 Well, I'm certainly encouraged that the energy level is so high. So we'll see how this goes. Welcome to the lecture on subjective value and market prices. We'll do three things in this time. First, what we want to do is talk about some of the fundamentals of human action. This is what I mentioned last night in saying that the Austrian school has a particular way of developing the insights from the Marginalist Revolution that were not mimicked in the Neoclassical School. The second thing we'll do is we'll talk about the Caruso economy. This is a very important thought experiment in economics because we use it to show how far the process of what we'll call valuation can extend in economizing the use of resources in society. This has direct implication for our democratic socialist friends' ambitions to have some czar run the entire economy. And then the third thing we'll do is the development of the theory of price itself. We'll show exactly how we can go from these fundamental principles to explaining market prices. And then this will be the foundation for other lectures that will be upcoming on entrepreneurship and allocation of resources and so on. So let's start in the fundamentals. We'll begin with just the definition of human action as purposeful behavior as Murray Rothbard likes to put it. Action is designed to attain an end. The attainment of the end is the motive for action. So every human action is motivated by the desire to attain the end. We recognize right away though that having an end, simply saying in our minds we wish to attain something, does not suffice to attain it. We make a distinction in other words between ends and means because we're finite beings and we can't will things simply to occur. We also notice right away that when we apply means to the attainment of ends the fulfillment of our ends can be inadequate. It can be not complete. It can be temporary or it could be just not as full as we thought it would be. So for example this morning when I got up and I went down to the little coffee shop in the hotel and I wanted to get some caffeine to start today. So I ordered a double espresso. And I had my end. So I'm energetic as well with the rest of you. So I had my end to fulfill and then I couldn't just think in my mind, boy I'd like to have that end fulfilled. I have to act towards the attainment of this end by applying means to the attainment of the end. And then I find a course after the day drags on a little while that this double espresso doesn't permanently satisfy my end. It has to be refreshed once again. So this is the idea, this is where we get to the idea of course of the scarcity of means. So our means are scarce. When they're scarce then it follows logically that we must choose in action. So we have two parameters of choice since they're ends and means. With given means we have to choose which ends to pursue that the means are capable of attaining. And for a given end we have to choose the combination of means that we might employ again that are suitable to the attainment of the end from among the possible combinations. This is where we get then to the principle of economizing. So human action is always economizing because the way in which we make our choices with respect to ends and means is always in accordance with the purposes that we have. Or as I pointed out in making my remark about Caruso, that we engage in valuation. We value the attainment of the end in a certain way or the use of the means to attain ends in a certain way. It's this principle of economizing. It's once we see the fact that as human beings we're economizing that gives structure and order to action it wouldn't be possible to do economic analysis. If there wasn't some order or structure to human action that we're analyzing and this is the principle from which that structure and order comes. Now when we say that we economize according to valuation we get to the next principle which is since we're making a choice we must rank order the alternatives. We must say the double espresso is worth more to me than the alternative like a cup of coffee or a glass of orange juice or whatever else might have gone through my mind at the time of my choice. We choose what we value more highly. We set aside what we value less highly. This we call preferring. So this is what we mean in the literature by preference. Now this preference obviously that I have for the double espresso or that you would have for whatever action you take is demonstrated in the action. So if you would have seen me in the coffee shop this morning buying the espresso then you could have inferred from that act that I preferred it to the alternative that I could have engaged in with the means that I expended. So we know something as observers about other people's human action just by observation. Now we get to the principle where we start to see some separation between the Austrians and the Neocostal School and this is on the subjectivity of value. And here because the Austrians are interested in doing a realist assessment of human action. In other words we want to start with real human beings and when we begin to talk about these fundamental principles of human action you can see right away how they apply to your own lives and the action you take and so on they're just almost commonsensical once it's laid out for us to see. Whereas in the Neocostal School they don't start this way at all. Some of you know all about this. They start with fictitious economic agents and they stipulate for the economic agents what their utility functions