 Earlier, you were talking about making decisions on the margin, and margin came up again when you talked about the marginal revolution of the 1800s, the late 1870s. You want to talk a little bit about that in terms of, because that's very important in terms of Austrian economics, that it was founded by Karl Manger. He was the first Austrian economist, and one of the things he contributed was this thing called the marginal utility theory of value. This was, they call it a marginal revolution because it was a real revolution in the way economists think that even a lot of the great economists from the early 1800s and late 1700s, like Adam Smith and David Ricardo, that as brilliant as they were, that they were fundamentally confused about something so important, something at the very rock bottom of building up an economic theory, just the theory of value. One of the things that Karl Manger solved was this thing called the diamond water paradox. People said that, well, it doesn't make sense to say that an item's usefulness determines its value because wouldn't we all agree that water is more useful to us as humans ultimately than diamonds, and yet diamonds are more expensive than water. It must not be utility that really fundamentally explains value. Some economists came up with an idea that, oh, it must be the work you put into producing the thing. Maybe it takes more to dig diamonds out of the ground, takes more work to dig them out of the ground than it does to take water up out of it, just scoop water up out of the ground, so that explains the value. Do you want to explain how Manger solved the diamond water paradox and showed that what's called the classical economists who came before him were fundamentally confused about even framing the question? Right. I like the way you ended that there. Adam Smith and David Ricardo, they weren't stupid. They clearly, it's not like they would have been shocked as, oh, my gosh, I can't believe that diamonds are more expensive than water. They knew that it was just a matter of their framework was not suitable for explaining that, and so they had to come up with ad hoc exceptions and say, well, in general, you will see prices tend to equal how much labor went into something or the long run average costs. That will determine the price in the long run, but in the short term, there could be issues because of scarcity or something like that. They could patch up their framework, but it was just like you say, they just got off on the wrong foot. They didn't know how to properly explain it, and as you said, everyone had this sense that, well, surely, since humans are the ones ultimately driving the economy, surely market prices must have some relationship to why something is useful to human beings, and yet, like you say, that was tricky, though, to square with the fact that, well, how come you have these weird situations where something that's not all that useful in the grand scheme like diamonds has a lower value or a higher value than something like water, which is essential for life? So the way, and the other two people of the marginal revolution were Leon Walross and William Stanley Jeven, so the three of them all in the same three-year period in the early 1870s independently published works that all approached this issue from the same way, and that's why they're all jointly credited with being the pioneers of the so-called marginal revolution. So the solution was to just say, it was basically what we were doing there a few minutes ago with the example of the guy putting cans of soda into his basket as simple as that is, is to say that, no, when you're valuing a good, what's important is the marginal utility, not the utility of the entire supply, and so what you want to say is, if I have a stockpile of goods and I were to take away that last unit, now, how do I rearrange the existing, what I still have left to satisfy the needs and desires that I have, and so clearly I must have given up some particular goal because now I have less of the good, and so the importance to me of that last marginal goal is the marginal utility of that stockpile. If you have water and there's a whole number of goals that you use the water for and those are ranked, right, in the preference scale. Right. So let's say the unit you're taking is a gallon of water, well, that first gallon you're probably going to use to drink to make sure you don't die of thirst, and the second gallon, maybe you drink it some more or you give it to your dog or something and then the third, maybe you use the third to the 15th gallons to take a shower or something, and then maybe you wash your dishes and so forth, oh, I might wash the car, I might water my lawn, and so. All the way down to maybe you might want to do water slides. Right, exactly, but at some point, you know, the water is so abundant that on the margin, you know, that millionth gallon of water is basically not worth much, you know, somebody just dumped it on the ground and the dispute wouldn't really care one way or the other, and that's why, you know, restaurants don't even mind giving you water for free because it's on the margin, it's not that important to us, even though those earlier units of water are essential for life. As opposed to a diamond, and say that the diamond, the goal you have