20th Century Quotes on Why Do Things Cost So Much? The Basics of Prices

"The significance of the Austrian school in the history of ideas perhaps finds its most pregnant expression in the statement that here man as an actor stands at the center of economic events. Certainly, manifold quantitative economic relationships are also for the Austrian school in the first place the cognitive object of economic inquiry. But the determination of these quantitative relationships is not the ultimate objective. One does not stop there; for these relationships flow from acts of the mind that have to be 'understood,' that is, their origin, their significance, and their effects must be explained within the framework of our 'common experience' of human action.

Also important for understanding the Austrian school is that here, in contrast to the classical school, men are viewed as highly unequal. Each one has different needs and abilities. The quantities and prices of goods sold in the market depend on these individual needs and abilities. This fact is exactly what the subjective theory of value stresses. Each economic agent through his action imprints his individuality on economic events. Man as a consumer cannot be squeezed into any homogeneous class. The same may be said of man as a producer. The concept of opportunity costs disrupts the homogeneity of the cost factors and broadens the area of subjectivity, which now also embraces the theory of production.

Finally, in the work of the Viennese school the classical concept of value undergoes a fundamental change. Value is no longer a 'substance' inherent in goods. The central concept of Viennese theory is evaluation, an act of the mind. The value of a good now consists in a relationship to an appraising mind. Owing to the heterogeneity of needs, it is highly improbable that the same good will be given the same appraisal by different economic agents. ... Out of the Ricardian concept of quasisubstance has emerged a concept of mental relationships."

Ludwig M. Lachmann
Sheed Andrews and McMeel
1940
Library Topic

"We must look at the price system as such a mechanism for communicating information if we want to understand its real function—a function which, of course, it fulfils less perfectly as prices grow more rigid. (Even when quoted prices have become quite rigid, however, the forces which would operate through changes in price still operate to a considerable extent through changes in the other terms of the contract.) The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information is passed on and passed on only to those concerned."

F. A. Hayek
American Economic Review, Vol. XXXV, No. 4
1945
Library Topic
Library Topic: Market Failure

"The price system is just one of those formations which man has learned to use (though he is still very far from having learned to make the best use of it) after he had stumbled upon it without understanding it. Through it not only a division of labor but also a coordinated utilization of resources based on an equally divided knowledge has become possible. The people who like to deride any suggestion that this may be so usually distort the argument by insinuating that it asserts that by some miracle just that sort of system has spontaneously grown up which is best suited to modern civilization. It is the other way round: man has been able to develop that division of labor on which our civilization is based because he happened to stumble upon a method which made it possible. Had he not done so, he might still have developed some other, altogether different, type of civilization, something like the 'state' of the termite ants, or some other altogether unimaginable type. All that we can say is that nobody has yet succeeded in designing an alternative system in which certain features of the existing one can be preserved which are dear even to those who most violently assail it—such as particularly the extent to which the individual can choose his pursuits and consequently freely use his own knowledge and skill."

F. A. Hayek
American Economic Review, Vol. XXXV, No. 4
September 1945
Library Topic

"In a totalitarian system, social competition manifests itself in the endeavors of people to court the favor of those in power. In the market economy, competition manifests itself in the fact that the sellers must outdo one another by offering better or cheaper goods and services, and that the buyers must outdo one another by offering higher prices."

Ludwig von Mises
Yale University Press
1949
Library Topic
Library Topic: Market Failure
Library Topic: Socialism

"Socialism, von Mises showed, in his greatest original contribution to economic thought, not only abolishes the incentive of profit and loss and the freedom of competition along with private ownership of the means of production, but makes economic calculation, economic coordination, and economic planning impossible, and therefore results in chaos. For socialism means the abolition of the price system and the intellectual division of labor; it means the concentration and centralization of all decision-making in the hands of one agency: the Central Planning Board or the Supreme Dictator.

Yet the planning of an economic system is beyond the power of any one consciousness: the number, variety and locations of the different factors of production, the various technological possibilities that are open to them, and the different possible permutations and combinations of what might be produced from them, are far beyond the power even of the greatest genius to keep in mind. Economic planning, von Mises showed, requires the cooperation of all who participate in the economic system. It can exist only under capitalism, where, every day, businessmen plan on the basis of calculations of profit and loss; workers, on the basis of wages; and consumers, on the basis of the prices of consumers' goods....

Thus, von Mises demonstrated that capitalism is an economic system rationally planned by the combined, self-interested efforts of all who participate in it. The failure of socialism, he showed, results from the fact that it represents not economic planning, but the destruction of economic planning, which exists only under capitalism and the price system. ...

