Editing Human Action (section)

=== Part Four: Catallactics or Economics of the Market Society ===
'''Chapter 14''', "The Scope and Method of Catallactics", focuses on the science of human action or praxeology, which studies goal-seeking, rational behavior.<ref name=":26">{{Cite web |title=The Delimitation of Catallactic Problems |url=https://mises.org/library/human-action-0/html/pp/736 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161158/https://mises.org/library/human-action-0/html/pp/736 |url-status=dead }}</ref> The chapter describes the delimitation of catallactic problems, which involve analyzing the formation of money prices for all goods and services exchanged on a market.<ref name=":26" /> The chapter also explains the use of imaginary constructions as the method of praxeology and the analysis of the pure market economy.<ref>{{Cite web |title=The Method of Imaginary Constructions |url=https://mises.org/library/human-action-0/html/pp/737 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161142/https://mises.org/library/human-action-0/html/pp/737 |url-status=dead }}</ref> Other topics covered in the chapter include the autistic economy,<ref>{{Cite web |title=The Autistic Economy |url=https://mises.org/library/human-action-0/html/pp/739 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161234/https://mises.org/library/human-action-0/html/pp/739 |url-status=dead }}</ref> the state of rest,<ref name=":27">{{Cite web |title=The State of Rest and the Evenly Rotating Economy |url=https://mises.org/library/human-action-0/html/pp/740 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161203/https://mises.org/library/human-action-0/html/pp/740 |url-status=dead }}</ref> and the evenly rotating economy.<ref name=":27" /> Finally, the chapter also discusses the stationary economy and its relationship with profit and interest.<ref>{{Cite web |title=The Stationary Economy |url=https://mises.org/library/human-action-0/html/pp/741 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161447/https://mises.org/library/human-action-0/html/pp/741 |url-status=dead }}</ref>

'''Chapter 15''', "The Market",<ref>{{Cite web |title=The Market |url=https://mises.org/library/human-action-0/html/p/758 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161143/https://mises.org/library/human-action-0/html/p/758 |url-status=dead }}</ref> focuses on the characteristics of the market economy,<ref>{{Cite web |title=The Characteristics of the Market Economy |url=https://mises.org/library/human-action-0/html/pp/744 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161212/https://mises.org/library/human-action-0/html/pp/744 |url-status=dead }}</ref> capital,<ref name=":28">{{Cite web |title=Capital Goods and Capital |url=https://mises.org/library/human-action-0/html/pp/745 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161202/https://mises.org/library/human-action-0/html/pp/745 |url-status=dead }}</ref> capitalism,<ref name=":29">{{Cite web |title=Capitalism |url=https://mises.org/library/human-action-0/html/pp/746 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161158/https://mises.org/library/human-action-0/html/pp/746 |url-status=dead }}</ref> the sovereignty of consumers,<ref name=":30">{{Cite web |title=The Sovereignty of the Consumers |url=https://mises.org/library/human-action-0/html/pp/747 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161150/https://mises.org/library/human-action-0/html/pp/747 |url-status=dead }}</ref> competition,<ref name=":31">{{Cite web |title=Competition |url=https://mises.org/library/human-action-0/html/pp/748 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161211/https://mises.org/library/human-action-0/html/pp/748 |url-status=dead }}</ref> freedom,<ref name=":32">{{Cite web |title=Freedom |url=https://mises.org/library/human-action-0/html/pp/749 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161143/https://mises.org/library/human-action-0/html/pp/749 |url-status=dead }}</ref> and [[inequality of wealth]] and [[Income inequality|income]].<ref>{{Cite web |title=Inequality of Wealth and Income |url=https://mises.org/library/human-action-0/html/pp/750 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161229/https://mises.org/library/human-action-0/html/pp/750 |url-status=dead }}</ref> In the market economy, individuals specialize in their occupations, and the means of production are privately owned.<ref name=":29" /> Economic calculation is based on the notions of capital and income,<ref name=":28" /> and capital goods refer to physical objects that can be used to augment future production.<ref name=":28" /> History shows that private property goes hand in hand with [[civilization]],<ref name=":29" /> and although the market economy has never existed in a pure form,<ref name=":29" /> it has grown in Western civilizations since the [[Middle Ages]].<ref name=":29" /> Even though entrepreneurs appear to be in charge,<ref name=":30" /> [[Consumer sovereignty|consumers are sovereign]],<ref name=":30" /> and their purchasing decisions determine which businesses expand and which contract.<ref name=":33">{{Cite web |title=Entrepreneurial Profit and Loss |url=https://mises.org/library/human-action-0/html/pp/751 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161210/https://mises.org/library/human-action-0/html/pp/751 |url-status=dead }}</ref> Competition entrusts control of scarce resources to those who are most likely to satisfy the wants of consumers,<ref name=":33" /> and the true restrictions on competition come from government, not the market.<ref>{{Cite web |title=The Selective Process |url=https://mises.org/library/human-action-0/html/pp/754 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161212/https://mises.org/library/human-action-0/html/pp/754 |url-status=dead }}</ref> Freedom and liberty are the most precious goods to many thinkers in the Western tradition,<ref name=":32" /> and people are not born equal.<ref name=":31" />

