 Well, good morning, everyone. We certainly appreciate all your energy, and my guess is that it won't diminish during the week that you'll become re-energized, one lesson, one lecture at a time, one discussion at a time. So it's great to have this energy. In this talk, titled Subjective Value and Market Prices, we're actually, I'm very interested actually to set the context of these two topics, and the context is the economic theory of economic calculation. What I'd like to suggest to you is that this concept, this idea of economic calculation, is really the foundation of all economic theory of society. What economists call catalactics, right? When Mises calls catalactics, economics of the market economy, and price theory, which is what we're going to talk about in this lecture, is the cornerstone of economic calculation. You'll see this worked out in some of the other lectures, especially today and tomorrow, the importance of economic calculation. So we're going to go through four steps in the time we have together this morning. I'm going to start with just some basic remarks about the fundamentals of human action, and then we're going to talk about what Frank Federer calls the personal economy. This is what you and I do in our own personal lives, right? And then we'll talk about the social economy. What does the economy look like when we take our personal economies and integrate them with each other into a social economy? And that's of course where we get to this principle of economic calculation. And then the last thing we'll do is talk about the topic of the lecture, which is the theory of price. Okay, let's start at the beginning. Human action is purposeful behavior. When we engage in human action, it's that subset of human behavior that is aimed to the attainment of an end. We have a goal in mind. We have a purpose. We're motivated to attain the end. We recognize right away, though, that having an end does not constitute action. We have all sorts of unmet ends, right, that we have not yet acted towards and attained. We have to take means. We have to acquire, well, we first have to identify things that can be used as means to attain ends, acquire them, and then apply them in acts of production and consumption. So there's economic, the human action, I should say, is always in an ends-means relationship, right, the connection between them. The other thing that we notice right away about human actions, we just recognized by our own experience, is that means are somewhat convertible. A given means can be applied, in other words, to actions various across the attainment of different ends. It's very rare to find a means that is limited only to the application of the attainment of one end. Means are somewhat convertible, and there's somewhat nonspecific. That is to say, if we do convert them from one use to another, like our labor, we plant a garden or something, and then then we go wash the car. If we move our labor from one thing to another, it doesn't lose all of its productivity. Means are like this in varying extents, right? Some means more specific and some less. But because of that, our means are scarce. As we said before, we have unmet ends, and because we can convert them, we have choices to make. We have a choice between alternative ends that we could pursue with the same set of means, and for any end that we pursue, we have a choice of the combination of means that we could put together and apply to the attainment of that end. So we have choice with respect to the ends and choice with respect to the means in action. So given the choices that we face because of the finitude of the human condition, and the fact that human action is purposeful, we get to this basic principle, the basic organizing principle of all human action, which is economizing. When we engage in action, we always choose the alternative we prefer with given means. We choose the end that we prefer over the alternative that we could pursue with a given combination of means to attain a particular end. We choose the combination that has the lowest opportunity cost, right? The lowest value in alternative use to attain the end. So we're always economizing in human action. Now, economizing in turn, as I've already suggested, requires a choice between alternatives, which means that we're valuing the different alternatives in rank order. So we have given means and we think of various ends that we could attain with these means, and we simply, to choose, we simply rank order and value the different ends, and then the same thing with combination of means that are alternatives in attaining a given end. All we need to do is rank order the value of things. So here's where we get to the idea of subjective value. What do we mean by value when we talk about this fundamental principle? Value is a personal assessment. We just, the individual person just assesses, just judges for himself or herself. What value would accrue from choosing one end as opposed to another or one set of means opposed to another? We're just assessing this, each one of us individually in our own minds. Now, this valuation then has two important characteristics, not to be confused. Sometimes these are conflated in other schools of economics. One is the subjectivity of value. By subjective, what we mean in this fundamental sense, following the line of Menger's analysis, is that value is a state of mind. Value is an intensive state of mind. Because it's only a state of mind, it lacks an extensive property. Nothing about valuation lies outside of the mind. Without an extensive property, we cannot come up with a measure of a unit of subjective value. The very concept of saying, I get 10 units of value from giving this lecture or something is a statement we can make no sense of, because we don't know how