What typifies the modern economy, writes Mises, is complex production that is a “continuous, never-ending pursuit split up into an immense variety of partial processes.” This complex structure of production generates a seemingly endless amount and variety of goods which not only maintains our life, but also makes life more pleasant. It would appear that there is a mysterious navigator who continuously modifies the complex network of the production structure in order to cater for individuals’ changing requirements. It seems that the production structure has, as it were, a self-regenerating mechanism, a kind of life of its own. [Full article]
Source link: http://archive.mises.org/2403/the-subsistence-fund/
The Subsistence Fund
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Very close, but you still don’t understand the systematic faults of capitalism.
An interesting article. Speaking as somebody with no background in economics, I found it an illuminating account of the role of savings in contributing to economic production and development.
“Capitalism has never been established by means of the free market. It has always been established by a revolution from above, imposed by a ruling class with its origins in the Old Regime–or as Christopher Hill or Immanuel Wallerstein might put it, by a pre-capitalist ruling class that had been transformed in a capitalist manner. In England, it was the landed aristocracy; in France, Napoleon III’s bureaucracy; in Germany, the Junkers; in Japan, the Meiji. In America, the closest approach to a “natural” bourgeois evolution, industrialization was carried out by a mercantilist aristocracy of Federalist shipping magnates and landlords.150″
(From the link posted above)
This person confuses “capitalism” with State action. They are not the same and thus, his argument begs the question.
“The technical prerequisites of the industrial revolution had been anticipated by skilled craftsmen in the urban communes, scholars in the universities, and researchers in the monasteries;135 but the atmosphere of barbarism following the triumph of the centralized state set technical progress back by centuries. The nineteenth century was, in a sense, a technical and industrial “renaissance,” built atop the achievements of the High Middle Ages after a prolonged hiatus; but because of the intervening centuries of warfare on society, industrial technology was introduced into a society based on brutal exploitation and privilege, instead of flowering in a society where it might have benefited all.”
This is ridiculous. This is more akin to romantic notions than serious economic analysis. Where does he get the idea tht industrial technology was imposed from above? What are we to think from this assumption, that State officials and landlords were technological geniuses?
First, the author is an ignoramus on how technological advancement and invention are achieved. Second, he has no clue about the concept of labor division: that of giving specialized tasks to specialists, and the spread of tasks.
The author also assumes that, somehow, Renaissance city-states were these peaceful, highly democratic societies that were brought down by gunpowder kings and despots, again romantically forgetting that many city-states of that era were in constant warfare amongst themselves, let alone with gun wielding states.
“Immanuel Wallerstein argued that the likely outcome [of a substitution of the feudal systems by a more libertarian, less exploitative one] would have been ‘a system of relatively equal small-scale producers, further flattening out the aristocracies and decentralizing the political structures.’131″
Small-scale producers… What the hell is a “small scale producer”? How SMALL a scale are we talking about? Two people? Ten? Fifty? And compared to which standard? How does one know a “small scale producer” is, in fact, small scale? The author fails to mention this, once again demonstrating his lack of understanding of basic economics.
There are other gems. I invite all of you to read the link and find the falacies.
Regards,
Francisco Torres
Monterrey, Mexico.
I would read the link that mutualistfan posted, but judging from Torres’ criticism of a little bit of the non-sense there, I have to make the ex ante judgement that the marginal utility of reading any more of that rubbish is nill, while the marginal cost is other more valuable things I could be doing.
Sincerely,
David Heinrich
Mutalistfan:
The link in question is a joke, correct?
The author cites _Human Action_ and _Man, Economy & State in his Bibliography.
Do you think he actually read it?
Hilarity!
Frank’s assertion in the article, that his assumption that the apples can be stored for forty days is unrealistic, is, I am afraid incorrect.
Certain varieties of apples, especially the wild ones our John would be most likely to encounter, can be stored buried in a suitable pile of sand for upwards of two months, let alone forty days.
Primitive technology in action helping increase the pool of funding Frank
As I e-mailed the author, this is one of the greatest articles to ever appear on Mises.org.
The Subsistence Fund By Frank Shostak is a brilliant piece of work. The only thing missing which might have contributed to the article is an explanation that government’s ‘thin air’ money circulates only by force of law.
Were the market free to choose to not accept government’s ‘bad money,’ it would not circulate much more than is required to meet tax payment obligations.
An excellent article — thank you Mr. Shostak.
V Harris
Thanks for a very interesting and enlightening article. It explains a phenomenon that I have been observing for quite some time – farming has become unsustainable in most parts of the world. Even in India the expenses for farming grow bigger than earnings from crops. This has led to increase of suicides by indebted farmers. In developed world, similar phenomenon is going on in many maufacturing branches. Production is not sufficiently profitable. Financial speculation is the only profitable investment. The article reveals how the basis of economic activity is being eroded by the fiat money. Moreover, the lack of “subsistence fund” – that is, using asset-based money for consuming – will strangle the economic prosperity in the future. John is going to be really thin before he has paid back all that he has borrowed, and he’ll be too stretched to invest in improving his ability to produce.
I wonder what we are going to eat when farmers can’t afford to farm anymore? Paper money is not very nourishing.
‘Should a zero interest rate be imposed , this will abort all savings and lead to the destruction of the production structure’ – maybe I miss the point but this is patently incorrect? Many banks offer zero interest rate accounts, dsome countries have virtually zero interest rates but people still save.
You may have a positive time preference but wish to restrain from present consumption for any number of reasons, even earning as most people unwittingly do negative real returns.
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