'''Chapter 16''', "Prices", covers the pricing process,<ref name=":34">{{Cite web |title=The Pricing Process |url=https://mises.org/library/human-action-0/html/pp/759 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161417/https://mises.org/library/human-action-0/html/pp/759 |url-status=dead }}</ref> valuation and appraisement,<ref name=":35">{{Cite web |title=Valuation and Appraisement |url=https://mises.org/library/human-action-0/html/pp/760 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161204/https://mises.org/library/human-action-0/html/pp/760 |url-status=dead }}</ref> the prices of goods of higher orders,<ref>{{Cite web |title=The Prices of the Goods of Higher Orders |url=https://mises.org/library/human-action-0/html/pp/761 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161150/https://mises.org/library/human-action-0/html/pp/761 |url-status=dead }}</ref> cost accounting,<ref name=":36">{{Cite web |title=Cost Accounting |url=https://mises.org/library/human-action-0/html/pp/762 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161155/https://mises.org/library/human-action-0/html/pp/762 |url-status=dead }}</ref> and logical catallactics versus mathematical catallactics.<ref name=":37">{{Cite web |title=Logical Catallactics Versus Mathematical Catallactics |url=https://mises.org/library/human-action-0/html/pp/763 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161204/https://mises.org/library/human-action-0/html/pp/763 |url-status=dead }}</ref> The '''pricing process''' in an organized market is determined by the subjective valuations of consumers and entrepreneurs, who appraise goods to make buying decisions that cause price formation.<ref name=":34" /> '''Appraisement''' is an objective assessment of an item's [[market value]], which may differ from a person's subjective valuation.<ref name=":35" /> Entrepreneurs evaluate factors of production based on their appraisal of the products that these factors can create, which determines the prices of second- and higher-order goods.<ref name=":35" /> '''Cost accounting''' is the process of evaluating the costs of production to determine how to create products and earn revenue that will cover the entrepreneur's explicit costs.<ref name=":36" /> Mises argues that [[mathematical model]]s of pricing are flawed because they ignore the market process, which is necessary for understanding the formation of real-world prices.<ref name=":37" />

Then, several topics related to monopoly are discussed.<ref name=":38">{{Cite web |title=Monopoly Prices |url=https://mises.org/library/human-action-0/html/pp/764 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161204/https://mises.org/library/human-action-0/html/pp/764 |url-status=dead }}</ref> A '''monopolist''' violates consumer sovereignty when they restrict output below the competitive level.<ref name=":38" /> '''Good will''', or a producer's [[reputation]], gives them an advantage over competitors who lack it, and government certification is not an effective solution to asymmetric information.<ref>{{Cite news |title=Good Will |language=en |work=Mises Institute |url=https://mises.org/library/human-action-0/html/pp/765 |access-date=2023-02-24 |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161154/https://mises.org/library/human-action-0/html/pp/765 |url-status=dead }}</ref> '''[[Monopsony|Monopolistic buyers]]''' can restrict demand, but they cannot earn a specific gain like monopolistic sellers can.<ref>{{Cite web |title=Monopoly of Demand |url=https://mises.org/library/human-action-0/html/pp/766 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161505/https://mises.org/library/human-action-0/html/pp/766 |url-status=dead }}</ref> [[Monopoly price]]s generally impair consumer happiness, except when a product would not be produced without monopoly prices for an essential input.<ref>{{Cite web |title=Consumption as Affected by Monopoly Prices |url=https://mises.org/library/human-action-0/html/pp/767 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161148/https://mises.org/library/human-action-0/html/pp/767 |url-status=dead }}</ref> [[Price discrimination]] can occur on the part of both sellers<ref name=":39">{{Cite web |title=Price Discrimination on the Part of the Seller |url=https://mises.org/library/human-action-0/html/pp/768 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161226/https://mises.org/library/human-action-0/html/pp/768 |url-status=dead }}</ref> and buyers,<ref name=":40">{{Cite web |title=Price Discrimination on the Part of the Buyer |url=https://mises.org/library/human-action-0/html/pp/769 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224163232/https://mises.org/library/human-action-0/html/pp/769 |url-status=dead }}</ref> but it can only happen under certain conditions and may not persist on a free market.<ref name=":39" /><ref name=":40" /> [[Privilege (law)|Government privileges]], not free markets, establish most [[cartel]]s and monopolies.<ref name=":38" />