to define a unit in a way that you and I can share the meaning of the definition of what a unit of subjective value is. My value is in my head, your value in your head. You can see right away then that subjectivity of value means that we cannot directly compare the subjective value you get from doing something with the subjective value that I get from doing something. It's not that this is a difficult problem, that if we just had the right instruments, we could solve it or something. This is a fundamental conceptual barrier to interpersonal utility comparison, as we say in economics. Now the second characteristic of value is distinct from subjectivity, and this is that value is not constant. Valuing things, we don't value in a constant set given way the external circumstances of our action. We know this right away, by the way, because of regret, right? We know in other words that when we do something and we look back on it and it didn't turn out well, that we could have chosen differently, otherwise we wouldn't experience regret. We would just say, ah, well, that's the way it goes. So we see this right away that there's no given connection between the circumstances we find ourselves in in action, and the action we take and the consequences of that action. This is all, again, a matter of choice and perspective and valuing, right? Now this has a further implication that we want to draw out here. If there are no constants in valuing, then there can be no utility functions. There can be no mathematical functions that are written as constants and variables, right? You can't write a functional statement of utility because there are no constants. Everything is a variable, at least in principle. Everything is variable. And so if your demand and supply theory is derived from utility theory, which is the economic procedure, because valuation is not constant and you can't have functions of utility, you also cannot have demand and supply functions, right? This is just, again, a conceptual problem, right? It's not like, well, if we could measure things better, we could have functions, or if we could really get at the bottom of things, they're sort of underlying functions somehow. And no, no, no, what the Austrian position is on this is rather extreme, right? To saying that there's a fundamental problem here that can't be breached. Okay, so the final thing I want to mention here is that on basic things is that to go back to choice, when we choose the thing that we value more highly, let's say the end we garden with our labor instead of washing the car, the cost of that choice is the value of the alternative, the next best alternative we don't choose, right? It's the value of the alternative we don't choose. So both value and cost in action is subjective. It's just a person valuing the different alternatives. So now let's go on to the first application of these principles. And this is the idea of value imputation. In other words, all we said so far is that value resides in the mind of the person. But we know, again, through our own experience that we say all the time that our objects have value. My car has value. My clothes have value. I say I value that and I value this object. And of course, further, we know in the market, things have monetary value. And so the question is, where does all that come from? What's the logical connection between all those things, if any? And the Austrians are, I would say, almost unique among schools of thought in adopting the top line of value imputation. And hopefully you see right away the reason why the top line is a sort of straightforward implication of what we've spoken about before. As we said before, human action is purposeful or striving to attain ends. And we identify and acquire means and then apply them to the attainment of the end. So human action, all of the value of human action is directed at the attainment of the end. And if anything else has value, it could only have value as an aid in attaining the end. Because that is the purpose of human action to attain the end. And if we could attain the end without means, if we could just snap our fingers and attain our ends, well, all the better, right? We wouldn't value means. We wouldn't have a reason to do this. But as human beings, of course, that isn't the way we are. Our human nature is not infinite in that sense. Okay, so you'll notice though, now we've introduced a new principle, right? So we have the mind that's assessed, the human mind that's assessing the value of different alternatives. The human mind then assesses the value of a consumer good with respect to the aid that employing that consumer good renders to the person in attaining the person's end. So I'm going to plant my garden and I have a hoe. And I use the hoe to dig, you know, a trench or whatever to make room for the seeds. And I value the hoe and that action with respect to the value that I place upon the end result of having the garden, whatever that value is to me. So this is the idea. And then the value of the consumer good is rendered to the value of the producer good. Again, in accordance with the value the producer good grants or generates in production of the consumer good. So this is the theory, if you will, or the logic of value imputation. So value begins in the mind, we place value on the consumer good. And then because the consumer good is valuable and doesn't exist in nature without an active production, we place value on the producer good that will, through an active production, will generate for us the consumer good. Now, the middle line, by the way, some of you will recognize this right away. The middle line is the theory of the logic of value transmission in the British classical school, whose most notorious expositor was Karl Marx, right? So you think of the labor