 Our topic is subjective value and market prices. One of the insights that all of us learned as the students in economics, even in neoclassical economics, is that price theory is really the core of all economic theory. Even Milton Friedman was quite correct on this point. His famous book is called Price Theory. And so that's what we want to do in this session is to talk about the Austrian theory of price. And as you'll see as the week unfolds, this is the groundwork for a lot of other more advanced and more interesting, let's say, theories that come later in the week. Now I'll proceed in the following way. We'll start with just some fundamental principles of human action. And then we'll talk about what Ludwig von Mises calls valuation as a method for action. And we'll use Roberts and Caruso to illustrate this. And then from there, we can go into the discussion of the determination of market prices. So that'll be our third step. And then the fourth step, we'll briefly mention how market prices are the basis for what Mises calls appraisement, the determination of production decisions, and so on in the market economy. So that's our procedure. So let's begin with just the basic principles of human action. Human action, of course, is purposeful behavior. Human action is motivated by the desire the person has to attain an end. But we see right away that simply having an end is not sufficient for action to exist, action to not consist of simply having an end. Because we're finite beings, we can't will our ends to be accomplished. We have to identify means and then employ them in an action that we design as an attempt to attain our end. So this is the principle of scarcity. Scarcity is ubiquitous in all human action because we're finite beings. And because of the scarcity of means, we have choices to make. And all action then involves choosing between alternatives. With given means, we choose between competing ends that we might attain. And for a given end, we can choose between competing sets of means to attain the end. And this is another margin of choice. Now we say in Austrian economics that human action, if we put these two together, purposefulness and scarcity or choice based on scarcity, is economizing. We always choose with given means to strive to attain the highest valued ends and set aside lower valued ends. And for a given end that we're trying to attain, when we're choosing between competing sets of means, we choose the lower cost means. So this is the principle of preference that you'll find throughout Austrian economics that in order to choose between two alternatives, what we need to do is order them in value. You need to say one alternative is more valuable, another alternative is less valuable. We establish a preference between the two options. And on the basis of the preference, everything else falls out as we'll see with respect to price theory. We can deduce the whole array of the theory of price. Now let's go on then to the subjectivity of value in the title, what do we mean by subjective value? And here we just want to emphasize that value is a state of mind. Value is just an intensive state of mind of the person acting. The value is contained within our mind. It has no extensive property that could be measured and therefore we cannot measure value. It's not a substance to be measured. It's just a state of mind. There is no way for us to define an objective unit of value to put this differently. In which I could say I get 10 units of value from delivering this lecture and you could say, well I get 12 units of value from receiving it and we could say oh well you're 20% more value than I am. This is a nonsensical kind of comparison. We're not really making an objective comparison when we do this. Now hopefully you can see the implication of this right away. When we get to talking about the division of labor where each person is producing to satisfy the consumptive ends of other people, the person who's making a choice about what to produce cannot objectively compare the subjective value of the different people that he or she might serve with his or her output. There seems to be a problem here, right? And a social problem we might say that needs to be solved and again it's price theory that solves this problem or it gives the explanation of how this problem is solved. Now I'll mention as an aside that value is also, from the Austrian's perspective, the value that we arrive at as a judgment of our mind has no constant relationship with objective elements of the world. It's always in, we're always somewhat uncertain about the connection between the subjective value in our minds and the objective features of the world. There's no fixed relationship between these things. This is the Austrian, the fundamental Austrian critique of banning the use of mathematics in utility theory. If we don't have constants, we can't formulate functions and so we can't have utility functions, right? We can only think of utility or value as a rank order of things. And then let me just finish by saying that if value is fundamentally subjective, as we're suggesting here, then so would cost be fundamentally subjective. If we're choosing between two alternatives, we choose what we value more highly and strive to attain it and then we forego what we value next most highly and we don't strive to attain that. So it's that opportunity cost that is the fundamental cost of all action. So now let's move to the second part and talk about value imputation. And as I suggested after a few remarks, we'll use Caruso to illustrate this. So now we wanna move to this next step theoretically. All we