Works as A Whole

Trade Can Make Everyone Better Off. Trade allows each person to specialize in the activities he or she does best. By trading with others, people can buy a greater variety of goods or services.

Markets Are Usually a Good Way to Organize Economic Activity. Households and firms that interact in market economies act as if they are guided by an "invisible hand" that leads the market to allocate resources efficiently. The opposite of this is economic activity that is organized by a central planner within the government.

Governments Can Sometimes Improve Market Outcomes. When a market fails to allocate resources efficiently, the government can change the outcome through public policy. Examples are regulations against monopolies and pollution.

How People Interact

A Country's Standard of Living Depends on Its Ability to Produce Goods and Services. Countries whose workers produce a large quantity of goods and services per unit of time enjoy a high standard of living. Similarly, as a nation's productivity grows, so does its average income.

Prices Rise When the Government Prints Too Much Money. When a government creates large quantities of the nation's money, the value of the money falls. As a result, prices increase, requiring more of the same money to buy goods and services.

Society Faces a Short-Run Tradeoff Between Inflation and Unemployment. Reducing inflation often causes a temporary rise in unemployment. This tradeoff is crucial for understanding the short-run effects of changes in taxes, government spending and monetary policy.

.

Slembeck's "Ten Principles of Economics (as a Discipline)"

.

.

Scarcity: Economists study situations where needs or wants exceed means. Therefore, people have to make choices.

Rationality is assumed to guide people's choices or decisions. They systematically gauge all pros (benefit or "utility") and cons ("cost") of all alternatives or options they are facing when deciding.

Preferences: People are equipped with fixed and given preferences that allow them to assign utilities to all options, and to choose the option that maximizes (net) utility.

Restrictions: People face constrains that they cannot change themselves, and thus have to take as given (such as budgets, input cost etc.). Maximization is always constriaint by restrictions.

Combining the first four points makes up for the "rational choice approach" of Neoclassical economics.

Opportunity Cost is induced by scarcity, and by the need to make choices. All choices always involve opportunity cost because deciding in favor of one option always means deciding against some other option(s). There are two main aspects of opportunity cost: 1) Utility maximizing choices induce opportunity cost to be minimal (static aspect). 2) Choices may be revised when opportunity cost rises (dynamic aspect).

The Economic Principle is the application of rationality to situations of scarcity: Minimize cost with regard to a given goal (e.g., level of utility) OR maximize utility for a given level of cost or input. Hence the "economic principle" frames situations as a minimizing or a maximizing problem, and allows to assess efficiency. Do not mix the two formulations! Applying the principle avoids wasting valuable resources.

Efficiency of activities, rules, transactions or distributions is a basic theme in economic analysis. Efficiency is most often assessed either in terms of the economic principle (minimize cost or maximize utility) or the Pareto criterion (with regard to transactions and distributions).

Marginal Analysis is a typical way for economists to look at problems. They analyze decisions in terms of marginal benefits and marginal costs. Marginal thinking is rather uncommon among non-economists, however.

Equilibrium is a fundamental notion in economic analysis. Basic economic models deal with the comparison of two (or possibly more) equilibria (comparative statics). Economist think in terms of equilibria, which are situations where no one has an incentive to change his or her behavior. The Nash equilibrium is the most fundamental formulation of the concept of equilibrium as used in economics.

Game Theory is an approach to study situations of interdependence where people have incentives to think and behave strategically.

Download Slembeck's 10 Principles (in PDF)

Comment (to follow).................

.

Page by Tilman Slembeck, 6 October 2001, last modified 1 Oct. 2006

What do you think about my list? - Comments are very welcome! -> tilman.slembeck@unisg.ch

BranchesEconomics

Saturday, September 8, 2012

What Are the Branches of Economics?

Economics is one of the basic core courses in almost all college degrees. It is the academic study of how money operates, and the interaction of money between consumer and business. Economics can be best divided into its two main branches: Macroeconomics and Microeconomics. Each of these main divisions and its sub-classes serves to illustrate all the distinct functions of various economies.

Macroeconomics

Macroeconomics is the study of the entire economy -- its behavior, main elements and overarching systems. The scale of these macroeconomic discussions are typically on a country level and utilizes facts from that country's economic performance -- gross domestic product, inflation, government interest rates and unemployment. This also touches upon international trade and the overall impact of imports and exports has on a country's economic growth.

Sub-Branches of Macroeconomics

Some important sub-topics in macroeconomic discussions are the factors affecting a country's stabilization policies and supply-side economics. Stabilization policies include the ability of a government to control its economic growth through employing fiscal and monetary policies during boom and recession periods. Supply side economics deals with the country's production rate of its goods and how it can leverage absolute and competitive production advantages against competing countries: creating a product mix for optimum export levels and growth.

Microeconomics: General

Microeconomics is the study of transactions between people and businesses and how the flow of money operates between these basic entities. This includes business investment and personal savings. Microeconomics also focuses on the supply and demand relationship between buyer and seller and how this ultimately determines equilibrium prices of goods and services.

