Praxeology Through Price Theory, Lecture 2 with Robert Murphy - Mises Academy
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This document summarizes the key topics covered in Lecture 2 of Robert P. Murphy's Austrian Econ I course from Spring 2011. The lecture covers: I) The Marginal Revolution, II) The Law of Returns, and III) Specificity and Convertibility. It also briefly discusses IV) Labor Pains, V) "Crusoe Economics" including saving, investment and the importance of capital maintenance, and VI) the Austrian definition of costs as subjective opportunity costs. Finally, it distinguishes VII) Praxeology as the formal study of purposive human action and Economics as the study of both isolated and interpersonal exchange.
Praxeology Through Price Theory, Lecture 2 with Robert Murphy - Mises Academy
- 1. Mises Academy Austrian Econ I: Praxeology Through Price Theory Robert P. Murphy Spring 2011 Lecture 2 May 4
- 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. I. The Marginal Revolution See mises.org/journals/jls/20_1/20_1_3.pdf.
- 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. 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. 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
- 8. A. Saving & Investment
- 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. 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. 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)