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.
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.
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.
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).
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.
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.
In this introduction to the basics of Austrian-school economic analysis, Joseph Salerno introduces a number of basic concepts including utility, exchange, psychic cost, choice, and marginal value.
Presented at the Mises Circle in Southern California on 6 May 2006 in Costa Mesa, California.