said up to this point analytically is that value is in our mind. Value is fundamentally the subjective judgment that we make in our minds. So how does that value get transmitted if you will to objective things? Why do we say that my house is valuable to me or my car has a certain value or things of this sort? Where does the value of the object come from? And you can see on the slide, there are only three logical possibilities. One is the Austrian view at the top that's called value imputation that the person acting imputes value from the judgment in his mind to the consumer good that he perceives is useful in satisfying the end. And then from the consumer good to the producer goods are useful in producing the consumer good. So there's a unidirectional cause and effect chain of value that the Austrians would assert. And notice the argument rests upon this distinction that we've already made between ends and means. Every action is striving to attain an end. And so whatever the means are that are employed by a person in the attainment of the end, the value of those means must come from the value of the end because the whole point of the action is to attain the end. So that's the basic logic. Now notice there's one difficulty involved and I'll mention this and again we'll see how this plays out as we work through the analytics. In order to proceed in producing something the person has to say I value the producer goods such and such. So we'll take the example of Caruso in a minute. Caruso values his labor so and so or he values coconut trees, his land resources such and such before he proceeds to act and then realizes and he has to climb up the coconut tree, pick the coconut, then take it back to his cave and break it open and then he satisfies his end. He has to value the producer good first. It seems, right? So how is this difficulty reconciled? It's reconciled, the Austrians point out by the fact that Caruso is anticipating the value of the attainment of the end. It's an entrepreneurial judgment that the person is making. So it isn't just that a person thinks oh, I've realized the value of the end and then I can impute value to the means. You can impute value to the means from the anticipation of the value that the end would satisfy and hopefully you can see right away this involves then all the different entrepreneurial elements of action. Having foresight and predicting and then making errors and correcting them and so on and so forth. All of this that we'll talk about later in the week. Now real briefly, the middle possibility logically, of course, cannot be true. You can think of the labor theory of values as an example of this, right? But it cannot be true. Producer goods cannot have intrinsic value that doesn't come from the value of the person using the producer good in action. They could have intrinsic value from some other perspective but not from the person who's acting, not from that person's perspective. In action they must be suitable to the attainment of the end the person has in mind. And for the same reason we can't think that the third option is correct either because it too depends upon producer goods having value that's independent from the value of the minds that for which ends are being attained. Now some of you will recognize and I won't go into this now but some of you recognize that that third option is the option of the neoclassical economists. And in order to make this logically feasible what they do is give up cause and effect reasoning and they say that everything is mutually determined. And so if you approach the problem that way, yeah, then this is not logically incorrect but you've given up a cause and effect explanation of human action altogether and you're proceeding now in a different way. And again that's a more advanced topic that maybe some of the lectures will take up later in the week. Okay, so let's turn to Caruso and use Caruso as an illustration of how this valuation proceeds from the mind to the consumer good to the producer good. So here we have Caruso and let's suppose that Caruso has two different consumer goods that I've listed on his preference rank here. This is, so preferences for consumer goods, MU is marginal utility, right? The additional utility from each additional unit that Caruso anticipates consuming. And he has two consumer goods, coconuts and berries. And he first chooses the size of the unit of each good that he wishes to consume. So he wants to drink two coconuts, not one, not three, not 10. He's chosen two as the appropriate unit. So once he consumes that first unit of coconuts, the two coconuts, he's completely satisfied his drinking end. So if he has another unit of coconuts, if he has two more coconuts, he would have to logically apply those coconuts to a different end. And by construction, since he's economizing he always values more highly his highest value to end and then less highly his next most valued end and so on, right? And so the second coconut unit down here, he would break apart and eat the coconut meat. And then he does the same thing for berries. He picks two quarts of berries, he wants to eat. Then he finishes his eating end with that amount and then he takes another unit of the same size and applies it to drinking. And then he makes bait and tries to catch animals that he can consume later or turn into pets or whatever. So we see then from this simple illustration the two laws of utility. The first law of utility that the larger the stock of a good a person possesses, the lower the value of the marginal unit where the marginal unit is the least valuable unit. If a person has more of a good, they