theory of value, where Marx said, labor has intrinsic value. And then through production, that value is transmitted to the consumer good. And then we as participants in the market sort of acquiesce in that value. We recognize that value, the last arrow on the left, our minds ascent to this value of the consumer good. We see a product and we say, oh, the price is $100. Oh yeah, that's that's the right price, right? We sort of ascent to that price. Okay, well, we're not going to go into, you know, a discourse on the labor theory of value. I just want to point out the basic problem here. The basic problem is all human action, the value that comes from all human action is from the attainment of the end. It couldn't be otherwise. Therefore, there can be no such thing as independent, intrinsic value of means that just it contradicts the very notion of human action. The third line, again, some of you studied economics, you recognize the third line. This is the neoclassical view, at least in the form that Alfred Marshall gives us, right? The demand and supply are the blades of the scissors, right? Demand subjective, the mind influences the price of the consumer good, but so do objective cost of production. And again, we're not going to go into a long discourse about this now. I just want to point out once again that this is logically contradictory. It can't be the case. In human action, all the value from the action itself comes from attaining the end. Producer goods cannot have independent value. They cannot be an independent source of value, independent of attaining the value of the end. Now, I will say one thing in defense of this Marchelian view before we go on. You can logically accept this view, but to do it, you have to give up a cause and effect explanation of human action. You have to accept a mutual determination theory of human action. So you can theorize this way, but if you do, then you give up any sort of logical human explanation of economic phenomena. Okay, so now let's turn to the personal economy. And here what I have in mind is, again, borrowing from Frank Federer who introduced this terminology. What I have in mind is just the theoretical, the economic theoretical explanation of anybody's action in any circumstance whatsoever. This is the general theory that we can apply to your action and my action and anybody else's action, whether it's Robinson Caruso, the isolated person, or whether we're engaged in social activity. It doesn't matter. This is the general principle or a set of principles. So of course, it would include then what we mentioned before, right? All the human dimensions of at the fundamental level would apply here, you know, the identification of what things in nature means, the acquisition of those things out of nature, right? The acts of production, the acts of consumption with these things and so on. But just since we don't want to get mired down in the discussion of all of this, you'll have other lectures which will talk about these elements. We want to talk just about first, just about consumption. We want to talk, in other words, about the value imputation that we just went through. What about the use of consumer goods and then the use of producer goods? And so that's where we'll assume everything else. In other words, we'll assume that we have a person who already has acquired goods, a set of consumer goods, and they're just valuing them. We already have stuff, right? And we're valuing it. So you have your stuff, I have my stuff, right? And we place value on these different goods. And well, are there any principles of how we value with respect to our personal economy? So I would suggest the two basic principles are these, the laws of utility and the law of the allocation of consumer goods. And these can be fairly briefly developed, right? So on the left-hand side, just a brief description of the logic behind the laws of utility. So this is a preference rank for the marginal utility, the additional utility that accrues to these goods for different units of the same good. So suppose we have a person who owns an iPhone SE and acquired this iPhone SE back in the fall when it went on sale by Apple, and they own and use this iPhone. So the theory of imputation says they place value on the uses, the consumptive acts with this iPhone, because the acts of consumption attain their end. They text their friends, they watch videos or whatever. They're engaged in these acts of consumption. And it's the acts of consumption, it's the attainment of those ends that they value. And the iPhone SE is their preferred means, they could use other means, right? But their preferred means to attain those ends. So they place value on whatever ends they're attaining with the first, what I've labeled the first iPhone. It follows logically that if they were to have a second iPhone, they would have to apply that iPhone to ends that they value less highly. And so we see the first law of utility, right? The larger the stock of a good a person owns, the less value the person assigns to the marginal unit. So this, again, is a law of our action. And then on the right hand side, I've just given a, again, a very brief account of this law of allocation of consumer goods. If we think then about all the goods a person owns, like in my example, it's just this person has an iPhone SE. He doesn't have the second iPhone because it's not worth it to him to acquire it, right? Its value is lower. So he doesn't acquire it. And he has a pair of running shoes. And then how does he engage in acts of consumption with these things? And the answer is he allocates his acts of consumption across these two goods and therefore across all of his goods so that he doesn't, it doesn't occur to him that he's able to give up acts of consumption using one of