 So Menger was involved in what was called, and you may have heard the term, the Marginalist Revolution. And what was the Marginalist Revolution? It was really the simultaneous and independent discovery by three individuals of different nationalities at about the exact same time, as I said simultaneously, of the principle of marginal utility. And I'll talk about what that principle means, it's at the base of the Austrian system of economics. And who are these so-called Marginal revolutionaries? They were an Englishman who was Stanley Jevins, Carl Menger, of course, who was an Austrian, and a French economist who lived in Switzerland, Leon von Ross. Now all of these men discovered the principle, but they had different terms. Menger really didn't name the principle himself. His student didn't call it marginal utility. And in this case, as we'll see, the term marginal is really synonymous with the term relevant, the relevant or dependent utility. And as we'll see, utility is really nothing but a name for satisfaction. Jevins called it the final utility, and von Ross called it rarity. OK, let me just show you the persons involved in this drama. There was Stanley Jevins, kind of a dashing ladies' man. But when he got older, I mean, he looks like one of those guys that feeds the pigeons on a fart bench. And this is Leon von Ross, who is kind of dark and diabolical. And he's younger, but then he's like your sweet old grandfather when he gets older. Don't age well. But Menger was kind of handsome and hip when he was younger, and handsome and dignified when he was older. And this seems to have carried over to later Austrian economists. OK, well, I mean. Now, the important difference in the conceptions of marginal utility by Menger on the one hand and Jevins and von Ross on the other hand is that Menger and Jevins and von Ross conceived of utility as a quantity of satisfaction that could be added up. So if you had a can of Coke, that might equal 10 eudels. And if you had a granola bar, that might be another 15 eudels. So you had 25 eudels of satisfaction that you were consuming. Of course, the question is, what the heck is a eudel? I mean, there is no unit in which satisfaction, which is an intensive magnitude, can be measured. Now, Menger understood this. So for Menger, utility was really an individual actor's judgment about how important a thing was to improving his well-being or how important it was to his life. So for Menger, if you had the choice between these three items that I have listed here a bottle of water, can of Coke, a granola bar, he would spend his money assuming that his funds were limited to only purchasing one of these items, and they all had the same price. He would purchase that which was ranked highest, that which was most important to his well-being. And that was the marginal utility. That was the satisfaction that he would derive from consuming this good. So satisfaction was purely subjective, purely ordinal, meaning you could only rank it. You could not quantify it and add it up and compare it between different people. You could stand at a vending machine and observe as people all purchased like the same cans of Coke Zero, let's say. They all paid the same price. But yet you would not be able to determine what utility that had to a person. How important it was to their lives, because there is no magnitude. Or there is no unit in which you could measure utility. And Menger understood that. Some of his followers kind of waffle back and forth between the idea of utility as a quantity and the idea of utility as a purely subjective, intensive feeling or magnitude. But of course today, all quantification has been completely purged from the Austrian notion of marginal utility. OK, but Menger went beyond the principle of marginal utility. He created a whole system of economics that was based on subjective value and individual choice. As we'll see, Menger showed not only why people consumed various goods, but how the value that people placed on these goods were imputed, you'll come back to that word, were imputed back to the machinery, the factories, the labor hours that were used to produce that good. So what Menger showed was that the consumer and his wants, or her wants, were at the center of economic activity. So this was his revolution. It wasn't merely discovering the principle of marginal utility as in the case of Al-Ras and Jevin. So they had other contributions. But for Menger, it was creating from this principle a whole vision of the economy and how it operated and what the end of the economy was, what the goal of the economy was. So some very, very important economists and historians of thought realized how important Menger's contribution was and what a genius he was. For example, Joseph Schumpeter, who was an Austrian by birth but really was not a member of the Austrian school, wrote, Menger is nobody's pupil and what he creates stands. Menger's theory of value, price, and distribution is the best we have up to now. And that was an obituary written in 1926 for Menger. But that's still true today. His theory of price actually as it was extended by Eugen von Bambaverk, Bambaverk was a very close follower of Menger's. Is the theory of price that you will learn