Sub-Branches of microeconomics

Microeconomics sub-branches are the study of specific monetary activities that are enacted by either businesses or individuals. Some significant knowledge bases are the network effect and consumer theory. The network effect outlines the ability of a micro-economy to generate additional cash inside its system self-sufficiently. This is illustrated by the money growth effects of consumer-bank, business-investment and consumer-business relationships. Consumer theory is the study of how quantitative and qualitative factors affect consumer spending and saving. Some topics in this theory include the effect of lending interest rates, labor investment and technological trends have in encouraging consumerism.

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IMPORTANCE OF ECONOMICS

Economics deals with the laws and principles which govern the functioning of an economy and its various parts. An economy exists because of two basic facts. Firstly, human wants for goods and services are unlimited and secondly, productive resources with which to produce goods and services are scarce. Therefore, an economy has to decide how to use its scarce resources to obtain the maximum possible satisfaction of the members of the society. It is this basic problem of scarcity which gives rise to many of the economic problems.

There has been a lot of controversy among economist about the true content of economic theory or its subjects matter. The subject matter and scope of economics has been variously defined. Each definition is incomplete inadequate and because of various conflicting definition, some confusion has been created about the nature and scope of economics.

The subject matter of economics has been divided into two parts: microeconomics and macroeconomics. In Microeconomics we study the economic behavour of an individual, firm or industry in the national economy.It is thus a study of a particular unit rather than all the units combined.We mainly study the following in microeconomics:

1) Product pricing

2) Consumer behavior

3) Factor pricing

4) Economic conditions of a section of the people

5) Study of a firm and

6) Location of a industry.

In macro economics, we study the economic behavior of the large aggregates such as the overall conditions of the economy such as total production, total consumption, total saving and total investment in it.It includes:

1) National income and output

2) General price level

3) Balance of trade and payments

4) External value of money

5) Saving and investment and

6) Employment and economic growth.

The problem of scarcity and choice making can be depicted using the tool of production possibilities curve. The basic economic problems of what, how and for whom to produce can be solved in many ways by an economy. If it gives the whole charge of the economy, to private ownership we get capitalist economy, to public ownership we get socialist economy and jointly to private and public ownership we get mixed economy.

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PROBLEMS

What are the 3 basic economics problems? and how to answer each one?

I did a quick search and found the problems, but got no idea how to answer them?

Here is the the basic economic problems:

What to produce?

How to produce?

And for whom to produce?

Hope someone can help, thanks in advance =)

4 years ago

Report Abuse

k_l_k_l k_l_k_l

Best Answer - Chosen by Asker

All 3 problems are more clearly explained using a ppf/ppc:

1) What to produce:

This problem is what should the economy produce in order to satisfy consumer wants (as seen by demand curves) as best as possible using the limited resources available. If a country produces goods in a way that maximises consumer satisfaction then the economy is allocatively efficient.

2) How to produce:

This problem is how to combine production inputs to produce the goods decided in problem 1 as most efficiently as possible. An economy achieves productive efficiency if it produces goods using the least resources possible. A productively effiecient economy is represented by an economy that is able to produce a combination of goods on the actual curve of the PPF.

3) For whom to produce:

Should the economy produce goods targetted towards those who have high incomes or those who have low incomes. What sort of demographic group should the goods in the economy that are produced be targetted towards? If the economy is addresses this problem then it has reached preto efficiency or pareto optimality.

If all three problems are addressed at any one time then the economy has achieved static efficiency. If the economy achieves static efficiency over a period of time then it is dynamically efficient.

All these problems are focused around the problem of unlimited wants and limited resources. Where resources are the fators of production (such as labor, capital, technology, land..) which are used to produce the products that satisy the wants.

Source(s):

My first ever economics lesson many years ago.

ECONOMICSEconomics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek οἰκονομία (oikonomia, "management of a household, administration") from οἶκος (oikos, "house") + νόμος (nomos, "custom" or "law"), hence "rules of the house(hold)".[1] Political economy was the earlier name for the subject, but economists in the late 19th century suggested "economics" as a shorter term for "economic science" that also avoided a narrow political-interest connotation and as similar in form to "mathematics", "ethics", and so forth.[2]

A focus of the subject is how economic agents behave or interact and how economies work. Consistent with this, a primary textbook distinction is between microeconomics and macroeconomics. Microeconomics examines the behavior of basic elements in the economy, including individual agents (such as households and firms or as buyers and sellers) and markets, and their interactions. Macroeconomics analyzes the entire economy and issues affecting it, including unemployment, inflation, economic growth, and monetary and fiscal policy.

Other broad distinctions include those between positive economics (describing "what is") and normative economics (advocating "what ought to be"); between economic theory and applied economics; between rational and behavioral economics; and between mainstream economics (more "orthodox" and dealing with the "rationality-individualism-equilibrium nexus") and heterodox economics (more "radical" and dealing with the "institutions-history-social structure nexus").[3][4]

Economic analysis may be applied throughout society, as in business, finance, health care, and government, but also to such diverse subjects as crime,[5] education,[6] the family, law, politics, religion,[7] social institutions, war,[8] and science.[9] At the turn of the 21st century, the expanding domain of economics in the social sciences has been described as economic imperialism.[10]