 So now we come to the end of the Austrian Econ basic series. And along with it, a way to show the world that you are now an official basic Austrian economist. With this stylish new mug and sticker set, they will make you the talk of the town for the low, low price of $7.17. Call now to reserve your order of this luxury item. So if you want to commemorate finishing this series with a little memento, a link to the teespring store will be in the description below. Now let's recap firstly on what this series was, then recap on the crucial points made in every episode. For starters, this was called Austrian Econ basics for a very specific reason. This is just for you to know what the Austrian school is, what it's comprised of, what it stands for, and what you need to know before you go on to embark on a journey to learn more. This is not meant to be a comprehensive series that tells you everything there is to know, it really only just scratches the surface and gives you the quickest explanation of each chosen area that's possible. After my recap here of each episode, I'm going to tell you the sources I obtained my knowledge from for each particular subject, some of which are books, others are online articles, and I expect you to at least do some more research into them. You will now have the footing you need to pick up any book included in an Austrian school reading list and be able to understand where it's coming from, but if you don't read any of them you'll be missing out on so much and wasting the foundation you've gained here. So off we go with the recap. Episode 0, demystifying economics. The field of economics seems like you need to be a student at Hogwarts to be able to understand all of its jargon, mathematics, and models, and seems an insurmountable task for the average person. But you can also ask, is economics so advanced and inaccessible that only bona fide geniuses can hold the knowledge required to understand how an economy works and why it moves? Well, if economists are that smart, why does the economy regularly crash and burn so terribly? Surely these self-proclaimed geniuses must be doing something wrong, and we can find what that is by going to the very roots and asking what economics as a profession is supposed to be. At its core, economics is a social science and the most tangible form of praxeology, which means the study of human action. An economy is simply the sum of thousands, millions, or billions of actions undertaken by various individual actors with various goals. Human action is spontaneous, unique, and left organically is technically unrepeatable as no two people will have the exact same goals at all times and people move, change their priorities, and some die while others are born. Human action itself is an ever-changing set of values in just one person, let alone an entire economy, and where the economic establishment goes so drastically wrong is trying to treat humans like controlled variables that can be quantified and calculated like heat and pressure can be in the study of physics. This imposition of the use of overly complicated models, functions, and approaches can be called physics envy, as economists try to pose themselves as hard scientists rather than the social scientists that they actually should be. Treating humans as these empirical variables immediately sets up mainstream economics for disaster and by changing the fundamentals of economics back to a social science we can get a much clearer view of what an economy is. At the end of the day, an economy is people and people do not have a predetermined path of behavior that can be modified and manipulated to achieve the aims of a handful of bureaucrats. This demystification of economics from the land of witchcraft and wizardry back to reality makes economics much easier for the average person to understand, and that's not because this Austrian view is in quotes simple, at its highest levels it can become just as advanced as any other, but the reason that it's so easy to pick up is because it is intuitively correct. No matter how good any economic analysis is, if it starts on incorrect assumptions, it is going to fail. But as we experience economic collapse again and again, the wannabe physicians in charge of our economies never stop to ask if their assumptions are wrong, and because the Austrian school puts extreme emphasis on being rigorous in building its assumptions before it tries to draw conclusions, we have an unbeaten track record of predicting how, why, and when economic crashes will occur. Sources Man, Economy and State by Murray Rothbard, this book will be in every source list. Economics in one lesson by Henry Haslitt, how an economy grows and why it crashes by Peter Schiff, Human Action by Ludwig von Mises, Individualism and Economic Order by Friedrich von Hayek, Economics for Real People by Jean Callahan, Economic Science and the Austrian Method by Hans Hermann Hopper. Episode 1, The History The Austrian school started, unsurprisingly, in Austria, officially with the publication of Principles of Economics by Karl Menge. Menge realized that more often than not, economies did not act according to the assumptions laid down by the classical economists such as Adam Smith and David Ricciardo. The chief example of this was in the way that humans understood value, which the classical scholars didn't have clear answers towards, often avoiding the question of value theory entirely, or concluding that the value of a good was objective and achieved by labour. Menge took inspiration from the, at the time, overlooked Spanish and French scholastics such as Richard Cantillon and Jean Baptiste Sey, and concluded that value was a manifestation of an individual's utility and that utility is subjective to that individual. Think of your favourite food, maybe it's pizza, tacos, burgers or anything else. Is that your dad's favourite food? Your neighbours? If not, why not? But because you simply enjoy it more than they do due to your own personal preferences and therefore it can be expected, if all else remained equal, such as all parties having the same amount of disposable money, that you would be willing to pay a higher price for it than they would. But Menge didn't just revolutionize this concept of value, he introduced one of the most fundamental principles that you will be taught if you ever study economics officially. Utility and therefore value is marginal. Let's say your favourite meal is pizza. When