the goods to acquire acts of consumption using another that would improve his overall situation. In other words, he doesn't want to run for a second hour by giving up, you know, one of his hours of using his iPhone. And remember, again, we can generalize the principle, right? Because I just used two goods. But he has, if he's going to run for two hours in a day instead of one, he has to draw that hour away from some other use, right? And so he has to give up the value of that and to get the value of this. So this is the idea. And then the last arrow, remember in our value imputation, is the arrow from consumer goods to producer goods. How do you and I allocate our producer goods? Because we own some of those too, right? Mainly our own labor as a producer good. So that's my example here. So suppose this person owns some acreage. And on the acreage, he hunts and fishes and whatever, right? He's got a stream and and so he owns all the gear that because he values those activities, he owns all the gear that's necessary to hunt and fish and hike and whatever he does on the land. And we can think then of the same process that we did for consumer goods. What if a person takes a producer good like labor and applies more and more of it sequential units of it progressively to the attainment of the same activity, right? Over and over and over. In this case, fishing. Well, as we said before, in our lives, the means that we have are variable. They're not identical. They're not homogeneous, right? They're variable. The land is variable. The stream is, fishing is not the same in one spot on the stream as it is on another. So there's a better fishing spot and one that's not not so productive. If this person then just wants fish, the person will go to the most, you know, the best fishing hole, right? On the stream and fish there first. But if he wants to turn around and apply more of his labor to fishing, you'll have to go somewhere else because he's fished out that spot for a while. You'll have to go somewhere else where the marginal physical product, the MPP falls. So this again is a general principle of production called the law of returns. And then if there is a law of returns, then we can apply that notion to the allocation of producer goods. So once again, this person, let's say, fishes with one unit of labor, maybe an hour of labor, and then takes other producer goods, a hammer and wood and nails and is labor and builds a doghouse. And the doghouse takes him two units of labor or two hours of labor, whatever it is. If we see a person engaged in the allocation of his producer goods that way, we can imply, we can deduce from that, that he didn't want to switch his labor reallocated away from doghouse making to fishing. Why? Well, because the extra fishing gives him less value. The marginal value product of the additional fish he can get by switching over to fishing is lower. So this again becomes a general principle that organizes, gives order or structure to our action. It gives us the ability as economists to analyze our action because there are laws that give order and structure to it that we can discern. So now let's go on to the interpersonal economy. Suppose we have this person we've been talking about, just you or me, just the person who's got goods and is engaged in the action and integrating, creating this integrated economy with the goods that he or she owns, right? The person is producing an economy, an ordered structure of action that is related to the greater fulfillment of the person's ends. What if that person tried to do the same thing to make decisions about acquisition and production and consumption for everyone in society? What about that? What would happen then? And hopefully you can see right away that this is just as Ludwig van Mises said in his famous article on economic calculation. This is simply impossible. Rational allocation of resources is impossible in socialism because socialism is a system where one will engage as an action, right? Only the central planners. They make all the decisions about action. They have no market to repair to, all they have to go on then is their own valuations. But if all they have to go on is their own valuations, they certainly can't economize for other people, which is the whole point of having an economy, right? Is to economize, each person is economizing for himself or herself. And we want to integrate that activity into a socially economized arrangement. So this is the source of the impossibility of rational allocation of resources in socialism. Again, you're going to hear more about this later, so I won't belabor this point. Instead, let's go on then to the solution that Mises gave us, the market solution to this. How is it then that it is possible for us to each have our own personal economy interacting with each other so that we're not relying on a central planner, right? We're just going to interact with each other in our own personal economies in a way that economizes the use of resources for all of us in this social process that economizes resources across persons, in other words, in this process, not just for each person individually. So this is, of course, the market economy. So in other words, this is what Mises argued that the market economy performs this feat. And in order to see this, let's just look at a schematic of how economists think about price theory. So this is a logical flowchart or schematic of the theory, right? We just start with persons, people who have preferences, we just have preferences, and we start with certain goods that we own as we said before. Let's just start with that. And then given this starting point, the way in which we engage in interaction, of course, is through the market, through exchange in the market, and in particular through monetary