are that may or may not have anything directly to do it certainly don't spring logically at least from real human action of real persons. So if we're going to stick to real human persons and we want to talk about the subjectivity of value or we're referring to what is the reference that we're making and here the idea is that when we engage in action we make a personal judgment of value. This is what we're referring to when we talk about subjectivity. Subjectivity is a mental judgment created by the person acting. It's a state of mind. As a state of mind or a judgment of the mind it has no extensive property. It just exists in our mind. This is what we mean by subjective fundamentally. If it just exists in our mind and has no extensive property then we cannot define a unit of subjective value. We cannot measure subjective value because there's no way to even conceive what a unit would be for which we could have a shared objective knowledge. Just no such thing, right? If I were to tell you when I drank my double espresso this morning I got 10 units of value. This would just be something like a nonsense statement. How would you know what one unit of value is to me? You might have a notion of what one unit of value is to you in drinking a glass of orange juice but you see we can't have a shared experience of what those units are. We can't engage in anything like arithmetic operations with value. We can't compare interpersonally the value of one person. We can't do this directly with the value of another person. This feature of value that we call subjectivity is different from another feature of value that we can also ascertain just by thinking about human action at this kind of fundamental level. The second principle of valuation is that value is not constant. By this we mean that there is no constant quantitative relationship between external circumstances that influence the way that I value things and the value that is produced by my mind. This, by the way, is a different proposition than the proposition of whether or not if you watch me during the week, if you watch me every morning as I got up and I went down to the coffee shop and whether or not I would always get espresso, this would be my intention, by the way, so you don't have to follow me around to find the sound. That'd be a little creepy, anyway. But the point is that's a different question from the point we're making here. There isn't any quantitative relationship between my external circumstance, how much money I have, I happen to be in the hotel and so on and so forth, all these external circumstances, and the way that I value the espresso, the sort of connection between those two things. Again, in contrast, in a neoclassical school, there are utility functions which do accept this assumption. There are economic agents that have utility functions, but functions have constants and variables, and so they're assuming that there's some kind of a constant relationship between the external circumstances, how much money I have, what the price of the espresso is, how hot it is, and so on and so forth, and the way that I value it. So, Austrians rule that out from the beginning. It follows from our discussion also that costs of action are fundamentally subjective, just like value, the cost of my obtaining the espresso was the subjective value to me of the alternative use of the means, which I forego when I bought the espresso, and then it also follows that profit, the net gain of an action is also fundamentally subjective. It's in my mind. I'm just making a value comparison between the value to me of the espresso, the value to me of the alternative good that I could have had with the same means. So, we see fundamentally all of these concepts that we can resolutely ascertain just by a little bit of reflection concerning human action. Now, one last principle, and we're going to diagram this just so it becomes clear as what we're referring to, we haven't yet talked about what Carl Menger liked to call the order of goods. So, when I go to get the espresso, the espresso to me is a consumer good because I can directly apply it in action to the attainment of my end. But that consumer good has to be made in a process of production by producer goods. So, there's the espresso machine and the beans and the employee who so kindly made my espresso and so on and so forth, right? All the means of production. So, if value is in our mind, I have this value for the espresso in my mind, then how does this value relate to the order of goods? How does the value relate to the consumer good and then from the consumer good, how does the value relate to the producer good? So, the top line contains the Austrian theory of imputed value or imputation since all action is an ends-means relationship, it's the value of the ends that is primary, the value of the ends drives the value of everything else. So, the value of an action starts in my mind. Given the circumstances of my situation, right, it starts in my mind and then I place value on the consumer good, the arrow of causality, and then because I place value on the consumer good, value will be placed on the producer good because I'm buying the espresso and other people are buying espresso, then this justifies the purchase of the machine and the labor expense for the worker and so on and so forth. So, this is the Austrian theory of the relationship between subjective value in the mind and the value that is attached to the orders of goods. Now, the second row contains a, what you might call a cost of production