In answer to the vicious and widely believed accusation of the Marxists that Nazism was an expression of capitalism, he showed, in addition to all the above, that Nazism was actually a form of socialism. Any system characterized by price and wage controls, and thus by shortages and government controls over production and distribution, as was Nazism, is a system in which the government is the de facto owner of the means of production. Because, in such circumstances, the government decides not only the prices and wages charged and paid, but also what is to be produced, in what quantities, by what methods, and where it is to be sent. These are all the fundamental prerogatives of ownership. This identification of 'socialism on the German pattern,' as he called it, is of immense value in understanding the nature of present demands for price controls."

George Reisman
Capitalism.net
The Jefferson School of Philosophy, Economics, and Psychology
1981
Library Topic

"Prices perform three functions in organizing economic activity: first, they transmit information; second, they provide an incentive to adopt those methods of production that are least costly and thereby use available resources for the most highly valued purposes; third, they determine who gets how much of the product -- the distribution of income. These three functions are closely interrelated."

Milton Friedman
Rose Friedman
Houghton Mifflin Harcourt
1990
Library Topic

"Inflation is a disease, a dangerous and sometimes fatal disease, a disease that if not checked in time can destroy a society."

Milton Friedman
Rose Friedman
Houghton Mifflin Harcourt
1990
Library Topic
Library Topic: What is Money?

"No sizable army can really be run entirely by command. The general cannot conceivably have the information necessary to direct every movement of the lowliest private ... Commands must be supplemented by voluntary cooperation -- a less obvious and more subtle, but far more fundamental, technique of coordinating that activities of large numbers of people."

Milton Friedman
First Harvest
1990
Library Topic

"It is even more astounding that the pencil was ever produced. No one sitting in a central office gave orders to these thousands of people. No military police enforced the orders that were not given. These people live in many lands, speak difference languages, practice different religions, may even hate one another -- yet none of these differences prevented them from cooperating to produce a pencil."

Milton Friedman
First Harvest
1990
Library Topic

"Adam Smith's flash of genius was his recognition that the prices that emerged from voluntary transactions between buyers and sellers—for short, in a free market—could coordinate the activity of millions of people, each seeking his own interest, in such a way as to make everyone better off."

Milton Friedman
Rose Friedman
Houghton Mifflin Harcourt
1990
Library Topic

"Why had this new 'Austrian' paradigm not been articulated earlier? A plausible explanation is that the mainstream paradigm had itself been gradually undergoing modification (particularly under the impact of the Walrasian approach) in the decades immediately following 1930. Earlier neo-classical thinking had not, in fact, confined price theory to the analysis of perfectly competitive equilibrium under conditions of perfect knowledge. ... The great 20th-century Austrians, Mises and Hayek, gradually realised the direction in which mainstream price theory was moving. The crystallisation of mainstream theory into an approach confined to analysis of equilibrium conditions under the assumption of perfect knowledge made it both possible and necessary for the Austrians to articulate, for themselves and others, their own approach.

By mid-century the Austrian tradition - at a time when conventional histories of economic thought were pronouncing that tradition to be in permanent eclipse - had produced at least the elements of a new analytical framework within which to understand price-formation, market processes, and the role of equilibrium analysis. Subsequent developments in the history of Austrian economics during the second half of the 20th-century continued this gradual liberation from the mainstream approach."

Israel M. Kirzner
Institute of Economic Affairs
June 1997
Library Topic

"Why had this new 'Austrian' paradigm not been articulated earlier? A plausible explanation is that the mainstream paradigm had itself been gradually undergoing modification (particularly under the impact of the Walrasian approach) in the decades immediately following 1930. Earlier neo-classical thinking had not, in fact, confined price theory to the analysis of perfectly competitive equilibrium under conditions of perfect knowledge. ... The great 20th-century Austrians, Mises and Hayek, gradually realised the direction in which mainstream price theory was moving. The crystallisation of mainstream theory into an approach confined to analysis of equilibrium conditions under the assumption of perfect knowledge made it both possible and necessary for the Austrians to articulate, for themselves and others, their own approach.

By mid-century the Austrian tradition - at a time when conventional histories of economic thought were pronouncing that tradition to be in permanent eclipse - had produced at least the elements of a new analytical framework within which to understand price-formation, market processes, and the role of equilibrium analysis. Subsequent developments in the history of Austrian economics during the second half of the 20th-century continued this gradual liberation from the mainstream approach."