this morning? Jeff Herbert will talk about subjective value and price this morning. Ludwig von Mises wrote, what is known as the Austrian School of Economics started in 1871 when Karl Menger published a slender volume and it was a very small volume and I recommend that everyone read it. It's very easy to read. The slender volume called the Principles of Economics. Until the end of the 70s, there was no Austrian school that was only Karl Menger, so he was the founder. And lastly, Friedrich Hayek, who won the Nobel Prize and was a student of Mises, wrote the fundamental ideas belong fully, or the Austrian School's fundamental ideas belong fully and wholly to Karl Menger. What is common to the members of the Austrian School constitutes their peculiarity and provided the foundations for their later contributions is their acceptance of the teaching of Karl Menger, okay? So Menger is truly the founder. Now when Menger was writing, the dominant school of economic theory was the classical school, the British school, and there were three eminent classical economists, David Hume, Adam Smith, and David Ricardo, and Menger did not downgrade the accomplishments of these economists. What he wanted to do was to put what was true in their system and there was a lot of truth in the classical system. He wanted to put it on firm foundations and then complete it. As we'll see, the classical school focused on the businessman, okay, the business owner as the primary actor in the economy. Res Menger, of course, focused on the consumer and his or her wants. So what did the classical school say? The classical school said many true things. They said that prices aren't arbitrary or random, okay? Prices were formed or determined by certain laws of nature that operated in the social realm. And most importantly, the law of supply and demand, at least in the short run. They also believed that in the long run, the costs that business men incurred to produce goods determined the value of those goods and that was a big error and I'll explain how that error occurred and how Menger purged that error from economics. Also, the classical school understood perfectly that profits and losses were central to the operation of a capitalist economy. Profits, their profits meant that the goods which were profitable were being underproduced and were more valuable than some other things that were being produced and that therefore the profits would spur businesses to increase the supply of those goods. If there were losses, it meant that there was a loss of value, a waste in the economy but the losses themselves would serve as incentives to stop businesses from producing as many of those goods and the supply would decrease. So as the supply of the profitable things increased, their prices would come down and as the prices of the unprofitable things or the supplies of the unprofitable things decreased, their prices would rise and eventually profits and losses would disappear and they saw a very important tendency in the market economy which was the continual destruction of profits and losses, wiping out profits and losses but because of continual change in the economy we always had them reappearing again and that's something that the Austrians really that notion was developed by the Austrians the central role of profits and losses and we'll explain in my lecture on socialism and calculation why socialism will always fail economically where it's really impossible because of this lack of the profit and loss system. Okay, unfortunately the classical school believed that in the long run all profits and losses would disappear and costs of production would be equal to prices. Now that is true in the long run but the long run is only imaginary, okay? It shows us the tendency of the economy. Unfortunately, this is where the classical school went wrong. They believe that the cost of production determined the prices, that in the long run the cost of production, the amount of money that was spent on producing a good pulled the prices back to that level, okay? And that's completely fallacious and Menger saw that and corrected it. Okay, what was the main flaw in the classical system, okay, which was really the fountain of their other mistakes. Basically they attempted to explain the value of goods and you can understand this in abstract classes. So diamonds were valued as a class of goods, okay? And so they would ask the question why are diamonds more valuable than bread? Why is beef more valuable than coal? Is steel or iron more valuable than copper? Okay, and that's the wrong question to ask. And Menger made his breakthrough by asking the right questions, okay? So we know though that and this is because of Menger we know this that human beings when they purchase goods and services they don't think of all the coal in the world and what that value is to the human race, okay? They think of the units that they are purchasing and how can they allocate their resources? How can they use their money and time to acquire units of goods that are more or less valuable to them? So they think in terms of a pound of bread or three pounds of prime rib or five pounds of potatoes or a business owner will think of a ton of coal versus a certain amount of