theory. So, this, many of you know, was held by the British Classical School, the school, the reigning school of thought that was overturned by the Margements Revolution. And there the argument was that factors of production have costs inherent to them. It's like they have certain other objective properties, like color and mass and energy and so on, in particular cases, right, of different producer goods. They also have value. And through production, this value accumulates and then is transferred to the consumer good where the arrow of causality is turned around. And then from the consumer good, our mind ascends to that value, right? We say, oh yeah, I see that the good is worth that because it has this particular price. You know, a particular producer goods embedded in it. So, this is what the Margements Revolution, this theory is what the Margements Revolution overturned. And then the bottom row is the Neal Classical Theory, which argues that the consumer goods value or price is mutually determined by the subjective value in the minds of the consumers and the cost of production. Now, we're not going to go into detail about this debate between the schools right at this point. I just want to note that if one reasons this way, one has abandoned this ends means connection that we've spoken about. Because to reason this way, one has to say, there must be some independent, independent from the mind, there must be some independent value for the producer good. It's not dependent on the mind. Or you have to have some other way of connecting these disparate factors. And again, we're not going to talk in detail about that. It raises other sorts of issues that hopefully will come up during the week in questions and so on. I just want to point out it's a different, it's clearly different from the Austrian view. Okay, so now let's turn to the second part of the lecture. And here we want to talk about the Caruso economy. So what Ludwig von Mises calls the autistic economy, the economy where there's only one person. Interestingly, I remember being sort of taken aback when I first read this in Human Action, where Mises also categorizes socialism as an autistic economy. I thought, wow, that's really provocative. That's very interesting. Aren't there a whole bunch of people? You know, I mean, how does he get that? And of course, the answer is quite straightforward. You read a little bit, you see what he's getting at, which is that in socialism only one will acts. Only the central planning will is put into motion. That's the whole notion of a central plan. The rest of us are just pawns on the chessboard. And we're told what to do. And only the central planners act, value and choose and assign means to ends and so on and so forth. So this is a very interesting question for us. We're not, of course, interested in Caruso economics just because they're a whole bunch of isolated people in the world that we're trying to figure out how they're going about their daily lives. We're interested in this question of the autistic economy. How far can the valuation in the mind of Caruso extend to the use of resources to integrate them in an economizing way into production processes that satisfy his consumptive ends? That's the question we're trying to answer. How far can the mind of OAC extend to all of us to incorporate us into a single system of economizing that is production that satisfies the highest-valued ends that we have, economizing system of the division of labor? I'll bet she's never thought about that. So we're going to think about that. And we're going to do this. First, let's start with Caruso's valuation of consumer goods, and then we'll do producer goods. And this is just a stylistic example to illustrate, again, important principles that we can develop from thinking about Caruso situations. So let's suppose that Caruso has two consumer goods on his island that he can directly produce, that is just with his labor. He can extract them from nature. One is coconuts, so he can climb coconut trees and gather coconuts. And the other is berries that he can pick off bushes. And so we'll just start at the simple level. And here's a, again, stylistic illustration of what his preferences might look like. And on the left side, we've got the rank of marginal utilities, so the MU for marginal utilities, for different units of coconuts. Now, here we can see right away that we have an analytical problem, an analytical issue in front of us, which is how do we even define the unit of a good? We could define it in a technical way. Coconuts come in, you know, one unit sizes, right? We could define it in a technical way. But that's not sufficient for economic analysis. That's just one aspect of a Caruso situation, right? The other aspect is how does Caruso perceive the usefulness of the coconuts in the attainment of his consumptive ends? And the answer is, well, he might actually want more than one coconut to attain an end. Or he might want just part of a coconut to attain an end. But this is a choice variable for him. He's not limited by just the technical facts of his environment. He can combine them in different ways. So let's say that his unit of action is two coconuts. So again, that's just arbitra. I'm just making that up just to have an example. Let's say two coconuts then is sufficient for him to satisfy his highest valued end, which is drinking the coconut milk. But once he does that, he satisfied that end. And if he has more coconuts, if he has four coconuts, those additional two would have to be put to some end that's less valuable