Any discussion of science — including the social sciences — must begin with basic premises or principles. Principles consist of assumptions that act as established truths at the beginning of any explanation or argument.
A clear understanding of the science of economics requires a few basic principles. I will begin my discussion with the following three: value, individualism, and action.
Every school of economics excepts the principal of the existence of value. To understand production, consumption, and savings, one must understand that these things have value. The source and measure of value I will discuss in more detail under the topic of value theory.
One principle frequently overlooked in discussions of markets and economics consists of the discrete nature of humans. Humans always exist and act as separate individuals. This principle plays an essential role in the building of sound economic theory.
Ludwig von Mises gets credit for the development of what’s commonly referred to as the action axiom. The action axiom provides an a priori principle that acts as a foundation for the discussion of economic activity. The axiom states in its simplest form that humans act with purpose.