exchange. And again, there are lectures later in the week, later today and tomorrow, where all of this will be spelled out in more detail. We're just being a little perfunctory here. So we're thinking then about the whole social order as we have it in the market now. So the suppliers of consumer goods are the entrepreneurs who produce them. They've organized production. Like our iPhone SE, right? We're now thinking about Apple producing Tim Cook and his entrepreneurial group that produced it, and they're selling it now, they're supplying it. This is the idea now. And then the demand for consumer goods, of course, are by you and I, just people engaged in acts of consumption. So we're integrating our activity. We're letting them produce in the division of labor, and then we're acquiring the consumer goods and using them to satisfy our ends. And so what we want to show is how that interaction leads to market prices for consumer goods. Then once they're market prices for consumer goods, this leads to two effects. One is revenue for Apple, right? They get the revenue from the iPhone. And the other is expenditures for the consumer. So the expenditures are made, and each consumer then is taking account of, is economizing with respect to buying things, with respect to these expenditures, right? These prices that have to be paid. And then once Tim Cook gets his revenue, the entrepreneurs have revenue, then that revenue constrains demand that they can express for producer goods. If consumers are paying enough to generate enough revenue, they can make expenditures to buy producer goods. They can buy tech worker services and chips and, you know, computer chips and gorilla glass and whatever else they need to buy. But if consumers aren't buying their products, they lack the sufficient revenue to have strong enough demand to outbid the other entrepreneurs who are also producing different goods for different consumers, and so on, right? And then the supply of producer goods just comes from owners of the factors of production. That's funny. Owners of the factors of production on the supply in the lower left, right? It just comes from people's preferences. The tech worker goes to work for Apple, choosing between working for Apple or working for Motorola or, right, or working for some state institution or whatever the alternatives are that that person values, right? So it's just a supply, just as we described it before. But now this person's supplying not just within the, you're acting, not just within the matrix of their own property, but they're interacting with other people, right? And this is all done through monetary exchange. So Apple is paying money, monetary compensation in hiring and buying the services of the producers. And then the prices of producer goods generate two effects, right? They generate income for the worker, and then that income is used to engage in acts of further acquisition and costs for the entrepreneur. So wages that are paid for the tech worker cost to the entrepreneur. So now we can see the basic principle of economic calculation, which is the earning of net income for the entrepreneurs. The entrepreneur is going to make the production decisions in the market economy. How can they do this in a way that's economizing for all of us, across persons in other words? And the answer is they strive to earn net income because if they earn net income, the costs that they pay, which are the prices that all the entrepreneurs who are using the resource across all the different uses are paying, that's what's given up. In other words, if they hire the tech workers, what's given up is the monetary value of that tech service to some other entrepreneur. So that's given up. And what's gained? What's gained is the product that's produced by Apple, which to the customers of Apple's products is generating more monetary revenue than was being generated by the other producers, right? The revenue is covering the costs. And the revenue is just generated by you and me, but not just for the Apple products, right? But for all the different products of all the different entrepreneurs. Okay, so that's the principle. All right, so now let's get to the last step of this, the theory of price. So now we want to fill in these arrows of cause and effect. We want to we want to do the top part, consumer goods prices, and then we'll do the bottom part, producer goods prices. So we just want to sort of fill in the theory of those arrows. So let's start with, let's start with the example that I've already given, modify it slightly. Let's suppose in a personal economy, this person that we referred to before with the iPhone SE, suppose this person actually does have two, two iPhone SEs, exactly the same, they bought two at the, you know, last fall. And they use one, let's say this person uses one for himself, and he uses one, you know, he has a spare or something. Maybe he's a rich guy, and he, you know, afford to just, you know, have one sitting around in case he forgot to charge his first one, or maybe he lends it out to someone or something like this, right? So it's a lesser valued use, that's the point. Well, then the logic, of course, of the law of utility, as we said before, is the second iPhone SE has to be ranked in value lower than the first. Then all we have to do in order to integrate this person's action within the social nexus is provide opportunities for trade, right? So let's suppose, again, my numbers are such that this person would sell the second iPhone, the least valuable one, if the going market offer or bid by a buyer was $250 or higher. Now, I want to make a caveat here just so we're all on the same page, and you're not conflating what we're doing here with the neoclassical approach. The way that a Hungarian tradition treats this analysis