to him. But just by definition, right? Because the unit of the good is the amount of the good that satisfies the end to which he's putting it. We define it that way because that's relevant for action. So that's why the second unit of two coconuts is lower ranked. And let's say he uses this for eating. He can mash up the coconut meat and eat it. And then an even lower ranked end might be something like he takes two more coconuts and stores them in a cave and consumes them in the future. So something like this. So he ranked orders the different units of good in succession, logically we're saying, in succession. This, of course, then gets us the laws of utility. So we can immediately see that there's certain principles involved here that are universally applicable to all human action. And we call these the laws of utility. The first law, the larger the stock of the good, the lower the value of the marginal unit. And the second law, the larger stock of the good is preferred to a smaller stock of the good. These are always true. We'll see that this is important when we make the jump to analyzing prices. So hopefully you can see right away, or you've already been trained in this, right, that the laws of supply and demand come directly from these laws of utility. Okay, so we can do the same thing with berries or any other good. It would be the same principle that we would use to analyze this. Now let's move to production. Excuse me, let's take one more step here in thinking about how Caruso would allocate his consumptive activity between two different goods. So yes, the laws of utility apply to each good, but Caruso's not faced with just thinking about, oh, what I'm going to do with coconuts, what I'm going to do with berries over here is a different set of actions. He's going to integrate everything, that's the point. He's going to think, you know, I can do all these different consumptive acts. How do I allocate across them? And the answer is he allocates according to the economizing principle, he allocates to the highest marginal utility consumptive act first, logically first, then he exhausts that, and then he goes to the next highest value, consumptive act, and then he exhausts that, right, he consumes and meets that end, and then to the third one, then to the fourth, then to the fifth, and the sixth. And how does this result then in an integration of coconut consumption with berry consumption? And the answer is Caruso will continue to consume these two goods, all the goods that Caruso consumes, so that there are no big value differences left between the marginal utilities of the different goods. He'll extend his consumption to each good so that he can't see that it's advantageous to shift the last unit of that consumption to another good, which would have a greater marginal utility. So on my example, once he drinks the two coconuts, that, using the second unit of coconuts is not very valuable to him. And so this allows berries to come in as his second consumptive act, and so on and so forth. Again, hopefully you're making the transition to social life. You can see the same principle will occur in social life. Now let's go to production real quickly. And here, again, we stipulate something for analysis that's relevant to Caruso's action, which is when Caruso's engaged in production of the coconuts and production of the berries, he has a fixed set of complementary factors of production. He's got the coconut trees on the island. And then he can add more and more of his labor to that fixed set of complementary factors of production. And we can analyze any production process this way, even if it involves highly advanced capital goods. We have a fixed set of factors of production, and then we're going to add more and more of a variable factor to it. So when Caruso does this, he'll find the law of returns. He'll find, in other words, that at some point, as he adds more and more units of the variable factor, in this case labor, the additional amount of output that he gets diminishes. And this, again, is because complementary factors of production have finite productive capacity. And we live in a finite world, and therefore production is finite. We can't just snap our fingers and produce whatever we want. And so we get diminishing marginal physical product for additional units of labor added to the coconut trees or the berry bushes to make this a little bit more concrete for Caruso. Caruso would find on the island that the coconuts are distributed in trees in different ways. So he's got a shelter, let's say, in a cave nearby, and then there's a coconut grove nearby. And in the coconut grove nearby, there are coconuts on the ground, there are coconuts in short trees, tall trees, there are lush coconut trees, there are sparse coconut trees, and so on. If he's economizing, and his goal is just to produce coconuts, he'll pick up coconuts on the ground first. And then he'll go to the less productive production possibility to move this way. And again, in social life, it's the same way. We do the same kind of allocating in land resources and so on in social division of the labor. So, same thing with berries, right? We get this same principle. And then we want to integrate how Caruso would then value and allocate his production, his labor and production to these different possibilities. So now we're integrating his consumption principles with his production principles. This is what in economics we call the marginal value product of his labor. It's the additional output he can produce from additional unit of labor