value a unit of it less than if they have less of a good and they value a unit of it more highly. That's the first law of utility. Second law of utility says a larger stock of the good is preferred to a smaller stock of the good. Goods are always scarce and so having more of the good is always preferred to having less of it because more ends can be attained with more of the good than with less of the good. So we see these basic principles of valuing for Caruso. And now let's turn to production for Caruso. So now we're on the second arrow. Caruso, the consumer goods have to be produced. The second arrow of my imputation diagram, right? So we have the mine to consumer goods, that's the arrow we just did. Now we have consumer goods to producer goods. So for Caruso to assess producer goods in value, he first must know his physical productivity and then he can assess how much he values, let's say his labor or coconut trees or berry bushes, whatever it is, given the productivity. So I've made up a couple of numbers just to illustrate. Again, the MPP is marginal physical product of his labor. So in the left hand chart, Caruso applies, let's say a half hour, his first unit of labor. By the way, how does he pick this? He chooses it. He picks a half hour of labor instead of an hour or 15 minutes, that's a choice variable for him. So let's say he chooses a half hour of labor, he applies that first unit to coconut gathering, he gets six usable coconuts. Then when he applies his next unit of labor to coconut gathering, he just gets five and then four and so on and so forth. Why does it diminish like this? Why do we get the law of returns? Why do we see diminishing returns? The answer is that the complementary factors of production that people work with are varied and that's why. If a person's economizing and there's variation in the complementary factors of production like coconut trees in this case, some of the coconut trees, for example, are clustered together, nearby Caruso's shelter, some of the coconuts are on the ground, some of the coconuts are up in the trees, some of the trees are short, some of the trees are tall, some of the trees are lush with coconuts, some are sparse. So if Caruso wants coconuts with his labor, he's economizing, he's a human person, right? He's going to apply his labor to the most productive possibility of production first. He's gonna pick up coconuts off the ground in the coconut grove nearby. But once he does that, he exhausts that possibility and then when he applies his second unit of labor, he has to go to more onerous production, less productive production, right? Now he has to go to coconut grove further away or he has to start climbing trees or throwing objects to knock coconuts down or whatever he deems as the most productive process. And so this is why we get diminishing returns because the natural world is also finite in its productive capacity. And so when we apply labor to it, Seder's Paribas, right? Given our technology and so on, we see diminishing returns. Same with berries. So we get the same principle with berries. Berry bushes nearby is cave. Some are lush, some are sparse. Some have thorns, some less prickly and so on. So there's variation, right? And Caruso's, as a human person, he can chart this out. He can scope this out and find out which is the most productive application of his labor first. Then he exhausts that, then he goes to the next. By the way, if you think this is a little bit too abstract, just think of the case of oil production. So yeah, we go to Saudi Arabia first, right? And then now with prices where they are, we're back to shale production in North Dakota. But we don't go to shale production first. We go to the more productive production processes first. And these eventually become exhausted. And then we employ the next best, right? And so on. It's just economizing. Okay, so that's the physical part. And then what about the value part? Well, now all we need to do is put the two together, right? So Caruso thinks, okay, I can get six coconuts from my first unit of labor in production or I can get two quarts of berries. Then he just says, do I value the six coconuts above the two quarts of berries? And we saw on the first preference rank that he does. And so he would apply his first unit of labor to coconut gathering. And then his second to berry picking. He doesn't go with his second unit of labor to coconuts because he accomplishes all of his most valuable ends with six coconuts. That's quite a few. And he doesn't need five more. He'd rather have the berries. So that's what he does, right? And he goes on extending his production in berries again until he sees that he's gone down to the point in production where his marginal value product has fallen such that shifting his labor to something else like producing a net to catch fish or making a grass hut or what have you is more valuable. So this again is the final arrow, right? This is how he imputes value to the producer goods. He's imputed value to his labor here from the value that he places on the coconuts that he can produce and the berries that he can pick. If he didn't, if he got tired of consuming coconuts then that would fall off of his value scale, right? He would get sick of coconuts and he says, okay, I don't want coconuts anymore. It doesn't matter if he can produce a whole bunch of them. If he doesn't value them, he won't impute as an end. He won't impute value to that means. Okay, so now let's make the transition to the next step in the market. What does all this have to do with market prices? So we've seen the kind of structure of how the logic