you're really hungry you might be willing to pay £20 for one, but after you eat that pizza you're not hungry and so if someone offered you another pizza for £20 you'd very likely say no. What if they dropped the price to £10? The pizza is exactly the same but now it might be worth to you half the price that it was just a few minutes ago and someone who is still hungry might still value that exact same pizza at £20. But the total utility or enjoyment that you'd get from one more pizza would be vastly lower than it was at the time when you bought the first one, so you would only pay a vastly lower price for it or just not buy it at all. And this principle of course works between people, as being given a £1 coin means something entirely different to a homeless person as it does a billionaire. Menge truly changed the entire field of economics and you'll probably never hear his name outside of Austrian school circles, as everything that follows from Menge's foundation contradicts so much of what the mainstream economic schools go on to say, while the Austrian school maintains intellectual integrity and doesn't contradict itself for personal gain and power. This is typified greatly by a quote from the next economist I'll mention just for this recap, Ludwig von Mises. To paraphrase something he once said to his wife, I'm going to study money but I won't make a lot of it. Meanwhile his contemporary, John Maynard Keans, studied very little about the history of money, yet decided he just knew how it all worked and by saying things that corrupt bureaucrats want to hear, he became the most powerful and influential economist the world has ever seen. Mises became an absolute machine of a scholar in praxeology and economics and devised many ground shaking theories such as the regression theorem of exchange rates, the economic calculation problem, the evenly rotating economy and the Austrian business cycle theory, among others. Two of those mentioned were given their own episodes in this series. All Austrian economics that followed Mises rests upon the shoulders of this giant. He also taught and then worked alongside Friedrich Hayek, who broke the Austrian school out of Austria and into the UK, America and beyond, writing the landslide anti-authoritarian book The Road to Serfdom and later going on to win a Nobel Prize for his work with Mises on the Austrian business cycle theory. However this remains a contentious topic for those in Austrian circles as this award was granted to Hayek only a year after Mises dies and while Mises was known for being stubborn as a mule, Hayek was more willing to compromise with mainstream economists such as Milton Friedman and this is believed to be a factor of bias on behalf of the prize being awarded to Hayek. The torch was then passed to the great Murray Rothbard, the man most known for being an unrelenting economist and historian who applied the Austrian methodology so unendingly that he determined that not only is government intervention in an economy unjust but the entire existence of a government is itself unjust and he created anarcho-capitalism. If I even try to list Rothbard's accolades, this recap will go on longer than the whole series so I will simply mention that he founded first the Cato Institute and then the Mises Institute when he found that Cato was not Austrian enough. These institutes have continued to go their separate ways and the MI stands tall and proud as the world's premier outlet of all things Austrian school. Almost all of the books that I list as sources can be accessed completely free in digital form from their website as well as great prices for physical copies and the quarterly journal of Austrian economics. Outstanding scholars who are current members of the MI are Robert Murphy, Ron Paul, Thomas J. DiLorenzo, Walter Block, Peer Bailand, Judge Andrew Napolitano and many more. Without a doubt the most accessible economics program currently in existence is Mises U, a several-day-long annual event for students of which they make many talks and lectures available on YouTube and I can't tell you how many hours I've spent listening to them. Seriously, get on it, it's free and it's brilliant. Sources Man, Economy and State by Murray Rothbard The Austrian school Market Order and Entrepreneurial Creativity by Jesus Huerta de Soto published online by the Institute of Economic Affairs. The Austrian School of Economics, a history of its ideas, ambassadors and institutions by Jürgen Maria Schulach and Herbert Intercuffler. Episode 2 Value and Prices In my history recap I already explained the subjective theory of value and marginal utility to emphasise the massive yet completely uncredited importance that the Austrian school has on the entire field of economics. But when the subjective values of different people meet at the intersection of what can be produced, we have the famous supply and demand. Supply and demand tends towards the equilibrium point where the most consumers and the most suppliers can be satisfied at a given price. With all else remaining constant such as resource abundance, technological innovations pull the price from suppliers down as the production becomes more efficient, requiring less time, labour and resources and new products supersede old ones at either lower prices or provide enough additional utility to consumers to justify a higher price, which still gets pulled down over time by production, innovation and competition. Consumer demand is always pulling prices down as people always want to spend less money and less supply is decreased, in which case the new scarcity of goods adjusts the price higher. A concept worth mentioning here is the inefficacy of price controls. In an all too common scenario where a local government of a built up urban area over regulates the production of houses, therefore making it more expensive, that same government prevents suppliers from charging more despite the increased cost. This removes the incentive to provide houses for people who need them or at least the incentive to provide good houses. Now most of a whole city is left with poor housing and the politicians who caused this blame capitalism and demand more tax money, while letting capitalism just do its job of increasing quality and lowering prices would have avoided this problem entirely. Minimum wage is identical to rent control in this way and subsequently halts any increases in job quality and real wage rates that would