Praxeology Through Price Theory, Lecture 2 with Robert Murphy - Mises Academy

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Praxeology Through Price Theory, Lecture 2 with Robert Murphy - Mises Academy

  1. 1. Mises Academy Austrian Econ I: Praxeology Through Price Theory Robert P. Murphy Spring 2011 Lecture 2 May 4
  2. 2. Austrian Econ I 1.The Marginal Revolution II. The Law of Returns III. Specificity and Convertibility IV. Labor Pains V. Crusoe Economics VI. Costs VII. Praxeology & Econ
  3. 3. I. The Marginal Revolution See mises.org/journals/jls/20_1/20_1_3.pdf.
  4. 4. II. The Law of Returns Factor Y b Units Factor X a Units Total Product p Units Average Unit Product p/a Marginal Product Delta p / delta a 3 3 3 3 3 3 3 3 0 1 2 3 4 5 6 7 0 4 10 18 30 40 45 49 0 4 5 6 7.5 8 7.5 7 … 4 6 8 12 10 5 4
  5. 5. III. Specificity and Convertibility ●General law: A change in the value of the product causes a greater change in the value of the (relatively) specific factors than in the value of the (relatively) nonspecific factors. (p. 40)
  6. 6. IV. Labor Pains ●“Leisure as consumer good” is first reliance on empiricism (not just action axiom), per fn 27. ●“Leisure is consumer good” = disutility of labor
  7. 7. V. “Crusoe Economics”
  8. 8. A. Saving & Investment
  9. 9. B. Capital ●“He who possesses capital is that much further advanced in time on the road to the desired consumers’ good.” (p. 52) ●Importance of maintenance (gross investment) ●Possibility of “capital consumption”
  10. 10. VI. Costs Definition: The cost of an action is the subjective value (or utility) placed on the next-best alternative that can NOT be achieved because of the action. (p. 71) Costs are never “realized” but are always anticipated.
  11. 11. VII. Praxeology & Economics Praxeology: formal study of the fact that people use means to achieve ends (without commenting on the ends themselves). Economics: Studies action of isolated individual and of interpersonal exchange (aka “catallactics”). (p. 74)

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