is going to work about how do we move to the market? And let's make the transition this way. Suppose Caruso now gets rescued from his island and he comes back to England and he sets up a bakery. And because he's a human person, he wants to economize in his bakery operation, right? He wants to be successful. He wants to run a successful bakery. But now instead of producing just for his own consumption in order to be successful, he has to produce for the consumptive ends of other people. And so he has this problem that we mentioned before. How does he weigh the subjective value that some of his potential customers could get from some products, croissants, let's say, against the subjective value that other customers could get from other products that he could make, let's say a wedding cakes or whatever. Now this is a perplexing problem in the abstract. This is very difficult to figure out how he could do this. Of course it's simple in the market economy, but it's a logical problem. This seems quite difficult. Hopefully some of you realize right away that this is the problem of socialism, right? It's a problem of economic calculation in socialism. In socialism you don't have a market economy, you don't have prices. How could the central planner make a decision like that? What we're saying is that not even Caruso could make a decision, not even a single producer could make a decision like that. It isn't the problem of having to command the whole economy as if the president of the United States could run the economy or something by determining all the different labor activity that we all engage in and how every natural resource is gonna be used and all the factories that are gonna be produced and what technology is gonna be invested in and so on and so forth. It's not even, the problem is more basic than that. It's that a single person can't even decide this individual labor for himself or herself. Because of the subjectivity of value, right? There's no interpersonal comparison of subjective values that can be done. So this is the problem. Okay, so now let's put up the solution. This is the theory. This is price theory condensed, if you will. And then we'll fill in, again, we'll try to fill in the arrows as we go. So the price theory of the Austrian school starts at the top with preferences. So we've seen that this is the fundamental thing, right? So people are in certain circumstances of acting and then they judge the circumstances of acting and establish preferences in their minds. They value, they see different alternatives and value them against each other and so on and so forth. And then some of the people who are doing this will desire to acquire goods, consumer goods, more eagerly than other people who have them and might hold on to them. Some people can offer money prices that would be acceptable to the people who own these goods and they could trade, they could make trades, right? In a minute we'll use an example of iPhone 10s that people bought back at Christmas time. So somebody could have bought one and then somewhat less satisfied than they thought. They could put it out on eBay, right? And then somebody else could make an offer and they could trade. So they just have preferences and trading takes place. Prices of consumer goods then come from just that, just those considerations, just the preferences of the buyers and the sellers. And then you'll see on the right-hand side, the prices of consumer goods provide revenue to the entrepreneurs who produce these consumer goods and therefore can finance the demands that the entrepreneurs have for factors of production. So Apple, Inc. when they sold the iPhones to the first customers, they earn the revenue from these sales and then they can use those funds to buy inputs to produce other goods, right? And so that's how it proceeds, the demand for producer goods. And then the demand for producer goods along again with the supply, this is the kinked arrow that comes from preferences, the supply of the producer goods, the workers who supply their labor, take a job with Apple, the landowners who supply their land resources and so on, that's the supply and demand at the bottom of the chart determines prices of producer goods. So we see again that the imputation is unidirectional, just cause and effect just proceeds in a straight line. And then at the bottom, the very bottom, the prices of producer goods determine two things, the costs for the entrepreneurs. So now the entrepreneurs are paying wages and they're rent for land and material prices and so on and so forth. They're paying all those prices to buy the inputs and then hopefully to produce the output and sell the output to generate revenue and so on. And then the prices of producer goods generate income for the owners of the factors of production. So the workers get their wages and again the landowners get the rental payments and so on and so forth, right? So that's the structure of price, this is how the argument is structured in the Austrian view. We mentioned already that the neoclassical view is mutual determination, right? We'd have to turn the arrows around at the bottom and point them up so that the two arrows, the arrow path from the bottom and the arrow path from the top came together in prices of consumer goods. That's the way they think about this. Okay, so now let's work through the arrows. We're gonna do this just like we did for Caruso. Start with preferences here, see how analytically we get demand and supply from that and then prices of consumer goods and then we'll work on this chain. Okay, so I suggested this example already. Let's suppose we have