Finally, there are several topics discussed regarding the connexity of prices.<ref name=":41">{{Cite web |title=The Connexity of Prices |url=https://mises.org/library/human-action-0/html/pp/770 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161159/https://mises.org/library/human-action-0/html/pp/770 |url-status=dead }}</ref> The prices of goods are related because they compete for the money of buyers, and labor is required for every good, making them interrelated on both the consumption and production side.<ref name=":41" /> The market process does not engage in separate activities of price and income determination, as the exchange ratios in specific transactions determine both.<ref>{{Cite web |title=Prices and Income |url=https://mises.org/library/human-action-0/html/pp/771 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161145/https://mises.org/library/human-action-0/html/pp/771 |url-status=dead }}</ref> The market process directs the factors of production into those lines that best satisfy the desires of the consumers.<ref>{{Cite web |title=Prices and Production |url=https://mises.org/library/human-action-0/html/pp/772 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161508/https://mises.org/library/human-action-0/html/pp/772 |url-status=dead }}</ref> It is nonsense to speak of non-market prices because market prices take into account all relevant facts.<ref name=":42">{{Cite web |title=The Chimera of Nonmarket Prices |url=https://mises.org/library/human-action-0/html/pp/773 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161142/https://mises.org/library/human-action-0/html/pp/773 |url-status=dead }}</ref> Any attempt to alter prices would ignore these real considerations, which would ultimately make consumers poorer.<ref name=":42" />

'''Chapter 17''', "Indirect [[Trade|Exchange]]", discusses the [[concept]] of money<ref name=":43">{{Cite web |title=Media of Exchange and Money |url=https://mises.org/library/human-action-0/html/pp/775 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161227/https://mises.org/library/human-action-0/html/pp/775 |url-status=dead }}</ref> and the errors associated with it.<ref name=":44">{{Cite web |title=Observations on Some Widespread Errors |url=https://mises.org/library/human-action-0/html/pp/776 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161222/https://mises.org/library/human-action-0/html/pp/776 |url-status=dead }}</ref> '''Indirect exchange''' requires a medium of exchange, where a good or commodity is used to facilitate a more ultimate exchange.<ref name=":43" /> When one good becomes the commonly used medium of exchange, it becomes money.<ref name=":45">{{Cite web |title=Demand for Money and Supply of Money |url=https://mises.org/library/human-action-0/html/pp/777 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161145/https://mises.org/library/human-action-0/html/pp/777 |url-status=dead }}</ref> The "[[equation of exchange]]" is a [[Failure|faulty]] method of [[Analysis|analyzing]] money because it assumes that the [[Price level|level of prices]] and [[Gross domestic product|total output]] are meaningful concepts, leading to the flawed notion of the [[neutrality of money]].<ref name=":44" /> The purchasing power of money is explained by the difference in marketability of various goods,<ref name=":46">{{Cite web |title=The Determination of the Purchasing Power of Money |url=https://mises.org/library/human-action-0/html/pp/778 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161153/https://mises.org/library/human-action-0/html/pp/778 |url-status=dead }}</ref> and the [[demand for money]] depends on its exchange value.<ref name=":46" /> [[Carl Menger]]'s theory of the spontaneous origin of money states that money emerged naturally from direct exchange, as people increased their demand for marketable goods.<ref name=":45" /> Finally, the price of money depends on its [[exchange value]] in the market and its industrial and monetary demand.<ref name=":46" />

[[Change (philosophy)|Changes]] in the [[Purchasing power|purchasing power of money]] can arise from the money side or the [[Real economy|real side]], but typically changes in the purchasing power of money can only occur from the money side.<ref name=":47">{{Cite web |title=Cash-Induced and Goods-Induced Changes in Purchasing Power |url=https://mises.org/library/human-action-0/html/pp/780 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161658/https://mises.org/library/human-action-0/html/pp/780 |url-status=dead }}</ref> Changes originating from the money side can only redistribute wealth and cannot make the community richer.<ref name=":47" /> Businessmen must decide upon a money in which to reckon for economic calculation purposes.<ref>{{Cite web |title=Monetary Calculation and Changes in Purchasing Power |url=https://mises.org/library/human-action-0/html/pp/781 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161238/https://mises.org/library/human-action-0/html/pp/781 |url-status=dead }}</ref> If people expect the purchasing power of money to change, they will adjust their cash holdings accordingly and speed up the process, which may result in the abandonment of the currency causing the "crackup boom" (Katastrophenhausse).<ref>{{Cite web |title=The Anticipation of Expected Changes in Purchasing Power |url=https://mises.org/library/human-action-0/html/pp/782 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161605/https://mises.org/library/human-action-0/html/pp/782 |url-status=dead }}</ref> Money substitutes perform all the services of money and become a money substitute if there is a claim to a definite amount of money, payable and redeemable on demand, such that no one doubts the solvency of the debtor.<ref name=":48">{{Cite web |title=The Money-Substitutes |url=https://mises.org/library/human-action-0/html/pp/785 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161149/https://mises.org/library/human-action-0/html/pp/785 |url-status=dead }}</ref> If the debtor has issued more money substitutes than it can redeem with money proper, then the "unbacked" portion of the claims become fiduciary media.<ref name=":48" /> The limit to the issuance of fiduciary media is that if the issuance proceeds so rapidly that the public becomes suspicious, they will turn in the claims and demand redemption in actual money.<ref>{{Cite web |title=The Limitation on the Issuance of Fiduciary Media |url=https://mises.org/library/human-action-0/html/pp/786 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161201/https://mises.org/library/human-action-0/html/pp/786 |url-status=dead }}</ref>

