Introduction to Austrian Economic Analysis

The tenth and final lecture from Joseph Salerno's Introduction to Austrian Economic Analysis seminar.Loan banking is non-inflationary. Interest rates on loans are merely reflective of price spreads. All speculation, on the free-market, is self-correcting and speeds adjustment, rather than cause economic trouble.100% reserve banking is sound, but fractional reserve banking is inflationary. An inflationary boom is caused by commercial banks extending more credit than any private pools of saving have justified. Money has been created out of thin air. Prices must be allowed to fall to adjust supply and demand. Doing less just postpones the final reckoning. Saving helps during recessions.

Barter – direct exchange- is inefficient because of the lack of a double coincidence of wants. Some third medium was sought to solve this. It is called money. Exchanges are not equal, they are win-win, with each party gaining more than he is giving or the exchange would not be made.An increase in the supply of all commodities is good, except for money. Increases in the supply of money merely dilute the purchasing power of each remaining money unit.The ninth of ten lectures from Joseph Salerno's Introduction to Austrian Economic Analysis seminar.

The eighth of ten lectures from Joseph Salerno's Introduction to Austrian Economic Analysis seminar.Naturally occurring monopolies do not last long. Competition emerges to upset them. The sovereignty of the individual defines the free market. The only monopolies that do persist are those maintained by government interventions.Cartels are not monopolies. There is no essential difference between a cartel and an ordinary corporation or partnership. But, the cartel is an inherently unstable form of operation.

The seventh of ten lectures from Joseph Salerno's Introduction to Austrian Economic Analysis seminar.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.Capitalists give up present money in order to pay labor present wages and in order to acquire the resources for the capital production stages. The capitalist has an expectation of future money at the end of the stages of the structure of production.  Consumption and investment takes place in every stage of production.  The capitalist can only invest. He cannot yet consume. The price spread is the difference between what the capitalist invests and what he receives. The interest rate determines what the capital value of the machine is.

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 price of a factor is determined by its diminishing general (discounted) marginal value productivity and the given supply (stock) of the factor in the economy. Factor pricing is by the Austrian theory of imputation. To Austrians, all costs are opportunity costs.Consumer goods and producer goods are subjectively determined by how they are used.The sixth of ten lectures from Joseph Salerno's Introduction to Austrian Economic Analysis seminar.

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).There is no going rate of profit. The basic rate is the rate of interest. Profits are the outgrowth of uncertainty. Few accounts about the economy focus on losses. Profits are an index that maladjustments are being met and combatted by the profit-making entrepreneurs. Don’t condemn the profit-making entrepreneur, but the one that has suffered losses. Losses are a sign that he has added further to maladjustment.The fifth of ten lectures from Joseph Salerno's Introduction to Austrian Economic Analysis seminar.

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.A maximum price control prohibits all exchanges of a good above a certain price, with the controlled price being below the market equilibrium price. A minimum price control prohibits exchanges below a certain price.The fourth of ten lectures from Joseph Salerno's Introduction to Austrian Economic Analysis seminar.

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.As the price increases, new suppliers with higher minimum selling prices are brought into the market, while demanders with low minimum buying prices will begin to drop out. As the price decreases, the quantity demanded must always either remain the same or increase, never decrease.It is clearly fallacious to believe, as has been the popular assumption, that utility and costs are equally and independently potent in determining price.The third of ten lectures from Joseph Salerno's Introduction to Austrian Economic Analysis seminar.

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.Demand is elastic if when you cut your price, demand goes up. Demand is inelastic when revenues remain strong even though prices have been raised. Consumers want that good at almost any price, as experienced with tobacco sales and hot items that consumers perceive as desirable.The second of ten lectures from Joseph Salerno's Introduction to Austrian Economic Analysis seminar.

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. He also introduces a number of important topics such as Crusoe economics and the water-diamond paradox. Salerno lays the foundation for this series of lectures which will cover all the basics of Austrian analysis in more detail.  The first of ten lectures from Joseph Salerno's Introduction to Austrian Economic Analysis seminar.