is the following. We just look out into the world, and we see this person who sells an iPhone. In other words, we look at the real action of a real person in the world. That's what we're referring to. We just look out and suppose we see that there's a person who owns two iPhones, the price is $250, and he sells one. So one of the entries, one of the choice associations, the $250 and the second iPhone, one of those connections, one of those associated rows is the actual behavior of the person. This is not entirely hypothetical, right? There are hypothetical parts to it, but they're logically implied parts to it. But we're talking about the real action of a person. And starting from there, okay, so then we ask this question, if the price is $250 and this person sells one of his iPhones, why doesn't he sell the second one? And we know the answer, right? He doesn't sell the second, excuse me, the first one. Sorry, that was confusing. Why doesn't he sell the first one? Why doesn't he sell both, in other words? He could find buyers for both, that the market's deep enough. And the answer is, he values them differently. He's giving up the least valuable use, the least valuable ends that he can attain with that second iPhone, and he's retaining the more valuable uses that he can accomplish with the first iPhone. But there must be some principle, there must be some price high enough that he would have sold both, because money is a good too, right? So in my example, it's $350. So we see the law of supply, right? For a given, we say it this way, our definition, for a given sale or actual sale of something, for a given actual sale of something, if the price would have been higher, the quantity sold would have been larger or the same. That's the law of supply. You notice it's different than the way you read it in the textbooks, because economic theory in the Hungarian tradition is causal realist, right? It's a theory about real human action, not hypothetical behavior. Then we can do the same thing with the logic of demand. We don't even need a different example, right? We can just say, suppose to the contrary that this person at the beginning didn't own an iPhone, but wanted, you know, valued an iPhone. And then once again, let's say the price happened to be $250. And we see this person buy an iPhone. So the quantity demand is one when the price is 250. We see the actual behavior of this person. The person goes into the market and buys the iPhone. Well, then we can conjecture again. We can logically infer that at a lower price, at least in principle, at some lower price, the person would have bought an additional unit. Or to strictly define the law of demand, we say for a given purchase, if the price would have been lower, the quantity purchase would have been the same or larger, right? That's the logic of the laws of utility when we apply them to social interaction between persons who are simply trying to acquire their, their economizing personal, well, I should say their personal economy that is most valuable to them. Okay, then finally on this line, let's just give the market. Let's suppose we have a market where there are more than one buyer, more than one seller. So the buyers, the iPhones are in parenthesis indicating that they don't own them. And the sellers, the iPhones are free, they own these iPhones. And if we had a market consisting of this arrangement, and all markets, by the way, logically consist of a similar kind of arrangement, right? That's the point. Different buyers have different preferences, different extents to which they value the good or willing to pay money to acquire it. Different sellers have different preferences, there's different willingness to supply the good at various prices, some at lower, some at higher. We're different from each other. And therefore when we meet together, we discover these differences, we can exploit them to our mutual benefit. That's what the market is, right? Okay, so you can see in my example that the price in this market will quickly gravitate to the market clearing, what we call the market clearing price at $250. It does this because only at the market clearing price are the preferences of all of the traders satisfied. The whole point of engaging in human action is to satisfy our ends. But the ends of all six of these people are only mutually satisfied if there's a market clearing price. If the price instead winds up to be $300, two of the sellers are dissatisfied. They want to sell but they can't find a buyer. And because of this, they'll just make a counter offer. They'll just recognize this and lower the price. And then the market will clear, right? Another buyer will come in and the market will clear. And likewise, the price is not below the market clearing level because at that, at the lower price, they're buyers whose preferences are not satisfied. They're not satisfied. They go into the market and they can't find a seller. And some of them who are willing to do this up their bid, they just up the bid. And then they find a seller at the higher price because of the law of supply, right? They'll find a seller at the higher price. And then the market clears. So there's this overwhelming tendency for prices that exist in actual markets to clear the market. One last thing about this, you'll also notice if you kind of work through the trading before and after trading activity, you'll see that buyer A and buyer B will both buy one iPhone each. And seller X and seller Y will both sell one iPhone each, which means that the three people that end up with iPhones are buyer A, buyer B, and seller Z. You'll notice that those are the three people that value the iPhone the most, relative to money, right? They value the iPhone more than buyer C, seller X, seller Y. That's what markets do, right? They