Production

Although the primary purpose of an economic structure consists of satisfying the preferences of consumers, production must always precede consumption. Even in the most basic economic structure of a hunters and gatherers, they must first pick the berry or kill the deer before they can eat. In more advanced societies methods of production become far … Continue reading Production

Government

Because government has a monopoly on the use of force, it represents the primary source of market intervention. Elected officials do not have the capability to decide on the most efficient allocation of economic resources. Even with the best of luck governments can never allocate resources is effectively as the voluntary actors in a free … Continue reading Government

Money

A person cannot overstate the role of money in free markets. I recall an economist stating that you cannot understand economics until you understand money. I believe that this statement holds a great deal of truth. Understanding money as a lot of aspects: who creates money, how does money get created, what role does money … Continue reading Money

Savings

Savings result from the passive activity of delayed consumption. That delay might be brief, in which case savings becomes relatively unimportant. More extended delays and consumption allow for you important developments in an economic system. Savings allow our friends the hunters and gatherers to survive harsh winters. More extended savings allow for what we refer … Continue reading Savings

Exchange

The process of exchange allows for the optimization of the effectiveness and efficiency of an economic system. Exchange provides the opportunity for the division of labor and comparative advantage. Division of labor allows for production processes to be distributed most effectively. Comparative advantage creates employment opportunities for all people wanting work.

Consumption

All economic activity ultimately leads to consumption. The actors in an economic system have no other purpose than to create goods used for consumption. Although it seems easy to understand, patterns of consumption provide us with the vital information needed for the development of an advanced economy. A lot more can be said about this … Continue reading Consumption

Intervention

I have defined free markets, the primary subject of this blog, as markets free of intervention. Thus, I plan to post permanent articles about the role of intervention in disrupting otherwise free markets. Since most intervention comes through government force, I find it impossible to avoid the topic of government intervention. As I may have stated … Continue reading Intervention

Principles

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 … Continue reading Principles

Theories

People frequently miss use the word “theory.” They often use the word theory when the more precisely mean hypothesis. I will describe these two terms in layman’s words to make a distinction: THEORY A theory explains why specific behavior occurred in the past and provides a basis for explaining expected behavior in the future. Sound … Continue reading Theories

Values

A person’s philosophical values must be congruent with the principles and theories that they advocate. This statement holds particularly true when applied to social sciences like economics. The connection between philosophical values and the economic meaning of the word value plays an essential role in understanding economic principles and theories. What a person subjectively values … Continue reading Values