oil. So the key is that goods are valued in concrete units and this was understood by Menger. If you don't understand that then you're gonna get bogged down in what we call the paradox of value in economics or the water diamond paradox. And that's what caused much grief to the classical school, what stopped them or stunted their theory from developing. So what is the paradox of value, okay? The paradox of value goes as follows. Sometimes called the diamond water paradox. Sometimes it's easier to use bread instead of water. So the question, the paradox goes as follows. Diamonds have a very, very high exchange value which was another term for price that was used by the classical school. But it has very low use value in everyday life, okay? In the sense that diamonds are mere ornamentation or they're displays of wealth so that people can show off how well off they are. So-called conspicuous consumption. If all the diamonds in the world were wiped out not much would change with human race, okay? However, if suddenly water or bread which was the so-called staff of life, okay? And was the main staple back in the, of most people in their diets back in the 18th and 19th centuries, then human beings would die of starvation or die of thirst. So why is it then that the exchange value of diamonds is so much higher than the exchange value or price of bread and water, okay? Well, water has a relatively low exchange value, okay? And so does bread compared to diamonds, okay? If you compare a given weight of diamonds with a given weight of bread, but yet both are indispensable in human life, okay? So how did the classical school solve this paradox? Okay, let me, so this is just an example here. This is a diamond that went for $46 million. Now, which at the time that was sold about 10 years ago was the most expensive gem to be sold at auction. Since it has been passed, there's one that's sold for $70 million or something like that, okay? Well, why, but yet it's not, in terms of use value, from the classical school's perspective, it's not as useful as water, okay? So this really sticks out, okay? So the classical school said, you know what? We're not gonna really solve the paradox. We're gonna do an end run around it, all right? So what they did was, they said, well, you know what? Economics really is not involved and is not interested in talking about use value, okay? Any good that's purchased on the market has a use value and that's what we're really gonna say about it. So they didn't really focus on the demand for goods. What they said was, we're just gonna focus on explaining the prices of goods, the exchange value. That's what economics is all about. And so it's easy enough to explain. Diamonds are more expensive than water or bread because diamonds cost more to produce than water or bread. So notice what's happening. They're slipping into this cost of production theory of value. Where's the consumer in all this? Where's consumer values, okay? Well, that drops out of the picture. The consumer is necessary. Yes, the consumer must value the good in some way, but we're not gonna talk about how the consumer goes about valuing units of different goods because they're not even thinking in units. They're thinking in whole classes. So they're saying diamonds are more expensive as a class and have a higher price on the market than does bread as a class because diamonds cost more to produce than bread does. Period, end of story, okay? So they sort of slipped into this cost of production theory of value. So, and in addition to that, the classical economists believe that the acquisition or that economics is about the acquisition and accumulation of wealth by businesses. So business owners would buy low, okay? So they try to minimize their costs and maximize the prices of the goods that they sold, goods that had high prices compared to costs, and in that way they were able to accumulate wealth. So the whole definition of economics became the explanation of the accumulation of wealth. Adam Smith's The Wealth of Nations. Okay, where's the consumer in all this? Consumer is not interested in accumulating wealth. The consumer is interested in the consumption of goods that satisfies his or her wants. But that dropped out of classical economics. So then Menger comes along, okay? He read all the classical economists. He also read economists that were not classical economists, French economists, German economists, Italian economists, and going all the way back to the 17th century, Spanish economists, scholastic economists who were Catholic economists in Spain, they had all realized this alternative tradition that value was subjective and that the consumer was central to explaining economic activity. However, they did not come up with the principle of marginal utility so they didn't develop a full-blown theory of economics like the classical school did. Though they had the correct value theory. It just wasn't refined enough to allow them to develop it further into a whole system of economics. So what did Menger write? After having absorbed all the different traditions of economics, he wrote in the preface to his great books of principles, I have devoted special attention to the investigation of the causal connections