Israel M. Kirzner
Institute of Economic Affairs
June 1997
Library Topic

"...The prices people pay in the marketplace reflect the opportunity costs of their choices. You cannot generally purchase a good or service in a free market for less than others are willing to pay for it, or for less than the amount spent to make it available, which is an important part of the social cooperation that emerges out of market transactions."

Dwight R. Lee
The Freeman, Volume 49
Foundation for Economic Education
March 1, 1999
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Commentary or Blog Post

Venezuelans spend next to nothing and consume more gasoline than their neighbors due to a longstanding fuel subsidy. Though the country loses more money on the subsidy than they spend on healthcare, they are hesitant to remove the perk citizens have come to expect.

"It is constantly reported that the price of attending college is rising. In a time when inflation has been prevalent, what does that actually mean? To put the cost of higher education in perspective, compare it to two of the other important expenses we face: medical care and housing. Between 1987 and 2008, the cost of healthcare increased by 5.0% per year on average and the cost of housing...

"The plate has always been a great fortifier. Soup to heal, stew to comfort, escape delivered in a good piece of chocolate. But events both at home and internationally are conspiring to shake the confidence of eaters. Global famine, war and disaster are no longer so easy to keep from the table."

"The retail cost of menu items for a classic Thanksgiving dinner including turkey, stuffing, cranberries, pumpkin pie and all the basic trimmings increased less than 1 percent this year, according to the American Farm Bureau Federation."

Williams gives an excellent, quick overview of the role markets and prices play in bringing order to society without the need for government control, management, or interference.

"Global food prices are moving ever higher, hitting record levels last month as a jittery market reacted to unpredictable weather and tight supplies, according to a United Nations report released Thursday."

While it might be tempting for the government to try to control the price, this article explains why letting industry freely set high prices leads to the best allocation of gas in society for both the rich and the poor.

In real terms, grocery prices are much lower than they were 150 years ago, according to one magazine. The magazine credited higher wages and a greater availability of food for the change.

"There is a simple reason health care in the United States costs more than it does anywhere else: The prices are higher."

Apple uses a different pricing strategy than other manufacturers, called price maintenance. Other manufacturers may offer wholesale discounts to retailers, who can then turn around and attract customers with a sale price that is higher than wholesale, but lower than the "manufacturer suggested retail price" (MSRP).

"Several conclusions can be drawn from all this. First, there is no absolute and objective gauge of inflation. Any particular measure is simply one way of making the calculation, based on a host of assumptions. Second, a number of the costs that middle-class households face are going up considerably faster than the CPI [Consumer Price Index]. Printer-ink cartridges may be a particularly obnoxious example, but they're not the only case where prices are rising more than official statistics indicate. At the moment, these trends aren't highly visible because the economy is so sluggish. But as the recovery continues, there's every reason to think that they will become more widespread."

"Prices go up, sometimes steadily, sometimes in leaps and bounds, and although they may occasionally slide in the other direction, higher prices are the rule. Over the past ten years, prices nationwide have gone up an average of about 2.5 percent per year, a healthy rate of inflation, says Northwestern University economics professor Giorgio Primiceri. The upward march, however, is not uniform across all the goods and services tracked by the consumer price index (CPI). In the last decade, the CPI category indexes of food, housing, transportation, medical care, and education have gone up nationwide compared with the overall inflation rate, while those of recreation, communication, and apparel have gone down."

Today, more food can be bought with the same amount of money than 30 years ago (adjusted for inflation). Food prices fluctuate from supply and demand. For example, bad weather may lower supply and therefore raise prices. An increasing population that consumes more meat per person also affects prices by increased demand.

In the name of fighting inflation, price speculation, and unaffordable for the poor, Ecuadorian president Rafael Correa is instituting price controls. However, the inevitable result of this will be a shortage of basic food and unintended consequences like cronyism and black markets.

Von Mises is important because his teachings are necessary to the preservation of material civilization.

The state of Maryland regulates hospital prices, which has kept them from rising as fast as in other parts of the country. However, the costs have been offset by extra Medicare reimbursements of about $1 billion per year. To deal with expenses that have begun to get out of hand, the state has decided to put caps on the price spent per person.

"The earth’s natural resources are finite, which means that if we use them continuously, we will eventually exhaust them. This basic observation is undeniable. But another way of looking at the issue is far more relevant to assessing people’s well-being. Our exhaustible and unreproducible natural resources, if measured in terms of their prospective contribution to human welfare, can actually...