preferences that people have right now for iPhone 10s that were sold already as new products months ago. And so we have a person here who establishes a preference for a 2017 model iPhone 10. He's thinking about going into the secondary market somewhere, right, eBay or someplace and buying these. Used iPhone 10. I used an example of used goods just to point out, again, how this Austrian theory doesn't depend upon production costs to determine the price of the phone. The price of the phone can't depend upon production costs. It's a used good. The buyer doesn't even know what the production costs are and neither does the seller. So it's a more general theory than the neoclassical theory. Okay, so we structured the preferences the same way we did for Caruso. The first iPhone 10 would be more valuable to this person than the second iPhone 10. Maybe the low enough price they're considering and getting one for their older son or something or their wife, a husband for his wife or wife or husband or whatever, right. There's some price low enough logically that the person might be interested in a larger quantity demanded because again of the law, the first law of utility. And so we see the law of demand really is a reflection of the first law of utility. So we get the column here of quantity demand at each potential price. So if the price happened to be 900, this person wouldn't buy, rather keep the 900 than pay and get the first iPhone 10. But if the price were 850, the person would buy the first iPhone. So one unit, if it were 750, also one unit, he'd be happier paying 750 than 850, right. But he's still only by one. But if the price were 700, this person would buy two. And so we see that reflected in quantity demands too. Now notice we can use this preference rank, we can just change the initial conditions and use the same preference rank because we said again in the Austrian view that both supply and demand are based on nothing but preferences. So we use the same preference rank to illustrate supply. All we have to do is say, now this person's preference rank or for this person who has his preference rank, this person owns two iPhone 10s. So this is some guy who bought two iPhone 10s, one for himself, one for his wife, or one for junior, right. And now they're dissatisfied and they're thinking about selling. And so they go see what the price is and maybe they can sell. So it's the same thing, right. Somebody bought it in the past and now they can sell it. And whether they sell or not just depends on their preferences. Do they rank the money that they could get above maintaining the ownership and using the good. So same thing. So now this person let's say has two iPhones and would be willing to sell then this second iPhone at a price of 750. They'd keep the one that was more valuable to them in whatever use they were putting it to and sell the one that was less valuable subjectively. And at a higher price, of course, maybe $900 so that you could entice this person to sell both. At that price, they'd be happy to sell both and get the $1800, right. And so we get the law of supply. Only at higher prices will the quantity supplied be larger, the willingness of the seller to sell a larger quantity supply. And only at lower prices will the quantity demand be larger with the willingness of the buyer to buy result in a larger quantity demand. So that's the first arrow, right. Preferences to demand and supply. And now in the second arrow, how about market price? We need to introduce competing buyers and competing sellers. More than one buyer and more than one seller who can, the buyers can bid against each other and the sellers can offer against each other. And then we can, you know, like a real market and then the market clearing price would emerge from this higgling and haggling of the market, this bidding and offering in the market. So in my example, let's say we've got now three buyers for the iPhone 10. Buyer A is the one we just had on the last slide who's the most eager of these three willing to pay 850. So buyer A can outbid, buyer B is only willing to pay 800. B can outbid, buyer C is willing to pay 750. Again, this is a realistic configuration, right. And in a market we would find different preferences on the different people have. We're not all clones of one another. We're gonna have a variety of preferences. And so some will be in a position to outbid others and others would be satisfied then at those prices to take a different alternative they would no longer wanna buy at those prices. And the same for the sellers, there's sellers more eager and then sellers less eager. So this seller is willing to sell 750 and can outbid the seller Y at 800. Seller Z takes 850, won't sell until the price is 850. And so either X or Y could outbid Z. And then what happens of course is that the market clears. The price is established in the market so the quantity demand quantity supply are the same. Now what's the logic of this? Why does this happen? It happens because the point of acting is to attain our ends. And at the market clearing price all of the participants in the market have their ends satisfied. They all get exactly what they prefer. Buyers A and B buy, sellers X and Y sell. At $800 buyer C wants to keep his money and at $800 seller Z wants to keep his iPhone. And that's what happens. So they're all satisfied. Notice if the price were any higher if the price were 850 then there'd be excess supply. There'd only be one iPhone bought and sold and that would be by buyer A, right? And both, it would go to one of the sellers and at least one of the other sellers actually wants to sell