Mises discusses various topics related to money,<ref name=":49">{{Cite web |title=The Size and Composition of Cash Holdings |url=https://mises.org/library/human-action-0/html/pp/787 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161205/https://mises.org/library/human-action-0/html/pp/787 |url-status=dead }}</ref> trade,<ref name=":50">{{Cite web |title=Balances of Payment |url=https://mises.org/library/human-action-0/html/pp/788 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161220/https://mises.org/library/human-action-0/html/pp/788 |url-status=dead }}</ref> and inflation.<ref name=":51">{{Cite web |title=The Inflationist View of History |url=https://mises.org/library/human-action-0/html/pp/792 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161637/https://mises.org/library/human-action-0/html/pp/792 |url-status=dead }}</ref><ref name=":52">{{Cite web |title=The Gold Standard |url=https://mises.org/library/human-action-0/html/pp/793 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224163235/https://mises.org/library/human-action-0/html/pp/793 |url-status=dead }}</ref> People decide on the appropriate size of cash holdings based on subjective [[marginal utility]], and it is possible to hold too much cash.<ref name=":49" /> The [[balance of payments]] is the record of the money equivalent of the incomings and outgoings of an individual or group during a specific period of time,<ref name=":50" /> and a trade "deficit" is not an unforeseen calamity but rather the cumulative outcome of deliberate transactions undertaken by each individual.<ref name=":50" /> Exchange rates between currencies are kept within narrow limits due to arbitrage opportunities.<ref>{{Cite web |title=Interlocal Exchange Rates |url=https://mises.org/library/human-action-0/html/pp/789 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161152/https://mises.org/library/human-action-0/html/pp/789 |url-status=dead }}</ref> [[Credit transaction]]s carried out in the same currency tend to yield the same interest rates for comparable credit risks,<ref>{{Cite web |title=Interest Rates and the Money Relation |url=https://mises.org/library/human-action-0/html/pp/790 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161511/https://mises.org/library/human-action-0/html/pp/790 |url-status=dead }}</ref> and '''secondary media of exchange''' are goods that are still quite marketable but not as much as the money good.<ref>{{Cite web |title=Secondary Media of Exchange |url=https://mises.org/library/human-action-0/html/pp/791 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161353/https://mises.org/library/human-action-0/html/pp/791 |url-status=dead }}</ref> In a market economy free from government expansion of the money supply, [[Deflation|prices would generally fall over time]],<ref name=":51" /> and the [[gold standard]] marked the hallmark of [[classical liberalism]].<ref name=":52" /> International monetary cooperation is not necessary for an international gold standard to work.<ref name=":52" />

'''Chapter 18''', "Action in the Passing of Time", covers the topic of time<ref name=":53">{{Cite news |title=Perspective in the Valuation of Time Periods |language=en |work=Mises Institute |url=https://mises.org/library/human-action-0/html/pp/795 |access-date=2023-02-24 |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161202/https://mises.org/library/human-action-0/html/pp/795 |url-status=dead }}</ref> and its role in human action.<ref name=":54">{{Cite web |title=Time Preference as an Essential Requisite of Action |url=https://mises.org/library/human-action-0/html/pp/796 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161514/https://mises.org/library/human-action-0/html/pp/796 |url-status=dead }}</ref> It explains how all actions are directed towards the improvement of future conditions, but people do not value fractions of time equally.<ref name=":53" /> The text covers different concepts of time, including maturing time, [[working time]], period of production, and duration of serviceableness.<ref name=":55">{{Cite web |title=Period of Production, Waiting Time, and Period of Provision |url=https://mises.org/library/human-action-0/html/pp/798 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161220/https://mises.org/library/human-action-0/html/pp/798 |url-status=dead }}</ref> It emphasizes that '''time preference''' is essential to action and implies that present goods are more valuable than future goods, if the only difference is their date of availability.<ref name=":54" /> The text also discusses '''capital goods''', which are factors of production that have been produced,<ref name=":56">{{Cite web |title=Capital Goods |url=https://mises.org/library/human-action-0/html/pp/797 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161151/https://mises.org/library/human-action-0/html/pp/797 |url-status=dead }}</ref> and how lengthening the period of production requires savings.<ref name=":55" /> The structure of production is complex, and monetary profit-and-loss calculation helps determine if capital is growing or shrinking. Mises explains the concepts of period of production, waiting time, and period of provision,<ref name=":55" /> emphasizing that action is always forward-looking.<ref name=":53" />