for the diamond is to make a ring for your mother and to make her smile, and so it's kind of like, well, what's more important, slip and slide or making your mother smile, and so it's not, the incorrect way of thinking of it is going to the top of the preference scale and asking, you know, what's more important, making your mother smile or surviving, and so that's like the non-marginal way of thinking about it, right? Right, exactly, and again, when people hear this, they might say, well, who the heck didn't know that, but they didn't, I mean, they knew it in a sense, but that wasn't the way that their formal structure worked, the way that economists had written their treatises and so forth until, it was not until the early 1870s that somebody systematically got off on the right footing and said, this is the way we explain subjective value, and then how do you go from subjective value to the emergence of objective market prices? I remember meeting a UC Berkeley student when I was living in Berkeley, and he raised the diamond water paradox as a real problem, even though he was studying economics at Berkeley, he was raising it as an actual problem, like isn't it weird kind of thing? Well, that, yeah, and it's, you know, you don't want to sound too elitist or something, but it's funny, I think, in a certain sense, like people who just even take this course or read the lessons of being an economist, in a sense, would be better, in my opinion, economists than a lot of people getting PhDs in economics from top ranked schools because they spend a lot of their time, you know, using mathematical techniques to find the equilibria states and these really complicated models that start off with all kinds of assumptions about, well, assume the agent has preferences of this form and they'll give a mathematical function and assume the production function such and such and it'll be a little simulation inside of a hypothetical mathematical world that really does not have much relationship to the real economy, and these people will be very good at cranking out the solutions to those models, but yet you ask them something like, you know, how do you explain value and they'll be tripping over philosophical problems that were actually solved back in 1871, and it's because they have never studied that stuff because there's just not time, you're going to spend all your time solving mathematical, you know, using Kuhn Tucker solutions, which is the kind of stuff they teach in grad school now in a typical economics program, there's not time to sit there and walk through the ordinal nature of preferences or something, even though that is in their books that they learn, there's like a little, you know, a good textbook will have a little digression and say, we're using card and utility functions, but really that doesn't mean anything but I think probably 90% of people going through that program and getting a PhD don't remember that part that they learned for one hour back in their first year as a grad student. So it's like a simple, humble amount of truth is better than an elaborate, you know, challenging, you know, high brain power set of falsity. Yeah, I think so, and it's also too, I mean, you, I mean, this is partly why you have all these, it used to be the case, and you read some of Mises' talk about the historical role of economists and how they were always the ones nipping at the heels of the rulers and the rulers hated economists. The wet blankets. Yeah. And now like that almost doesn't, that sounds quaint to me because now it's the economists who are front line give the spotlight on me and I will explain why Obamacare is going to be great for everybody, you know, and it's, and they had, they can come up with a mathematical model where that's true. And so, you know, technically we're saying, well, your model's making a lot of bad assumptions, but they wouldn't even be in that position. In my opinion, if they had a more solid education in the basics of economics. And isn't, isn't Paul Krugman sort of the, just the anti-wet blanket that not only is he not saying, you know, you can't, you can't do these things. You can't, there's certain economic laws that you can't violate no matter what grand plans you have that he's, he's saying the opposite that, oh, no, you're thinking too prosaically that you're thinking like a non-economist to think that you can't spend your way out of a depression. You know, that's, that's normal people thinking, but we economists know that, oh, there's all these grand things that you can, that you can do that you wouldn't even thought that you could do. Yeah, exactly. I mean, he explicitly says that we're in an Alice in Wonderland world right now because we're at the zero lower bound and that all these things like all of a sudden thrift is a bad thing. And, you know, he, his recommendation for central banks around the world is to credibly promise to be irresponsible. That's literally exact quote that that's what he's saying that, you know, they need to get people to realize they're going to inflate more than they really want to in the future and that will get people to spend more now and things like that. So, so yes, that he, and he hates the metaphor of saying, well, because households in this recession are tightening their belts, the government