at that price and can't. And so what does that seller do? That seller undercuts. That seller's perfectly willing to sell at a lower price. They just offer a lower price. You see this all the time on eBay, right? It's just, it's higgling and haggling. It's bidding and offering and then the price emerges at which the trades actually take place. So what we're saying again, the Austrian theory, what it's about are the actual prices that we see for goods and we'll see consumer and producer goods right now in markets. That's what we're explaining. Again, this is in contrast to the neoclassical approach which explains hypothetical prices, equilibrium prices, prices as they would be buying by in the sky, right? Now we're trying to explain the actual prices that exist in markets because as we'll see at the very end, we're going through all of this in order to explain how entrepreneurs actually make production decisions efficiently in the market right now. And they don't work with equilibrium prices. They work with actual real market conditions, right? And then they project or forecast what they think markets will become when they are in a position to sell their output. Okay, now one other thing we wanna mention just logically about this process, because again, this is helpful in thinking about the general applicability of this theory. We've shown it only for used consumer goods. What about newly produced consumer goods? Would the consideration be different? Would production costs somehow enter in? If we were talking about Apple selling the iPhone 10 as a new product, do they consider production costs? And so this slide gives us the logical categories of alternatives that buyers and sellers have when they make a trade in the market. So we've seen already that the preference of the buyer will be between the value of the good that they obtain, they value the good more highly than the money they give up, and so they get the good and they give up the money. And what are the alternatives that they could have done with the money? Well, they could have held on to the money, right? They could have just not spent it and held on to it and maybe the anticipation of buying something else in the future, or they could have spent it on something else. So they can either use it for personal ownership, they can just keep the money and have the gratification of possessing the money and or they can trade it to another seller. They could buy an Android phone. They could, instead of buying a phone, they could go to the grocery store and buy groceries, or whatever, whatever they're gonna do with the money. And the same for the seller, the supplier, the seller gets the money and gives up the good, the iPhone X. Well, what are the logical possibilities for alternatives now that they're given up? That you've given the phone to somebody else, the ownership of the phone to somebody else. Well, you could keep it for your own personal use, which is what you were doing before, or you could sell it to somebody else. Not this guy who you just sold it to, but somebody else. Those are, logically, those are the only possibilities, right? You can keep it for yourself or you trade it to somebody else. Okay, so Apple Inc. is in the same position. I read a story, and again, we're gonna turn to this in just a second, but I'll throw up the numbers, but I read a story in the tech news that Apple, I don't know if they intended this, but they produced enough iPhones in the production, iPhone X in the initial production run when they were selling at first in the fall to carry over a fairly large inventory into the second quarter of, the first and second quarter of 2018. Now, maybe they did this intentionally, maybe not, right? Maybe they thought, wow, it's gonna be tremendous sales and it didn't work out that way. But the point is they're holding up, they produced these phones, paid the production costs, and now they're just sitting in warehouses. And so Tim Cook and his entrepreneurial group have the same alternatives, right? The same alternatives we have here. They could sell, they could have sold more iPhone X if they would have lowered the price initially, if they would have offered the iPhone X at $900 instead of a thousand, they could have sold more, the law of demand, but they didn't. They held on to the iPhones in anticipation of selling them to somebody else. But notice they're not doing this, doesn't recoup their production costs. They don't consider the production costs at that point. Their production costs are not an alternative given up at that point. They've already given up their production costs. And so this theory, this price theory, explains both used goods and newly produced goods. Whereas, again, other price theories are not that general. Okay, so now let me move on to this appraisement question, this last issue of the four that I mentioned at the beginning. How does this structure of market prices then affect entrepreneurial production decisions? Just like with Caruso, right? How does Caruso, given the way he values things, how does he then align his production? How many coconuts to produce, how many berries to produce, whether to produce a fishing net or not, and so on and so forth. So here are the figures I was alluding to a minute ago. And I don't know this exactly, right? But the article said that in the first quarter of 2018, the volume sales of iPhone X, 16 million. Now, if the average price was $1,000, at that I don't know, right? That's $16 billion in revenue that Apple earned from just the sale of the iPhone X. That doesn't include the eight or the eight plus, right? It's just a 10. And the