According to Mises, '''capital''' refers to physical capital goods<ref name=":56" /> and their degree of convertibility,<ref name=":57">{{Cite web |title=The Convertibility of Capital Goods |url=https://mises.org/library/human-action-0/html/pp/799 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161239/https://mises.org/library/human-action-0/html/pp/799 |url-status=dead }}</ref> and even cash is not a completely free form of capital.<ref name=":57" /> He believes that the market economy cannot be judged based on hindsight because the limited convertibility of capital goods is what prevents the adoption of more productive arrangements.<ref>{{Cite web |title=The Influence of the Past Upon Action |url=https://mises.org/library/human-action-0/html/pp/801 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161206/https://mises.org/library/human-action-0/html/pp/801 |url-status=dead }}</ref> '''[[Capital maintenance|Maintaining]] or [[Capital accumulation|increasing capital]]''', for Mises, means maintaining or increasing the [[productivity]] of future efforts at [[Utility (economics)|want satisfaction]], which can only be accomplished through saving.<ref name=":58">{{Cite web |title=Accumulation, Maintenance and Consumption of Capital |url=https://mises.org/library/human-action-0/html/pp/802 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161200/https://mises.org/library/human-action-0/html/pp/802 |url-status=dead }}</ref> '''Capital consumption''' occurs when the consumption takes such a large portion of current output that the remainder devoted to new capital goods is insufficient to replace the depreciation of the capital stock.<ref name=":58" /> The transactions of the stock market, according to Mises, do not alter the sum total of profits or losses, but merely the particular people on whom the profits or losses fall, which shows the pointlessness of foreign-exchange controls.<ref>{{Cite web |title=The Mobility of the Investor |url=https://mises.org/library/human-action-0/html/pp/803 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161206/https://mises.org/library/human-action-0/html/pp/803 |url-status=dead }}</ref> He explains that entrepreneurs hold cash balances, and [[saving]] and investment are necessary for [[Capital accumulation|accumulating additional capital]].<ref>{{Cite web |title=Money and Capital; Saving and Investment |url=https://mises.org/library/human-action-0/html/pp/804 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161356/https://mises.org/library/human-action-0/html/pp/804 |url-status=dead }}</ref>

'''Chapter 19''', "The Rate of Interest", explains the [[phenomenon]] of interest.<ref name=":59">{{Cite web |title=The Phenomenon of Interest |url=https://mises.org/library/human-action-0/html/pp/805 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161235/https://mises.org/library/human-action-0/html/pp/805 |url-status=dead }}</ref> '''Originary interest''' is the discount applied to future goods versus present goods, and is ultimately due to the universal phenomenon of time preference.<ref name=":60">{{Cite web |title=Originary Interest |url=https://mises.org/library/human-action-0/html/pp/806 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161217/https://mises.org/library/human-action-0/html/pp/806 |url-status=dead }}</ref> It explains the higher market price for present goods versus future goods.<ref name=":59" /> Interest income is not just earned by the owners of capital goods but also by the owners of land.<ref name=":60" /> The rate of interest is not determined in the loan market but is determined by people's subjective [[time preference]]s.<ref name=":60" /> A higher interest rate does not necessarily draw forth more savings, rather, the discount people place on future goods determines both the amount of saving and the height of interest rates.<ref name=":61">{{Cite web |title=The Height of Interest Rates |url=https://mises.org/library/human-action-0/html/pp/807 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161153/https://mises.org/library/human-action-0/html/pp/807 |url-status=dead }}</ref> The supply of capital goods bears no necessary relationship with the [[rate of interest]].<ref name=":61" /> Lastly, the excess of [[Revenue|gross revenues]] over [[Expense|total money expenditures]] is not just [[Profit (economics)|profit]], but it is the implicit wages for the entrepreneur, interest on the capital invested, and true entrepreneurial profit or loss.<ref>{{Cite web |title=Originary Interest in the Changing Economy |url=https://mises.org/library/human-action-0/html/pp/808 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161532/https://mises.org/library/human-action-0/html/pp/808 |url-status=dead }}</ref>