than the value to him of that output. So for Caruso, he values with the first unit of the labor, he values most highly the six coconuts that he can get by gathering up coconuts. But you'll notice that the second if you were to apply another unit of labor to coconuts, it would not be very valuable to him. It's the last ranked item, right? Fifth coconut, five coconuts for his another unit of labor to coconuts. So instead, he allocates towards berries. And then as he does that, the marginal value product of additional labor in berry production goes down. And then he again brings into rough equality the marginal value product of the different output that he can produce with labor. By the way, this is true in social life, right? Social life in a division of labor we have all these workers and they have to be allocated in different production processes. How does this happen in the market? It happens through this equa-marginal principle, right? Through economizing the principle of the same principle that Caruso uses. Okay, so now we're at the point where we can proceed to the theory of price. Let me just reiterate the conclusion that we arrived at here with Caruso. What we've tried to show with Caruso is briefly is that Caruso can extend through his own mental processes of intelligence and valuing and so on. He can extend his economizing activity to a certain degree but he has to be able to have personal experience with all the different production processes and consumptive goods and so on and so forth. He has to at least be able to anticipate that he would have personal experience with all these things in order to value them in a relevant way with respect to his action. So his economy extends as far as his personal activity can extend and as far as he can integrate things into the value of other things that he's doing. Let me just give you one more illustrative example of this. Let's suppose Caruso wants to catch fish in a stream but he can't do it directly. He can't do it with his bare hands. So he thinks maybe with some of the material on the island I can fashion a net and then I can use the net to snag the fish so then he has to integrate a capital structure into an inter-temporal structure of production into the more direct production that he's already engaged in. He can do this. He would just keep going and extend his domain of his economy in this way but there are limits and this is the point. So now what we want to do is turn again to the theory of price and again the setup here is valuation of Caruso or any person Solomon AOC wouldn't matter who the person is can only extend so far in integrating into an economizing arrangement the use of factors of production to produce goods that satisfy the highest value consumptive ends. This is a conceptual problem it's not that if someone were born with a special person that they could do this. It's a conceptual problem with the limitation of the human person. So let's say that Caruso comes into the division of labor and he opens up a bakery and now in order to integrate his productive activity into the social nexus he needs to discover what is valuable to his customers because he's not going to consume his own baked goods he's going to produce in the division of labor where his production is done to satisfy the consumptive ends of other people but as we've seen the subjectivity of value means he cannot experience the subjective value of other people he can't get into their heads he can't mind meld with them he's not a Vulcan he can't do this and have a shared experience of what the value of a croissant is to this person or the value of a loaf of bread is to that person he's stuck conceptually here and the same problem exists if he tries to think of well who should I hire where should I get the workers to be bakers with me and cleaners of the equipment and so on and so forth he has the heads to share knowledge of the opportunity cost of the different persons who might come into this employment so that he can minimize that opportunity cost like he can do on the island when he's by himself he can do that because the opportunity cost is in his head but the opportunity cost for you and me is not in the head of AOC and it cannot be in her head so we've got this problem and that's why the theory of price is important because it shows us how this problem is solved and how we can have a division of labor economy that is in fact economizing where all production decisions are left to the group of entrepreneurs who can then economize on the basis of market prices now this is the schematic of the theory of price and I put this out so that you can have a kind of framework we can only give an overview of how this all works and there are obviously some nuances that you might have questions about so we begin with preferences and then preferences that people have lead them to demand like my expresso I demand the expresso, I show a willingness to pay money to obtain the expresso and then there are others who prefer the money to the expresso and so we can make a mutually advantageous trade and we can agree on the price on the terms of trade so that gets us the price of the consumer goods the price of the consumer goods then generate revenue for the entrepreneur it's expense to me when I buy the expresso but it's revenue to the coffee shop and that revenue then is a causal factor in the demand that the entrepreneur has to buy the factors of production it's one of the causal factor not the only one but the only causal factor so the arrow of causality goes from revenue for