The free market’s efficiency in responding to economic change. Factor prices. Price controls, shortages, and economic chaos. Illustrations from the energy crisis and rent controls. From partial price controls to universal price controls.

READINGS

Tendencies toward uniform prices over space and time; applications to the Arab oil embargo and commodity speculation. Tendency toward a uniformity of wage rates at any given level of ability. Equal pay for equal work. Permanent inequalities in wage rates. Prices and costs of production. Ultimate analysis of cost of production. Cost of production and supply and demand.

READINGS

Demand and supply curves. The law of demand. Elasticity of demand. The uniformity-of-profit principle and its applications to consumer sovereignty, economic progress, farm subsidies, rent and price controls, profit taxes, and racial discrimination.

READINGS

The division of labor as the central requirement of a high and rising output per capita; its advantages and alleged shortcomings. Dependence of the division of labor on the economic institutions of capitalism, especially the price system. Prices, economic planning, and economic coordination.

READINGS

Natural resources, the law of diminishing returns, and conservationism. The ecological critique of economic progress: a rebuttal.

READINGS

The role of wealth in human life. “Scarcity” and the limitless need for wealth. The law of diminishing marginal utility and its reconciliation with the limitless need for wealth.

READINGS

Week 1

Introduction: The nature and value of economics. An overview of the subject’s content and history. Principal applications. The philosophical foundations of economic activity. Economics and capitalism.

READINGS

Reisman: Introduction and Chapter 1

von Mises, Human Action: pp. 1-3, 7-10, 862-885. Also see glossary at the end of this syllabus.

OBJECTIVES

1. To provide the student with a comprehensive knowledge of the nature, foundations, and operations of a division-of labor, capitalist society, with special emphasis on the institutions of private ownership of the means of production, competition, the profit motive, and the price system as the basis for economic coordination and economic progress. The consequences of government intervention with respect to these institutions will be considered in depth.

2. To teach the student to think of economic phenomena in terms of their long-run effects on all groups, not merely their short-run effects on those directly concerned.

OVERVIEW

The course will focus on five main current problem areas: 1) The validation of economic activity and fundamental economic institutions in the face of widespread criticisms. 2) Environmentalism and energy supplies. 3) Economic “planning” and the reasons for the worldwide collapse of socialism. 4) The monopoly question and antitrust policy. 5) Prevailing ideas on the nature of productive activity and the effect of government intervention on the standard of living of the average wage earner.

Two leading themes of the course will be 1) The possibility of continuous economic progress based on the combination of economic freedom, private ownership of the means of production, division of labor, saving, and technological progress. 2) The ethical implication of the harmony of the rational self-interests of all men under capitalism.