'''Chapter 20''', "Interest, Credit Expansion, and the Trade Cycle", discusses the [[neutral rate of interest]] and the problems associated with it.<ref name=":62">{{Cite web |title=The Problems |url=https://mises.org/library/human-action-0/html/pp/811 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224163222/https://mises.org/library/human-action-0/html/pp/811 |url-status=dead }}</ref> It explains that the neutral rate of interest is the hypothetical, single rate of originary interest that would prevail in an imaginary, perfectly competitive economy.<ref name=":62" /> However, in the [[Reality|real world]], there are different implicit rates of interest in various lines of production, due to people's inability to perfectly forecast the future.<ref name=":63">{{Cite web |title=The Entrepreneurial Component in the Gross Market Rate of Interest |url=https://mises.org/library/human-action-0/html/pp/812 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161619/https://mises.org/library/human-action-0/html/pp/812 |url-status=dead }}</ref> The chapter also discusses the credit expansion, which is responsible for the business cycle.<ref name=":64">{{Cite web |title=The Price Premium as a Component of the Gross Market Rate of Interest |url=https://mises.org/library/human-action-0/html/pp/813 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161146/https://mises.org/library/human-action-0/html/pp/813 |url-status=dead }}</ref> It explains that the actual gross rate of interest quoted in a loan contract reflects not only the pure rate of originary interest, but also an entrepreneurial component<ref name=":63" /> and a price premium component.<ref name=":64" /> The chapter further explains that the market process tends to equalize the net rates of interest in various lines,<ref name=":65">{{Cite web |title=The Loan Market |url=https://mises.org/library/human-action-0/html/pp/814 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161215/https://mises.org/library/human-action-0/html/pp/814 |url-status=dead }}</ref> bringing them all into conformity with the originary rate of interest.<ref name=":65" /><ref>{{Cite web |title=The Effects of Changes in the Money Relation Upon Originary Interest |url=https://mises.org/library/human-action-0/html/pp/815 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161409/https://mises.org/library/human-action-0/html/pp/815 |url-status=dead }}</ref> The crucial function of the market interest rate is to coordinate the duration of production processes.<ref name=":65" /> If the gross market rate of interest is distorted due to changes in the money supply, it may mislead entrepreneurs.<ref name=":66">{{Cite web |title=The Gross Market Rate of Interest as Affected by Inflation and Credit Expansion |url=https://mises.org/library/human-action-0/html/pp/816 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161213/https://mises.org/library/human-action-0/html/pp/816 |url-status=dead }}</ref>

Then, there is a discussion on credit expansion<ref name=":66" /> and contraction,<ref name=":67">{{Cite web |title=The Gross Market Rate of Interest as Affected by Deflation and Credit Contraction |url=https://mises.org/library/human-action-0/html/pp/817 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224163238/https://mises.org/library/human-action-0/html/pp/817 |url-status=dead }}</ref> as well as the [[monetary theory]] of the [[Business cycle|trade cycle]].<ref name=":68">{{Cite web |title=The Monetary or Circulation Credit Theory of the Trade Cycle |url=https://mises.org/library/human-action-0/html/pp/818 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161200/https://mises.org/library/human-action-0/html/pp/818 |url-status=dead }}</ref> In '''[[credit expansion]]''', the [[Monetary policy|government artificially increases the money supply by lowering interest rates]], which leads to a boom period with [[malinvestment]]s, and ultimately to a bust phase.<ref name=":66" /> In [[Credit crunch|credit contraction]], the [[Monetary policy|government artificially reduces the money supply by increasing interest rates]], which leads to [[Deflation|lower prices]] but has no lasting ill effects.<ref name=":67" /> The [[British Currency School|Currency School]] made mistakes in only analyzing the cycle in terms of one country's banking sector and missing the issue of the deviation of the market rate of interest from the originary rate.<ref name=":68" /> Theories of the [[boom-bust cycle]] that rely on "real" factors still assume that there is a credit expansion necessary for a boom and bust.<ref name=":69">{{Cite web |title=The Market Economy as Affected by the Recurrence of the Trade Cycle |url=https://mises.org/library/human-action-0/html/pp/819 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161154/https://mises.org/library/human-action-0/html/pp/819 |url-status=dead }}</ref> Finally, the [[Economic depression|depression]] is the necessary readjustment phase to correct the malinvestments that occurred during the boom.<ref name=":69" />