the entrepreneurs to the entrepreneurs demand for the producer goods but of course the coffee shop owner isn't the only entrepreneur demanding labor it would be demanded by other entrepreneurs providing other things to other consumers where the labor is transferable between these different activities and so we get a market we get an overall demand for the and then prices for these producer goods and the prices of producer goods then in turn generate costs for the entrepreneur so there's a wage to hire this labor in the market and then the coffee shop owner has to pay this wage right now the coffee shop owner can compare the revenue streams from customers satisfying customers preferences with the cost structures that represent the opportunity cost the monetary expression of the opportunity cost for drawing those resources into the coffee shop production and out of the alternative the entrepreneur has to bid those resources away from other entrepreneurs and so pay the cost that's given up in other production that's not done because I'm such a coffee hound and you know you have this tremendous demand for coffee okay so with that as an overview let's go through some of the nuts and bolts of this and let's start so this is the first set of arrows from preferences to demand and supply for the consumer good and let's start with a used consumer good and the good that I've chosen here is a 2007 a 17 iPhone 10 this is a two year old iPhone 10 just for sale on ebay or some place right that's the idea and so we have someone who might be interested in well a person who goes into this market and buys the iPhone 10 the two year old iPhone 10 they're people actually selling and buying them now so we have this person and this person we as economists could analyze this person's action by thinking of a preference rank what the person is doing of course is saying I value the iPhone 7 more than $650 and so look I bought it I acquired the iPhone and I paid the $650 so we know that the buyer preferred the iPhone at that moment to the $650 then as economists we can infer that only at lower prices would this person have purchased a greater quantity of iPhones at some lower price well maybe he wouldn't purchase more but he certainly would not purchase less in other words if the price would have been $550 instead of $650 he would have bought the iPhone even more happily than he did but it's sort of an interesting question as to why he buys this first iPhone if the price is $650 but he doesn't buy another one there's more than one for sale on eBay why does he just buy another one and the answer must be that he values the second one less highly otherwise he would just buy the second one and then the third and the fourth and the fifth if there was no change in the marginal utility of these iPhones so that's what the economists are saying the laws of utility restrict the amount that each buyer buys but if prices were lower there could be an increased quantity demanded by various buyers so we get the quantity demand schedule right this is just the analytical apparatus of the economists and then we can do the same thing with supply same thing is true of those who are supplying these used iPhones they're just consumers who bought them a couple years ago and now they want to upgrade or whatever and they're selling their iPhones and so they have the same kind of a preference arrangement right suppose we have a person now who owns two of these iPhones well then this person would be willing to sell one the second one the least valuable one for $550 and so that's where we get the first entry is supply so we see somebody doing this and then as the economists we say look that person preferred getting the $550 to the continued use the value of the use of the iPhone otherwise they wouldn't have made this trade they're demonstrating their preference and then we can infer that if this person owned more than one iPhone they still had one that that iPhone could only be bid away from that person at a higher price at least conceptually this would be possible and so we get the law of supply that at higher prices satyrist paribas the quantities offered for sale would be larger but the law of demand says that only at lower prices will the quantity offered to be purchased be larger so you can see that these these two behaviors will only be consistent at some intermediate price and so that's where we get the theory of price so let's add a couple more buyers couple more sellers just to have some competitive bidding and offering in this market so it's more like a real market and we can see in my stylistic example that the market clearing price the price where the quantity demand quantity supplier is the same it turns out to be $600 so what Austrian economists are arguing is this if we looked at we got onto eBay and we looked and we saw this price we saw trade occurring at this price or we go in any market I go to the coffee shop and I pay $4 for the double espresso we see an actual price and trade taking place then our analysis is saying that that price is in fact market clearing that price is the price at which quantity demand quantity supplier is the same why is this logically so? because at any other price there would be dissatisfied buyers or dissatisfied sellers at any other price, at a higher price there would be some sellers who could not find buyers and yet some of those sellers are willing to sell at a lower price as the law of supply says and therefore they would just if they couldn't make their sale they would just cut their price and