"When oil prices hit record levels, many people look for a scapegoat, and hugely profitable oil companies are an easy target. Even so, the typical political 'solutions' overlook the crucial role that market prices play in resource allocation, both among competing uses in different areas of the world today and among competing uses in different time periods (i.e. today versus the future)....

The author addresses the economic reality of scarcity. Everything we do has an opportunity cost. To do one thing, we have to forgo another thing. This is not altogether bad, because it means we have more opportunities available. Without opportunities, there would be no costs. These costs can be reflected in prices and help society choose among resources.

The countries of Argentina, Venezuela, and Ecuador are trying to suppress inflation by artificially keeping prices low. The official inflation rate stays low, but the repressed inflation rate still rises, accompanied by a shortage of goods.

"How many people see natural disasters like the tornadoes in Tuscaloosa, Alabama, and Joplin, Missouri, and say, 'we should be working to impede the recovery and make life harder for storm victims'? Probably no one. How many people see prices rise after natural disasters like the tornadoes in Tuscaloosa, Alabama, and Joplin, Missouri, and say, 'we should prosecute "price gougers"!'? Probably a lot. And yet prosecuting price gougers makes life harder for storm victims."

That magical role of prices in directing resources is the bread and butter of economics. But to the non-economist, high prices are just a form of gouging that ought to be stopped. It's wrong to let people profit from the distress of others.

"Over the past 200 years or so, many of the world's conflicts have developed around a little-known debate in economic theory. The outcome of this argument has had an impact equal to that of a major war. As an educator, I find it one of the most important but difficult concepts to teach to students, but let me take a shot at explaining it to adults."

In response to possible congressional price controls on energy costs in California, this article recalls historical lessons from ancient Egypt to Colonial Britain that teach the folly of price controls.

"We spend less of our money on groceries than we did 30 years ago."

Using data from the Consumer Price Index, the author found that, between March 2010 and March 2011, transportation prices had seen an increase of over 9.8 percent (adjusted for inflation). Gas was up 27.5 percent and education 4 percent, while the price of clothing and technology was down.

Dr. Cravens gives a basic explanation of how prices are set based on supply and demand. The author gives an example of how the price on apples is set. Farmers and retailers decide how much to charge based on how many apples they have and how fast customers are buying them. The seller has the power to set the price, but the buyer is always free not to make the purchase. This may encourage the seller to set a lower price.

"Staying healthy in the United States is expensive. In fact, in 2009, the average annual cost of health care was $7,960 per person -- two and a half times what it was in Japan for the same year."

"Analysts say gas prices are going up for two basic reasons: oil prices are rising, and refineries are shutting down."

"WHAT prices will today's home buyers get if they sell a decade from now? Most people live in their home for many years. They don't need to view it as an investment at all, but if they do, they surely need a long forecasting horizon. The problem is that modern economics has a poor understanding of past movements in home prices. And that makes the task of predicting the state of the market in 2023 challenging, at the very least. Still, we can learn something by analyzing the factors that affect home prices in general."

"In the same way that a Ponzi scheme or chain letter initially succeeds but eventually collapses, socialism may show early signs of success. But any accomplishments quickly fade as the fundamental deficiencies of central planning emerge. It is the initial illusion of success that gives government intervention its pernicious, seductive appeal. In the long run, socialism has always proven to be a formula for tyranny and misery."

Chart or Graph

"...Food inflation hit its all-time high of 28.7% in 1917 (Figure 2)."

"It is constantly reported that the price of attending college is rising. In a time when inflation has been prevalent, what does that actually mean?"

"In the last decade, the CPI [Consumer Price Index] category indexes of food, housing, transportation, medical care, and education have gone up nationwide compared with the overall inflation rate, while those of recreation, communication, and apparel have gone down."

Chart 1.6 from each year's report shows the percent increase in both CPI inflation and in core inflation between January 2000 and November 2008.

"Global food prices are moving ever higher, hitting record levels last month as a jittery market reacted to unpredictable weather and tight supplies, according to a United Nations report released Thursday."

Real prices for meats and other food items have dropped significantly in 30 years, as seen in this chart.

"The average price for a gallon of gas has [risen] more than 10% this year. Residents in North Dakota pay the most as a percentage of their income."

"The price tag for medical care is dramatically higher in the U.S."

Setting artificially low prices on energy is costly. In 2011, Saudi Arabia spent $61 billion, or 10.6% of GDP, to subsidize energy. Venezuela, which practically gives away its gasoline, spent 8.6% of GDP to keep prices low.