'''Chapter 21''', "Work and Wages", distinguishes between two types of '''labor''', "introversive" labor and "extroversive" labor,<ref name=":70">{{Cite web |title=Introversive Labor and Extroversive Labor |url=https://mises.org/library/human-action-0/html/pp/821 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161146/https://mises.org/library/human-action-0/html/pp/821 |url-status=dead }}</ref> and identifies four reasons why people undertake labor, which may include building strength, religious duty, and avoiding mischief.<ref name=":70" /> The author discusses the psychological experiences of joy and tedium associated with labor,<ref>{{Cite web |title=Joy and Tedium of Labor |url=https://mises.org/library/human-action-0/html/pp/822 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161230/https://mises.org/library/human-action-0/html/pp/822 |url-status=dead }}</ref> and how these experiences do not affect the '''disutility of labor'''. The text also explores the determination of [[wage]]s through competition in the [[labor market]],<ref name=":71">{{Cite web |title=Wages |url=https://mises.org/library/human-action-0/html/pp/823 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224163242/https://mises.org/library/human-action-0/html/pp/823 |url-status=dead }}</ref> where wage rates are determined by the [[Marginal product of labor|marginal productivity of labor]].<ref name=":71" /> Mises discusses the concept of '''catallactic unemployment''', where workers remain unemployed due to their perception of available working opportunities.<ref>{{Cite web |title=Catallactic Unemployment |url=https://mises.org/library/human-action-0/html/pp/824 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161223/https://mises.org/library/human-action-0/html/pp/824 |url-status=dead }}</ref>

Then, Mises discusses various topics related to wages,<ref name=":72">{{Cite web |title=Gross Wage Rates and Net Wage Rates |url=https://mises.org/library/human-action-0/html/pp/825 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161155/https://mises.org/library/human-action-0/html/pp/825 |url-status=dead }}</ref> subsistence,<ref name=":73">{{Cite web |title=Wages and Subsistence |url=https://mises.org/library/human-action-0/html/pp/826 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161204/https://mises.org/library/human-action-0/html/pp/826 |url-status=dead }}</ref> and the labor market.<ref>{{Cite web |title=The Supply of Labor as Affected by the Disutility of Labor |url=https://mises.org/library/human-action-0/html/pp/828 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161144/https://mises.org/library/human-action-0/html/pp/828 |url-status=dead }}</ref><ref name=":74">{{Cite web |title=Wage Rates as Affected by the Vicissitudes of the Market |url=https://mises.org/library/human-action-0/html/pp/829 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161701/https://mises.org/library/human-action-0/html/pp/829 |url-status=dead }}</ref><ref name=":75">{{Cite web |title=The Labor Market |url=https://mises.org/library/human-action-0/html/pp/830 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161238/https://mises.org/library/human-action-0/html/pp/830 |url-status=dead }}</ref> The classical economists explained wage rates<ref name=":72" /> as being determined by the bare subsistence requirements of workers,<ref name=":73" /> but this "[[iron law of wages]]" was false, as the [[standard of living]] of the average worker continued to grow under capitalism.<ref name=":73" /> The [[Marxism|Marxist]] and [[Historical school of economics|Prussian Historical Schools]] explained modern wage rates as directly caused by historical precedent rather than current valuations.<ref name=":73" /> Under capitalism, the accumulation of capital has proceeded more quickly than the increase in population, so that the marginal product of the worker has risen over time, allowing for an increase in real wage rates.<ref name=":73" /> The popular interpretation of the "[[Industrial Revolution]]" as being exploitative and requiring [[Labour law|pro-labor reforms]] is a myth.<ref name=":73" /> Finally, the [[labor market]] is affected by changes in market data,<ref name=":74" /> and wage rates are [[Equality (mathematics)|equal]] to the price of the "full produce of labor."<ref name=":75" />

'''Chapter 22''', "The Nonhuman Original Factors of Production", discusses the theory of [[Economic rent|rent]]<ref name=":76">{{Cite web |title=General Observations Concerning the Theory of Rent |url=https://mises.org/library/human-action-0/html/pp/831 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161450/https://mises.org/library/human-action-0/html/pp/831 |url-status=dead }}</ref> and land use.<ref name=":77">{{Cite web |title=The Time Factor in Land Utilization |url=https://mises.org/library/human-action-0/html/pp/832 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161216/https://mises.org/library/human-action-0/html/pp/832 |url-status=dead }}</ref> The [[Classical economics|classical]] trichotomy of land, labor, and capital is shown to be untenable,<ref name=":76" /> and modern economics uses a single theoretical framework to explain the prices of each productive factor.<ref name=":76" /> The distinction between original and produced [[means of production]] is retained,<ref name=":76" /> and the use of nonhuman factors of production depends on institutional factors.<ref name=":77" /> The quantity of available land is so large that submarginal land is not brought into cultivation at all,<ref>{{Cite web |title=The Submarginal Land |url=https://mises.org/library/human-action-0/html/pp/833 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161144/https://mises.org/library/human-action-0/html/pp/833 |url-status=dead }}</ref> and some land must be withdrawn from agricultural or other "productive" uses to be used as the foundation for homes, [[Office|office buildings]], factories, etc.<ref>{{Cite web |title=The Land as Standing Room |url=https://mises.org/library/human-action-0/html/pp/834 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161714/https://mises.org/library/human-action-0/html/pp/834 |url-status=dead }}</ref> The price of a piece of land is equal to the sum of its future rents, discounted by the rate of interest.<ref name=":78">{{Cite web |title=The Prices of Land |url=https://mises.org/library/human-action-0/html/pp/835 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161211/https://mises.org/library/human-action-0/html/pp/835 |url-status=dead }}</ref> The romanticized notion of land as a noble source of livelihood is discredited, as actual [[peasant]]s view land as a means for the satisfaction of wants.<ref name=":78" />