then attract a buyer and the same way with the buyers the buyers don't offer prices below the market clearing price when I went to the coffee shop and I found the price was $4 I didn't say well would you take $3 I'm just kind of a little short today they would just say take a hike get out of here there's a disjunction between quantity demand and quantity supply I was perfectly willing to pay $4 I don't even try this because it's a waste of my effort it's not economizing for me to try this sort of thing so it's not economizing for people to do that sort of thing it's economizing for them to meet and trade at the market clearing price and that's why that price rules in the market this is the Austrian argument once again we can make a clear distinction between the Austrian view of all of this and the neoclassical the neoclassical system is not designed to explain actual prices in markets it's designed to explain equilibrium prices in the far away by and by prices as they would emerge if all mutually advantageous activity simultaneously happened or that would emerge if all adjustment processes in the market were finally taken some hundreds of years in the future, something like that they're trying to explain those sorts of prices Austrian economics we're trying to explain actual prices in the market we're trying to explain those prices because these are the relevant prices for entrepreneurs to economize actual entrepreneurs to economize their production decisions right now in markets that's the whole point of economic analysis explain what entrepreneurs are doing right now what workers are doing right now what consumers are doing right now in markets to explain the actual economy as it exists now one last point on this and I'll make some quick remarks about producer prices we can generalize now the categories so to speak the logical structure of demand and supply this way the references of the buyers of course they value this the good obtained so I value the expressive that I got and then we can categorize the two alternative the opportunity costs alternatives to any person as either the continuing use of what I give up so I could have just kept my money and then held on to it and gotten that value from holding money and spend it for something else so I have money I can either hold on to it or I can spend it when I spend it I can either spend it to one vendor or another vendor those are the categories of choice and then it's the same with supply so the coffee shop owner has the coffee the coffee shop owner can keep the coffee for personal use it's highly unlikely in a divisional labor right I don't mean some of the coffee but not all of their coffee would they keep they could sell it to me or they could say well I think if somebody is going to come in at 10 o'clock and pay a better price I'll just wait and sell it to someone else they can keep it for themselves they can sell it to somebody they can sell it to me they can sell it to someone else these are the logical possibilities now because this exhausts the logical possibilities hopefully you can see right away that it doesn't matter whether or not the good being sold and supplied is newly produced has just been produced like the coffee the espresso right or it was a used good like my example of the two-year-old iPhone because once the good is produced then the opportunity cost for the seller is exactly reduces exactly down to these possibilities right once the good is produced the cost of production have no causal impact on the prices of consumer goods at least not in this kind of direct fashion now let me say what one final points were at the end of the time I do I think these are posted right the PowerPoint so you can go through I've got some slides on a little bit more elaborate discussion of producer good prices but let me just say this in closing if we think now about Apple Inc producing deciding now you know how are we going to arrange our production for the rest of the year so they have all this past knowledge of how markets have unfolded over the year how many iPhone 10s they sold how many 10 Rs and 10 pluses or whatever and so on and so forth right all their different product lines and now they have to make an adjustment as to what what to produce moving forward what they that too has certain logical parameters or a certain logical character to it they have to figure out the anticipated additional revenue that any factor production would render in this future period where they're going to use it to produce something so they have to think we're going to pay for a computer programmer is going to work on this software and this is going to enhance the usefulness of this particular iPhone line and then in two months from now the consumers are going to value that within the matrix of all the other possibilities they have in a certain way that would generate enough revenue to cover that cost this is a distinctly entrepreneurial activity right and then the other thing the last thing I want to mention on that point is if the entrepreneurs pay the owners of the factors of production upfront so if they pay their workers right now for goods that will generate revenue months from now then the entrepreneurs only willing to pay upfront a discounted value for having that revenue capacity right so there's an entrepreneurial anticipation in all wages it's entrepreneurial expectations they're part of that and there's also a rate of interest a discount that exists in all payments for factors of production so at that point I'll end so thank you for your kind