Led by a 28 percent increase in gasoline prices, the prices of meet and fresh vegetables increased by double digit percentage points from March 2010 to March 2011.

This chart shows how various prices changed between March 2010 and March 2011. Gasoline and transportation by far saw the highest increase, while communication saw the greatest decrease in prices. Values are adjusted for a 2.7% rate of inflation.

Petroleum prices catapulted in the 1970s and 1980s under the influence of the Organization of Petroleum Exporting Countries (opec). After that, as Figure 1 shows, real oil prices returned to their historical levels, until 2003, when oil prices increased significantly again."

This interactive chart shows what happens when prices are too low or too high. Prices that are too low create shortages. Prices that are too high create a surplus. Prices that balance supply and demand are at equilibrium.

"The retail cost of menu items for a classic Thanksgiving dinner including turkey, stuffing, cranberries, pumpkin pie and all the basic trimmings increased less than 1 percent this year, according to the American Farm Bureau Federation."

In February 2013, 20.4 percent of items were out of stock in stores.

"In 2006, USDA estimated that the average farm-value share of all food products of U.S. farm-origin consumed in the United States (both at-home and away-from-home) was 18.5% (Figure 6) out of an estimated $880.7 billion."

Analysis Report White Paper

Dr. F.A. Harper examines the question of who should decide the rate of exchange. Should one of the two individuals involved in a trade decide the price? Then one would have coercive power over the other. Should a disinterested third-party decide the price? He would have even less information on which to base his decision.

"In Chapter VIII, which ostensibly shows how the market determines prices, the analysis attempts to demonstrate that in reality it is not so much the 'market' per se that establishes prices but rather it is the firm which sets them at all times.

Rose explores the various ways information influences decisions in economies, the optimal amount of information, and problems with asymmetric information in production and quality.

Rose gives a very thorough and important lesson on the critical role of prices by showing how information is conveyed through prices, how private ownership is essential for market forces to determine the prices.

This in-depth article lays out the fundamental argument against price controls, namely, that price controls distort the allocation of resources and lead to surpluses, shortages, black markets, and long lines.

"Counter to the 'start high, end high' effect of anchors in individual judgments and dyadic negotiations, 6 studies using a diverse set of methodologies document how and why, in the social setting of auctions, lower starting prices result in higher final prices. Three processes contribute to this effect.

"History shows that price controls lead to shortages and stagnation. So why do we want to control prescription drug prices?" In answering this question, Morton outlines the negative impacts of price controls through history up to the present, and concludes with ways that prescription drug prices could be lowered through the market.

"If public policy ought especially to protect persons during periods of emergency — and that is the claim of some advocates of price gouging laws — then price gouging laws should be repealed if it is found that they lead to more harm than good for such persons."

"My three sons, ages seven to twelve, suffer from a chronic condition I've heard described by economist John Baden as ironitis—the love of anything made of metal. They are fascinated by cars, trucks, backhoes, tractors and—well, you get the idea. The other day, my middle son suggested that my next car should be a convertible.

Video/Podcast/Media

"Is the economy at risk of another boom-bust cycle in housing? Or is there a healthier, more sustainable tint to this new housing surge?"

This interactive tool, adjusted for inflation, calculates how much money will be left over after buying groceries on a budget of $35.46. Remaining amounts after purchase are shown for 2002, 1992, and 1982. More money tends to be left over with each later decade.

"Americans spend less on groceries than they did a few decades ago. That's partly because of new machines and technology that have made it much cheaper to produce food."

Listen in as Munger and EconTalk host Russ Roberts discuss the human side of economics after a catastrophe.

"Prof. Steve Horwitz addresses the common belief that the world is running out of natural resources. Instead, there are economic reasons why we will never run out of many resources. In a free market system, prices signal scarcity. So as a resource becomes more scarce, it becomes more expensive, which incentivizes people to use less of it and develop new alternatives, or to find new reserves of...

"Is price gouging bad? Is Minimum Wage good? We'll see what government price controls do compared to the market setting the price."

Friedman breaks apart the many different natural resources and processes involved in making something so seemingly simple as a wood pencil.

"Have you ever stated economic principles as haiku? Have you tried? Economics professor Art Carden takes the challenge in this short video on the laws of supply & demand."