between economic phenomena. He's very interested in the cause of economic phenomena which is ultimately the consumer, as we'll see. He says, causal connections between economic phenomena involving products and the corresponding agents of production, meaning the factors of production, the inputs, not only for the purpose of establishing a price theory based on reality and placing all price phenomena together under one unified point of view. And he goes on to say in the rest of that quote, but in also allowing us to explain all economic phenomena and extending to things like business cycles, though he himself did not do that. So he was interested in causality and reality. He was interested in explaining the prices that you would pay right now if you went to Walmart and you went shopping, okay? How did those prices arise? Who was involved in the determination of those prices? They're certainly not random. They're certainly not arbitrarily set by Walmart. If they overnight made those prices five times as high, many things would change, okay? They could not sell as much with prices five times as high tomorrow as they are today. So we have to explain prices exactly as they are in the real world, not some equilibrium price, and that'll be mentioned later on, but Jeff Herman will talk about that. So what Manger established was what we call causal, realist economics. He was interested in what the causes were in determining prices in the real world, okay? And so he began that tradition. So primarily economic theory is about the investigating the causes of prices in all their forms, okay? Including wages, rents, interest rates, and so on. Now, as Manger was writing his book, but before it was published, he had a notebook that he wrote notes for for whenever he had thoughts that were relevant to what he was writing. And so here's some of the things that he wrote. He says, man himself is the beginning and the end of every economy, okay? So now we're getting to the root of the cause of economic activity. He also said, our science is the theory of a human being's ability to deal with his wants. So the human being and his or her wants are at the center of economic activity. And then the very first line of his book, the very first sentence of his book says, all things are subject to the law of cause and effect. So I'm just trying to show you how important causal realism was to Manger. He also wrote out a little diagram, okay? Sort of a trinity or a triad of causal connections. So in his notebooks, we find the following. He wrote ends, means, and realization. I put the arrows in there. He wrote man, external world, subsistence, and he wrote out wants, good, satisfaction. And what he was doing there was showing how the subjective wants, ends, or the nature of the human being himself. How those things are the ultimate cause of economic phenomena. And those things are all what? Those things are all subjective. They're all intensive magnitudes or feelings that we have, okay? We feel a lack of satisfaction. Mises sometimes call this felt uneasiness. We're uneasy. We're imperfect beings. We're incomplete and we'll never be complete, okay? We're continually striving to improve our lot but we never become perfectly satisfied. So Manger recognized that. So now notice that that feeling of imperfection, of lack, of defect leads the individuals to then look around in their environment and search for means. The means of improving their welfare, of satisfying these wants, okay? And those things are in man's environment. We also know them as goods. Those are the external elements in economic activity, okay? So the wants cause people to look around, acquire, and produce goods, but then the goods themselves, those external things are the causes of a change in our subjective states. So when we consume the goods, it causes the satisfaction of the original wants and hence the arrow that goes back to wants, okay? So all action begins in the human mind, uses elements of the objective world and ends in the human mind, right? Now that was powerful. I mean, that was an example of Manger's creative genius. Come up with that. Let me mention that the exact same number one, exact same statement also appeared in the French economist's book, Frederick Bastia, very important and insightful and influential free market economists who was writing in the mid-19th century. He had a subjective theory of value, okay? But he didn't develop it like Manger did, but it's clear Manger read him because there's a few statements which just takes right from Bastia. Okay, so here it is in a little more vivid form. Guy's hungry, right? And so he looks about his environment and he sees these things that can serve as means, okay? For ham sandwich and so therefore he combines them. And by the way, Manger understood this and actually the French school of economists understood this even before Manger, production is not the creation of anything. The French economists who were Catholic economists didn't believe that human beings could create anything, okay, only providence could create. Human beings could only transform things that providence gave us, okay? So production, J.B. Say in 1802, French economist who was very influential on Manger, pointed