'''Chapter 23''', "The Data of the Market", discusses various topics related to economics. Praxeology deals with human action and its theorems are exact as long as the conditions are present.<ref>{{Cite web |title=The Theory and the Data |url=https://mises.org/library/human-action-0/html/pp/837 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161156/https://mises.org/library/human-action-0/html/pp/837 |url-status=dead }}</ref> Economics does not assume that man is free,<ref>{{Cite web |title=The Role of Power |url=https://mises.org/library/human-action-0/html/pp/838 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161535/https://mises.org/library/human-action-0/html/pp/838 |url-status=dead }}</ref> but rather deals with the fact of scarcity and the role of coercion in people's behavior in the marketplace.<ref>{{Cite web |title=The Historical Role of War and Conquest |url=https://mises.org/library/human-action-0/html/pp/839 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161359/https://mises.org/library/human-action-0/html/pp/839 |url-status=dead }}</ref> [[Theorem]]s of catallactics apply to private ownership of the means of production, and division of labor. The real man and his actions are the focus of economics, not economic man or a statistically average man.<ref>{{Cite web |title=Real Man as a Datum |url=https://mises.org/library/human-action-0/html/pp/840 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161156/https://mises.org/library/human-action-0/html/pp/840 |url-status=dead }}</ref> The market adjusts to changes in data, but entrepreneurs must anticipate the rate of adjustment.<ref>{{Cite web |title=The Period of Adjustment |url=https://mises.org/library/human-action-0/html/pp/841 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161229/https://mises.org/library/human-action-0/html/pp/841 |url-status=dead }}</ref> Cases of external costs reflect loopholes in the legal system rather than flaws in private property.<ref name=":79">{{Cite web |title=The Limits of Property Rights and the Problems of External Costs and External Economies |url=https://mises.org/library/human-action-0/html/pp/842 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161211/https://mises.org/library/human-action-0/html/pp/842 |url-status=dead }}</ref> [[Regulation|Legal restrictions on the market]] may lead to monopoly gains or differential rents.<ref name=":79" />

'''Chapter 24''', "Harmony and [[Conflict of interest]]s", argues that one man's profit is not necessarily another man's loss, and that entrepreneurial profits are earned by better adjusting production to satisfy consumer desires.<ref>{{Cite web |title=The Ultimate Source of Profit and Loss on the Market |url=https://mises.org/library/human-action-0/html/pp/844 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161217/https://mises.org/library/human-action-0/html/pp/844 |url-status=dead }}</ref> Mises also discusses how the [[Family planning|limitation of offspring]] is necessary for maintaining higher [[Standard of living|standards of living]] and that private property is essential to the market economy.<ref>{{Cite web |title=The Limitation of Offspring |url=https://mises.org/library/human-action-0/html/pp/845 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161145/https://mises.org/library/human-action-0/html/pp/845 |url-status=dead }}</ref> He emphasizes that there is a harmony of interests among all people<ref name=":80">{{Cite web |title=The Harmony of the "Rightly Understood" Interests |url=https://mises.org/library/human-action-0/html/pp/846 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161202/https://mises.org/library/human-action-0/html/pp/846 |url-status=dead }}</ref> and that conflicts only arise due to [[Interventionism (politics)|government interference]] in the market.<ref name=":80" /> Finally, he claims that war and conflicts are caused by government interference<ref name=":81">{{Cite web |title=The Conflicts of Our Age |url=https://mises.org/library/human-action-0/html/pp/848 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224161213/https://mises.org/library/human-action-0/html/pp/848 |url-status=dead }}</ref> and that respecting [[private property]] is the liberal solution to these issues.<ref>{{Cite web |title=Private Property |url=https://mises.org/library/human-action-0/html/pp/847 |access-date=2023-02-24 |website=Mises Institute |language=en |archive-date=February 24, 2023 |archive-url=https://web.archive.org/web/20230224163246/https://mises.org/library/human-action-0/html/pp/847 |url-status=dead }}</ref><ref name=":81" />