Prof. Matt Zwolinski shares several reasons he thinks price gouging is not immoral and should not be illegal. He says that raising the price on scarce goods during times of emergency can actually reserve those scarce resources for those who would value them the most. The higher prices also incentivize people to transport more of those resources to the region of scarcity. He reasons that laws against price gouging do not solve the underlying problem of scarcity, anyway.

The short video describes the post-World War II economy in Berlin as a result of wage and price controls imposed by the Allies. Ludwig Erhard abolished the wage and price controls, which resulted in a flourishing economy.

The Carter administration was the last to attempt to intervene directly in wage and price setting to restrain inflation. For example, the Kennedy-Johnson administrations used wage-price guideposts and the Nixon administration imposed mandatory wage-price controls.

The Associated Press examines the ripple effect of record high gas prices in a small town in Illinois.

"Why are prices important? Prof. Daniel J. Smith of Troy University describes the role that prices play in generating, gathering, and transmitting information throughout the economy. Information about the supply and demand of different goods are dispersed among different buyers and sellers in an economy. Nobody has to know all this dispersed information; individuals only need to know the relative prices. Based on the simple information contained in a price, people adjust their behavior to account for conditions in supply and demand, even if they are unaware of that information."

Primary Document

Each year, the Chairman of the Council of Economic Advisors issues the Economic Report of the President, which details the nation's economic progress using text and data appendices. It reviews last year's economic activity, makes projections, and, based on the President's economic agenda,...

This economic classic is noted for providing us with terms for and expositions of such key economic ideas as the division of labor, "invisible hand," self-interest as a beneficial force, and freedom of trade.

Kirzner delves into competition and the market process, as well as compares critiques of government regulation on competition and the market process from the "neoclassical" paradigm and the "Austrian" paradigm.

"During the 1991 to 2006 period, U.S. food prices were fairly stable—annual food price inflation, as measured by the Consumer Price Index (CPI) for all food (excluding alcoholic beverages),averaged a relatively low 2.5%. However, several economic factors emerged in late 2005 that began to gradually push market prices higher for both raw agricultural commodities and energy costs, and ultimately retail food prices. U.S. food price inflation increased at a rate of 4% in 2007 and at 5.5% in 2008—the highest since 1990 and well above the general inflation rate of 3.8%. The situation of sharply rising prices came to a sudden halt in late 2008 when the financial crisis hit U.S. markets leading to a severe economic recession. Annual food price inflation dropped to 1.8% in 2009 and 0.8% in 2010, before rising to 3.7% in 2011 driven by improving U.S. and global economic conditions. USDA projects that annual food price inflation will range from 2.5% to 3.5% in 2012 and rise to 3%-4% in 2013."

We know from years of patient refinement that competition insures the achievement of a Pareto optimum under certain hypotheses.

Henry Hazlitt's classic primer outlines a straightforward and accessible portrayal of free-market economics. An unshackled market, Hazlitt says, is the only path to "full production".

Cantillon wrote one major work which was regarded by Jevons and Hayek as an important early contribution to the theory of marginal utility.

"Price is the primary mechanism that links raw farm commodities through the various levels of the market system to the retail food product. The nature of price transmission between farm and retail levels depends, in general, on the size of the farm-value share of the retail price and the degree of market competition at each stage of the marketing chain."

This paper presents, in non-technical terms, an 'Austrian' view of how a market economy works.

Mises explained economic phenomena as the outcomes of countless conscious, purposive actions, choices, and preferences of individuals, each of whom was trying as best as he or she could ... to attain ... wants and ... avoid ... consequences.

"Hundreds of thousands of Americans of all ages continue to enjoy this simple and beautiful explanation of the miracle of the 'invisible hand' by following the production of an ordinary pencil. Read shows that none of us knows enough to plan the creative actions and decisions of others."

"Two days ago, I was favored with your polite and elegant letter of January 22d. I have received so many of your letters, within a few months, containing such important matters, in so masterly a style, that I am ashamed to confess that I have answered but one of them, and that only with a few lines. I beg you would not impute this omission to inattention, negligence, or want of regard, but to...

"The production and use of ethanol in the United States have been steadily increasing since 2001, boosted in part by long-standing production subsidies. That growth has exerted upward pressure on the price of corn and, ultimately, on the retail price of food, affecting both individual consumers and federal expenditures on nutritional support programs. It has also raised questions about the environmental consequences of replacing gasoline with ethanol."

F.A. Hayek presents a very thorough analysis on the role of knowledge and infomation in societies, how it is transmitted in various societies and economic systems, how a lack of knowledge ultimately proves to be the downfall of central planning, and other key topics.

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