out that production is only the transformation of means into ends, the transformation of things in our environment into other things that are more useful for serving our wants, okay? So you get the subjective and objective elements of action in this diagram, okay? So one of the keys when we focused on what Manger saw as the objective elements in human action were goods and he developed the whole theory of the good. He basically said there are several preconditions before something can become a good. You need a human need, okay, or a human want. Secondly, the thing must be capable of being brought into causal connection with the satisfaction of the need. That is it must cause the satisfaction of the need. The ham sandwich must cause the satisfaction of one's hunger, all right? There must be human knowledge of this causal connection. The individual must know that those various inputs, the mustard, the knife, the cheese and ham and so on, that when they're combined and transformed into a ham sandwich that they would satisfy his hunger. And there must be a command of the thing. He must have control of these things that are sufficient to allow him to transform them to satisfy his need, okay? Now Manger made an error here and von Mises later corrected it. Mises pointed out that look, it's not that you have a knowledge, an absolutely correct knowledge of the fact that there's a causal connection between the means that you're using in the end, but you have to at least just believe that it's true, so he said, we'll wipe out two and three, they can be combined and the proper precondition of a good is the belief that a thing has the capacity to cause the satisfaction of the human need. That's all you need. Now Manger actually realizes, a couple of pages later, he says, well, there are imaginary needs, okay? Or rather imaginary goods, goods that don't really satisfy real needs, okay? That really don't bring about the achievement of a satisfaction. So today we might think of things like psychics, I mean, that's what Manger was thinking about, you know, who will claim that they can put people in touch with their dead relatives or the New York Times, for example, that claims that they objectively report the news. So things like that are imaginary goods, okay? And Manger's thought, but we know that, look, they have prices. If they have price like any other good, they're all goods. Okay, and then Manger came up with the notion of economic good, okay? So an economic good was a good for which the wants for that thing exceeded the amount of the good available. So an economic good was a good for which it was an insufficient quantity to satisfy all human needs for that thing, okay? Or all human wants for it. So Manger thereby introduced scarcity. Once you have scarcity in the world, once things are scarce, then you have to choose between which ones that you want to acquire and which ones that you wanna renounce, put aside. And in order to do that, you have to decide which of your ends are the most important. There's not enough goods in the world to satisfy all your ends, okay? Or if you as a human being don't have enough resources to acquire or produce the goods necessary to satisfy all your wants. Well then you have to economize on goods, okay? You can only use them for the most important needs. So Manger replaced the classical economic man, so-called homo-economicists, who just wanted to accumulate wealth with the economizing man, okay? So he talks about the economizing individual continually. And that's the person who will use the things that he acquires through economic activity only for the most important purposes. Just going back for a second. Manger would not say that air was an economic good. In fact, air is not really, doesn't have any value. Air in a normal situation doesn't have any value. The reason is that it's not an economic good. There's more than a sufficient supply in a normal situation to satisfy all our needs. That's certainly not true of air for someone who is going into space, outer space, or someone who is deep sea diving, okay? Sunlight, which you want as one of the means for having a picnic or playing softball or something like that, that's also not a good, okay? Not because it's not scarce, because when you have rain and so on and an overcast sky, you don't get the sunlight, but because you can't control it. So that other precondition isn't met. You don't have the command of the thing sufficient to allow you to use sunlight for your ends. Okay, so let's get to the law of margin utility because that's really the punch line. So the value of a good is, so let me just, before I go into that, what was the question that Manger asked that allowed him to solve the paradox of value because that's what the law of margin utility did. It solved the paradox of value. The question that Manger asked was someone has supply of the same good. Someone has five sacks of wheat. We'll go into this. Someone has five bushels of wheat and has many uses for this wheat, okay? What is this wheat? What's the value of this wheat? Is it the value of all? Is it the value of the highest need that these five sacks of wheat fulfill? Is it the average value of the five different ends that this wheat could