cost, well, I don't know what the costs are. So I made up a number. Now nobody knows except Tim Cook and his entrepreneurial group, but the actual costs are. Because you have to buy all the, it's not just like a Wired Magazine who takes apart the components, right? And then prices out the components. They have labor costs. They have costs that they have to amortize their assets, right? They have factories and warehouses and so on and so forth. They have to amortize that. That's a cost. They have R&D costs that all has to be amortized over these units. And so nobody knows except them, except Apple, what their actual costs are. So I made up a number, let's say $920. So just to have a concrete case. So revenues and costs, right? These costs, as I suggested, were incurred beforehand. So they incurred all these cuts. They paid the wages of their tech workers and they bought their component parts and they had the factory that they bought five years ago or whatever and so on and so forth. And then used those inputs to produce the output and then they sold the output in the fall, or excuse me, in the first quarter and earned the $16 billion. So they fronted money to the owners of the factors of production and then produced the good and sold the good to the consumers and then earned the revenue. Now on the basis of what they did in the first quarter, then they have to make an appraisement of what to do. So knowing what market conditions are, then Tim Cook and his entrepreneurial group have to decide, what are we gonna do now? And again, what the story said was that they're reducing their production of new iPhone 10s, of more of them, and they're drawing down inventories to sell. And so again, I made up a couple of numbers to illustrate this case. Maybe they think, maybe Apple thinks, well, in the second quarter, we're only gonna sell 12 million and we already have an inventory, whatever, five million and so we only need to produce seven, right? Something like this, right? They're working that out and thinking about how to arrange things in the most efficient way. And maybe they have to discount their price a little bit. Maybe they'll find, you know, to stimulate some additional quantity of demand that they'll have to do this. But they think their production cost might stay the same. Okay, but I don't know, right? That's their business to determine this. So to have a concrete case, I just assume they're the same. So then in the second quarter, they generate 11.8 billion in revenue with 11 billion in costs, not earning quite the same rate of return as they did in the first quarter. They have to, you know, consider that. That's the point. They can use these monetary entries to make efficient and effective decisions. But without these prices, of course, they wouldn't be able to do this at all, right? They wouldn't be able to proceed at all. Now, once they've made these appraisements, they can enter into the market for labor services, computer programming services, and they can decide whether or not to buy tech labor. And again, maybe the market for this kind of labor is 85,000 a year, and it's a big market, right? 271,000 employees, they're not, Apple's not employing them all. They're just buying out of the market. They have to pay what other tech companies pay for these workers. So if Apple hires a worker out of the tech market, society, consumers at large, give up the products that would have been produced by the competing enterprises that no longer have this tech worker. And what consumers get in society is the products of Apple. And so whether or not this decision economizes for you and me, for society at large, consumers at large, just depends upon the monetary value of those two options, right? The monetary value of what consumers pay for the products of alternative enterprises versus the monetary value of what consumers are willing to pay for the products of Apple. This is how the economizing feature works in the social system. Now let's break this down one more step. If we look at the demand side of, this is Apple Inc again, demanding or the entrepreneur demanding, the services of this tech worker, we like to say it's based upon the discounted marginal revenue product of the producer good that the entrepreneur anticipates, right? So Apple Inc is hiring a tech worker paying $85,000 right now, right, they're paying this out month by month right now. And that tech worker's working on products that will be sold in the fall. And so Apple has to have some funds saved up from the past that they're advancing to the workers and the owners of the materials that they use and so on. And then they hope to sell the output later in time and generate revenue to more than cover those costs. So that's where we get the discount, the interest return from investing. The marginal revenue product we mentioned already is the additional revenue that the services of the worker provide. So that too has to be estimated by the entrepreneur. And then it all depends upon entrepreneurial foresight, the anticipation. So Tim Cook and his team think that we can rearrange our production patterns and earn more profit by producing this product and selling it. Again, I heard in the story that Apple decided to quit producing the iPhone SE, their kind of entry model and they're gonna replace it with a big screen entry model, a low price big screen model because they think, well, that's what customers want. And so they're just anticipating, they don't know this for sure, right? It's just an entrepreneurial expectation. Okay, so I've exhausted the time and thank you very much for your attention. Thank you. Thank you.