allocate the good in an economizing way. They allocate it to the people who value it the most relative to money. That's where the economic calculation point comes in. Okay. So one point of transition, and then we'll talk about prices of producer goods real quickly. On this slide, I've just listed out the general categorical, logically necessary categorical structure of what's behind demand and supply in any and all cases. Because the example I gave you through a little bit of sleight of hand, unintentional, but I just realized this, it was for a used iPhone SE. And the reason to do that is just so you can see that the price of the product is determined, given people's situation is determined by nothing more than our preferences for things. As we said before in the value imputation discussion, there are no objective cost of production. They're not independent and objective, right? They're determined to in this same way that buyers determine the subjective value of consumer goods. So on the demand side then, it always looks like this, right? There's the value of the good obtained and then the value of the money given up. And the value of the money given up can have one of these two possible categorical reasons, right? The person could retain the money and just use it for personal uses. The buyer, right? Could just withhold and say, I don't want to buy. Or the buyer could find another seller who values the money differently, more advantageously to the buyer, right? So those are the possibilities. And then for the seller, the preferences look symmetric, right? There's the value of the money obtained, that's what the seller wants, right, prefers, is the money. And then the value of the good given up and the value of the good given up could either have a personal use or it could have a use in selling it to someone else, right? Money, in other words, that could be acquired by selling it to someone else. So with this, with this general categorical structure, we can fit Tim Cook and his entrepreneurial group in directly into the theory that we've already discussed, right? It's just that Tim Cook, when he sells the iPhone SE, you know, back in August or October last year, his personal use for, you know, for the 50 millionth iPhone SE that he's produced is basically zero. That's the difference, right? A person who already owns the iPhone who bought it before and is using it has a personal use that's significant. But the entrepreneur has no personal use of the thing, generally speaking, right? They have no personal use. And so their supply is always value of the money obtained from one consumer, value of the money that could be obtained from another consumer. I'm going to sell to you because I think I'm going to get the, you know, an adequate price that no other consumer is going to pay me more for. And so I'm just going to go ahead and sell to you. I'm not going to hold out for later and so on. All right. So with that in mind, we can, I'll try to quickly run through this, but just to give you a sense at least of how this works. On the top, the top block, we've got the net income. I've already calculated this stylistically. The net income from iPhone SE sales from when they were first offered for sale October 2022, let's say March of 2021. And so you can see that in my example, the revenue and the cost is such that this is a net income generating activity for Apple. And so, you know, they look back and say, yeah, we did okay with that. That was good. A good investment. We earned a rate of return that was adequate and so on. But in March of 2021, Tim Cook and his entrepreneurial group had to sit down, they're always doing this, right? Had to sit down and say, should we continue? Should we continue? We could produce other things, right? We don't have to produce the iPhone SE. Maybe it's gone really good right now, but maybe the man will sag and, right, people will shift to more high-end devices or vice versa, right? They have to reassess. So in March of 2021, we get the bottom grouping, right? Where Apple, the entrepreneurial group at Apple is saying, well, if we continue to sell the iPhone SE from March to the end of the year, the next iteration, we think we're going to get revenue, we'll sell 30 million units still at the $399 price and we'll get $12 billion. And then, you know, we think the costs will look like this, our labor costs, the price of capital, right? A gorilla glass and so on that they buy and natural resources and so on and so forth will all accumulate to $10.8 billion. And that's still okay. That's an adequate return, so we're going to go ahead, right? This process is called appraisement. Economic calculation, again, is just accounting. It's just having the accounting framework, right, of revenue and costs for net income, of assets and liabilities for net worth or equity. Appraisement is what the entrepreneur is doing in assessing, making decisions, right, in assessing what the social value, the monetary value that is of activity will be. And then I'll close with this real briefly, just so you can see the connection. When Apple earns this or anticipates earning this revenue, then they'll be willing to buy the inputs, right? They'll be willing to engage in the costs, pay in advance to get the inputs to acquire them and then use them in production and then sell the goods sometime in the future. So the demand for the producer goods comes from the entrepreneur's anticipation of what will happen if they acquire these inputs, produce and then sell output in the future. And then we mentioned on the supply side, it's just you and I, owners of the factors of production, right, who make our decision about selling to this entrepreneur or holding out and selling to another entrepreneur. All right, thank you for your kind attention.