serve? Okay, how do we determine the value of it, all right? So let me give you the definition of margin utility and we'll give an example of how Manger answered that question. So the value of a good is determined by its margin utility. Marginal means relevant. Utility means satisfaction, okay? So it's the satisfaction from the least important or lowest ranked ends served by the available supply of the good, okay? That determines the value of all units of the good that you possess. The value from the least valued unit, the unit that's, or better put, the unit that satisfies the least valued want, okay? So what the law of margin utility leads us to understand is that as you increase the supply of a good that an individual possesses, the value of the good falls, okay? The more you have of a good, the lower its value is. And so now let me show you an example. And this is an example very like the one that Manger used. So Robinson Crusoe harvests five sacks of wheat and wants to use them, okay? It's an economic good. They're scarce so he has to economize. Therefore he has to rank the different ends for which he will use the wheat, according to which is most important to him, all right? There's no quantity of utility here. He just ranks the first, second, third, fourth. He uses ordinal numbers and not cardinal numbers, not quantities. So the most important is that the first sack of wheat will allow him to sustain his life over the course of the year, okay? Second sack of wheat he'll also, let's say, transform into bread because that second amount of bread will allow him to be healthy and vital and to provide for other needs. The third sack will be used as seed for the next harvest. He'll plant it so that he can live another year. The fourth will be used, let's say, to allow him to vary his diet, okay? So he'll keep some goats while goats that he's found, he'll domesticate them, he'll feed them, and now he'll be able to have the goat milk and cheese and so on. Finally he wants, you know, a beverage. He wants to be happy, he's alone, lonely on this island, so he'll turn it into a manger said whiskey, I like vodka, so I put vodka there, okay? And then if you have a, now it's scarce so that there are other things that he would like to do with wheat, but he doesn't have enough. So he's lonely and he would like a parrot, but he has to give up that end, okay? Because there are only five sacks of wheat and there are five more important wants than feeding his parrot and keeping the parrot company. Okay, so the question is then, what is the value to him of this wheat? Well, it depends on its margin of utility. What is its margin of utility? Well, let's say that after he's harvested this wheat, you know, he's stored it and let's say a vermin break into the barn where it's stored or into the shelter where it's stored and they consume the second sack of wheat, okay? Does he ask the question? Does Robb's and Crusoe go without that second amount of bread that he could produce? No, no matter which sack of wheat is consumed by the vermin is destroyed, he will give up what? His lowest ranked end because that gives him the least satisfaction. All right, so every sack of wheat is equal to the satisfaction from drinking vodka, okay? No matter which one he loses, that's the satisfaction that he gives up. That's the satisfaction that an economizing man, as he would say, would forego. So from anger then, margin of utility, okay, or the satisfaction of the lowest valued want that the supply can fulfill or serve, that is what he gives up and that is the margin of utility. If he finds or harvests a few more sacks of wheat, then what happens to the, oh, let me just stop there for a second. So now what happens to the value of wheat after one sack is destroyed? Is it more or less important to him, each of the remaining units? The value has gone up because notice now if he loses one of those four, what happens? He has to give up a greater satisfaction. He has to give up the milk, the cheese, the goat meat, and so on, all right? So the lower the supply of units of good, of the good, the higher its margin of utility. The more important it is to him, okay? So to give a more modern example, let's say, there's a family that has three automobiles. Let's say that the husband's the primary breadwinner, the wife has a part-time job and so she uses a car. And let's assume they're all sort of identical like the wheat. And then Junior just got his license and so Junior can, the third car goes to Junior. And let's say the old man cracks up his car. Is that, does he stop going to work? Or does Junior stop driving around? Junior starts to stop driving around because that's the lowest valued use of the car, okay? So now the margin of utility of cars has gone up. Now it's the income from the second job that would have to be given up. Let me give you a little test on this, a little quick quiz. Okay, let's say there's a farmer who has three horses and two cattle. Now the horses and cattle are different goods. They serve different wants. They can't serve the same wants. And let's say he values the ends that they allow him to achieve in the following way. The first horse is used for plowing, for wheat. The second horse increases