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Source link: http://archive.mises.org/10921/how-the-free-market-works/

How the Free Market Works

October 27, 2009 by

In Rothbard’s vast compendium of economic wisdom, we read much that has not yet been properly popularized. Rothbard’s production theory, for example, is quite different from the standard account. FULL ARTICLE by Daneil Krawisz

{ 6 comments }

Mr Eko October 27, 2009 at 2:38 pm

Good, lucid explanation. Maybe I’ll show it to some of my progressive/liberal friends to help them understand? Usually this is the kind of thing that makes their eyes gloss over, then finally the standard retorts, “but the worker has to make a fair wage”, “it’s not a very fair system”,”it facilitates abuse of power”, etc.

Mike October 27, 2009 at 2:46 pm

Life is tough.

Patrick Barron October 27, 2009 at 6:18 pm

Bravo! This is a very logical explanation of the irrefutable steps required by any society, whether it calls itself capitalist or socialist, to create prosperity for all.

Stephen Grossman October 27, 2009 at 8:45 pm

Working my way thru _Human Action_, I see that economics is a science of the immediately known absolutes of production for a market, not an arbitrary, pseudo-mathematical description of a random flow of experience. I also have Mankiw’s _Macroeconomics_ in which capitalism sometimes is productive and sometimes ,curiously, is not. Mises has two (2) chapters on time. Mankiw barely mentions it. Mises discusses, at length, market vs govt money and banking. Mankiw doesn’t seem to recognize the distinction.

Ribald October 27, 2009 at 10:02 pm

Overall, I thought the article was a good retelling of the roles of various market participants. I thought, however, that this statement was simply thrown out there without any qualification:

“Though we might be envious of the wealthy proprietors, no one can better allocate a factor of production than its rightful owner.”

That should be “…no one can better allocate a factor of production *according to the knowledge of its rightful owner* than its rightful owner.” Otherwise, we’d be making the silly assumption that the rightful owner had greater knowledge of a given factor of production than anyone else. He has no special insight into the best use of his resources just because he owns them. Of course, the statement is pretty tautological when the qualifier is inserted, so I’d leave it out altogether.

Another minor issue would be the clarification that the proprietor’s disuse of his factors of production is not a bad thing when he is saving them for later use. Interestingly, this implies (with the above paragraph) that depriving him of rent in an attempt to encourage him to save those factors of production can improve the proprietor’s income, in the special case that the one depriving him of rent is more knowledgeable and has the proprietors interests in mind. Of course, the exception is a rare one, so this is a minor issue.

Anarkap October 28, 2009 at 8:38 am

Patrick Barron,

“Bravo! This is a very logical explanation of the irrefutable steps required by any society, whether it calls itself capitalist or socialist, to create prosperity for all.”

If a society follows those steps, it cannot claim to be socialist.
And prosperity is never created for all, prosperity is always created for self. It is not society nor the system which creates prosperity, it is the individuals who create prosperity for themselves.

Your writings betray your socialist statist tendencies.

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