otherwise naturally occur. Sources, man, economy and state by Murray Rothbard, economics in one lesson by Henry Haslett, human action by Ludwig von Mises, competition and entrepreneurship by Israel Kersner, why Austrian school economists have a better understanding of goods and services by Peer Bailand, published digitally on the Mises Wire, prices and production by Friedrich von Hayek. Episode three, the economic calculation problem. Markets and their prices are the most efficient possible way to allocate resources and perhaps the only effective way in the long term. This is because the prices formed by the supply and demand model when left unmolested are signals that tell producers where resources are most efficiently allocated according to the economy, which as we established is the some decision making of the entire population. Other economic systems such as socialism require resources to be allocated by a committee to meet political ends rather than organically decided upon by all actors involved. This economic planning committee faces two impossible tasks, having all of the consumer information that the entire population does at any one time and then holding the economic rationale to determine where resources are best placed at any one time. This attempts to centralise into a single bureau what is fundamentally the most decentralised, organic and individualist display of human action that can ever exist, the economy. This inability for one entity to emulate an infinitely scalable process is why the USSR collapsed spectacularly, China is now basically fascist, Yugoslavia turned into PUBG and Cuba is somehow still managing to hang on by a thread. And I know US foreign policy had a huge hand to play in most of these events, but it's self-evident that during the Cold War America was never going to implode the way that the Soviet Union did despite the equal amounts of espionage, sabotage and much more and that is precisely because one was socialist and the other wasn't. Sources, man, economy and state by Murray Rothbard, economic calculation in the socialist commonwealth by Ludwig von Mises, calculation and socialism by Joseph T. Salerno delivered at Mises U 2019, the use of knowledge in society by Friedrich von Hayek from the American Economic Review, a theory of socialism and capitalism by Hans Hermann Hopper. Episode 4, Austrian Business Cycle Theory Leading on from the previous explanation of prices as organic signals of demand and corresponding resource allocation, we have to ask whether or not money itself is affected or exempt by this. Mainstream economic schools will try to justify the latter, that money can't be treated and examined like a consumer good, but their explanations for why are riddled with circular logic and straight up falsehoods. The fact is that money does have its own supply and demand, the demand to own it is simply savings. Saving stored in bank vaults would be loaned out to wanting borrowers and the demand to borrow money is represented by the bank's rate of interest which it charges to borrowers and then passes someone to savers to thank them for their business. But enter the central bank, a bureau created by governments to allocate interest rates to meet arbitrary economic goals. Does that sound familiar to the reason why socialism is doomed to fail? Then you see exactly why central banking is doomed to fail. However important to an economy the issuance of money and credit is, the fact is that it's only one component of an economy. So by deliberately applying the economic calculation problem to banking, it's absolutely no surprise that every 5-10 years the banking system collapses just as socialism did in the late 20th century. However because it wasn't the entire economy that collapsed so spectacularly, the remaining capitalist part can pick up and carry on just for the central bank to show its appreciation by bringing it all down again. The reason that this happens is because governments are incentivized to keep interest rates low by making inflation constant. This means savings lose their value over time incentivizing constant consumption and viewing savings as nothing but a drain on GDP growth. Interest rates being low would normally be a signal to investors that spending is currently relatively high and investors should make short-term and generally riskier investments as a result. This malinvestment creates speculative bubbles that will burst in only a matter of time and when the market crashes as a correction to this bubble, the government implements countermeasures, money printed going, that just put inflating the next bubble into overdrive, continuing the process in perpetuity. Thanks government. Sources Man Economy and State by Murray Rothbard. America's Great Depression by Murray Rothbard. What has government done to our money by Murray Rothbard. Monetary Theory and the Trade Cycle by Friedrich von Hayek. The Paradox of Saving by Friedrich von Hayek. Episode 5 Opportunity Cost and Time Preference. This is going to be an extremely short recap because it was a very short episode and is probably still fresh in your minds. Opportunity cost is the perceived cost of choosing to implement one action over the next best alternative. If you do not pick your best possible option then your opportunity cost is higher than it would otherwise be as what you gained either in utility or monetary terms is comparatively lower based on your subjective values. Time preference is a view of patience and you can most often expect that being patient or having low time preference will sacrifice a lower gain right now to achieve a higher gain in the future. This can be in the form of not buying a model of car now when you expect a newer and better model will be released in a year or not withdrawing any investments because you expect them to appreciate and having that money held as just cash will depreciate due to inflation or any other example. Lower time preference actions are generally more successful and wiser than higher time preference action but this is only a guide and certainly not to be viewed as a rule. Sources of Man, Economy and State by Murray Rothbard, Economic Science and the Austrian Method by Hans Hermann Hopper. So there we go, curtain draw. Once again I really hope you've enjoyed this little project of mine and that it wasn't too all over the place and confusing and if I inspire you to go out and learn more then my objective is complete. Take it easy.