the productivity. If you hit your second horse to the plow, it allows you to produce more wheat. The first cow allows you to produce milk, okay? The second cow allows you to produce beef. And then the third horse is for recreational riding. Which of the two animals, horses or cows, are more important? Yeah, because you don't look at the top. You don't look at the fact that it doesn't matter that the horse serves the most important want, okay? It matters that the satisfaction, let's say there's, Manger would say, let's say there's a barn in which all these animals are being housed and catches off fire and can only save for the animals. Which animal do you leave in the barn? The horse, because it serves, because the larger utility of horses is lower than the larger utility of beef or of the cow, okay? So now what happens? Now that you only have two cows and two horses, what happens to the value of the animals? Before the horse was less valuable than the cow. Now what's true? The cow is less valuable than the horse, okay? Because with the cow, beef is less valuable than the second horse used for plowing, the extra amount of wheat that you get from plowing. Let me just finish this up. Manger also wanted to talk about not just consumer goods, but also goods that go into producing consumer goods, which are the higher order goods or capital goods. So he talked about orders of goods. And so the higher order goods are goods that are further away from consumers. And so what he did was to show that the iron ore, for example, plus labor causes the production of steel and steel plus labor causes the production of various shapes of steel and so on. So as you get closer to the consumer, you get to lower and lower order goods, okay? And those goods then, eventually, when they become consumer goods, that's the final good or the final order good or the lowest order good that satisfies consumer demand, okay? So the value of the means, the value of the higher order goods, which are means for producing the consumer goods, which is again, only a means for satisfying your want, is determined by the value of the ends, okay? So value is imputed backwards from consumer value judgment. So if you buy a new car, it's not the car itself that's valuable, it's the satisfaction you get from driving around in that car, okay? That satisfaction is valuable. So because the car causes that satisfaction, the car itself is valuable. And the parts that were assembled into that car are valuable only because they cause the production of that car, which in turn cause, generates the satisfaction. And that goes all the way back, okay? And so the value is imputed backwards. So if you look at this diagram, you'll see the difference between the classical school and menger. So the classical school said and menger, they both agreed that production goes from the higher order to the lower order, goes from farm tools and wheat, then through to flour and then to bread, the baking of the bread and so on, okay? In that stage and then finally the bread is shipped to retail stores and sold to consumers and the wants are satisfied. But the classical school said, the bread is valuable because the farm tools are valuable and the wheat is valuable and the flour is valuable. We have to pay prices for those things. The cost of these things determine the value of wheat of bread, menger said that's not the case. It's the exact opposite. Value goes the opposite of production. Value is imputed backwards, okay? The only reason why farm tools have any value, whatever, is because they cooperate in the production of the bread, which is what satisfies human wants and therefore has value, all right? So just to take an example that menger gives an example, the only reason why tobacco has a price is not because it's very costly to produce tobacco or cigarettes and cigars and so on, it's because people value them. So let's assume that suddenly people really took warnings about smoking seriously. Everybody did and the demand for all tobacco products dropped to zero. What would happen to the demand for tobacco land? What would happen to the price of tobacco land? Which is very, the price is very, very high in the United States by the way. Assuming that it could not be used for any alternative uses. Supply of tobacco would, or the price of tobacco land would fall to zero. Same thing is true of diamonds. I'll finish on this note. There was a great movie in the 1980s. Harrison Ford started, it was called Witness. If you're interested in Amish life, it gives a very good depiction of how the Amish live. Now the Amish are people that are in South Eastern Pennsylvania and in a heart of Ohio and elsewhere. And they're also known as the plain people. So any sort of ornamentation on their clothing is considered sinful, so they don't even use buttons, let alone any jewelry. So let's say everyone adopted the values of the Amish. What would happen to the value of diamond mines? What happens to the value of diamonds? They're four to zero. And then the wages of dealers and specialists in the same gems and diamonds. Diamonds, that would all fall to zero. And then so again, with the value of the diamond mines. So this was Manga's great revolution. I'll stop here. Thank you.