should too, including the things that no, that's just, you know, ignorant thinking of people who haven't been trained in proper economics to know that no, when everyone else is saving, that's when the government needs to run massive deficits. So, so exactly. He's he's the opposite of what Mises is saying the historical role of the economist was. So your next chapter is Robinson Crusoe economics. And so Robinson Crusoe is a fictional character, someone who was shipwrecked on an island and and for a long period of time was completely alone on this island. Why is considering such a person like that helpful to starting out your process of economic reasoning? Well, what Mises does in human action is he the first part of the book is devoted to just action per se. So what can we say about action in any setting? You know, the nature of purposeful behavior itself and there's certain things that flow from it. And that's a lot of what we covered. In lessons for the economist in the earlier chapters. And and so and so here, you know, a lot of people historically have used Robinson Crusoe and Mises doesn't go into it himself, but Bumbaver does it. And other people do it just to show that, look, there's a lot you can do in terms of the tradeoffs involved in capital accumulation. So in that book, these are things like, OK, well, there's your hungry and you see coconuts and you know, with your bare hands, your raw labor power, you can collect so many coconuts per hour. But then you realize that after a few days, you know, this I'm living literally living hand to mouth. This isn't good in the long run. What can I do to improve my situation? So they say, oh, well, what if I went and got some sticks and some vines and assembled a long pole that I could use to knock coconuts down? And so then augmented with what's now a capital good that I've created out of the raw gifts from nature, I can now augment my labor power. Now, my physical productivity per hour, how many coconuts I can get per hour of my time is much higher if I'm using this capital good. And so even you start going down that train of thought and you just start understanding the tradeoffs involved and things like the difference between a consumer good and a capital good and saving an investment and so on. You just get those raw concepts under your belt and there's a lot you can do even just with one individual who's in a world of scarcity and has preferences and reason and chooses means to achieve ends. There's a lot of economic concepts that you can talk about even in that setting. And also I've just gotten feedback from people saying that younger people, for whatever reason, they really love that chapter that, you know, one guy says just because, you know, kids are kind of self centered naturally. And so they're just reading the story about, yeah, I'm alone on an island and I got I got fish and I got coconuts and I got predators and I got to do something that for whatever reason and just like why was Robinson Crusoe itself a fun book and why it was so popular or the modern version people have seen that Tom Hanks movie cast away. And that was a phenomenal part of the movie was fascinating to see some guy by himself on an island when you describe it, you might sound boring, but no, it was fascinating. And that's so that's what I tried. That's the the pedagogical reason for casting this discussion in terms of Robinson Crusoe is that it's it's, you know, more entertaining. It's readable. If you're following some fictitious guy around and trying to see what's he going to do. So in the classic book, Robinson Crusoe by Daniel Defoe, later on, Robinson Crusoe does get a companion on the island, a native named Friday. And and so that is a big step in a lot of economists in terms of when they're explaining the basics of economic theory is that they then introduce the Friday character, and then you get you get the possibility of interpersonal action and you get the possibility of of exchange and other things like violence too. But for these things that you were talking about, like just just the basic principles of production and capital accumulation and savings that when you're introducing that Friday would kind of just be a distraction at that point with me. Right. And it's and that's the thing too that some critics deride so called Robinson Crusoe economics. And that's not the real you know, you economists are so, you know, anti social and you think everything's individualistic, but but you're right. The point is, it's just gonna yeah, ultimately, we as economists need to be able to explain a modern market economy with billions of people and you know, millions and millions of different types of consumer goods and so forth, different currencies and everything boom bus cycles, but you can't just start on that in day one, you got to build it up from a foundation. And so yeah, it to the extent that you can explain certain economic concepts, like the notion of the trade off between present consumption versus future consumption and how do you use physical materials to construct capital goods in order to, to employ that trade off or implement it. Those sorts of things, if you can do it with just one person, then to start there, because then yeah, it just makes it a lot more complicated when you introduce another person.