CONTENTS
INTRODUCTION TO THE SECOND EDITION OF MAN, ECONOMY,
AND STATE WITH POWER AND MARKET
by Joseph T. Salerno . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xix
PREFACE TO REVISED EDITION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . li
CHAPTER 1—FUNDAMENTALS OF HUMAN ACTION . . . . . . . . . . . . 1
1. The Concept of Action. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2. First Implications of the Concept . . . . . . . . . . . . . . . . . . . . 2
3. Further Implications: The Means . . . . . . . . . . . . . . . . . . . . 8
4. Further Implications: Time . . . . . . . . . . . . . . . . . . . . . . . . 13
5. Further Implications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
A. Ends and Values . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
B. The Law of Marginal Utility. . . . . . . . . . . . . . . . . . . . . 21
6. Factors of Production: The Law of Returns . . . . . . . . . . . 33
7. Factors of Production: Convertibility
and Valuation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
8. Factors of Production: Labor versus Leisure . . . . . . . . . . 42
9. The Formation of Capital . . . . . . . . . . . . . . . . . . . . . . . . . 47
10. Action as an Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Appendix A: Praxeology and Economics . . . . . . . . . . . . . . . . . 72
Appendix B: On Means and Ends . . . . . . . . . . . . . . . . . . . . . . . 76
CHAPTER 2—DIRECT EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . 79
1. Types of Interpersonal Action: Violence . . . . . . . . . . . . . . 79
2. Types of Interpersonal Action: Voluntary Exchange
and the Contractual Society . . . . . . . . . . . . . . . . . . . . . . . 84
viii Man, Economy, and State with Power and Market
3. Exchange and the Division of Labor. . . . . . . . . . . . . . . . . 95
4. Terms of Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
5. Determination of Price: Equilibrium Price. . . . . . . . . . . 106
6. Elasticity of Demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126
7. Speculation and Supply and Demand Schedules . . . . . . 130
8. Stock and the Total Demand to Hold . . . . . . . . . . . . . . . 137
9. Continuing Markets and Changes in Price . . . . . . . . . . . 142
10. Specialization and Production of Stock. . . . . . . . . . . . . . 153
11. Types of Exchangeable Goods. . . . . . . . . . . . . . . . . . . . . 162
12. Property: The Appropriation of Raw Land . . . . . . . . . . 169
13. Enforcement Against Invasion of Property. . . . . . . . . . . 176
CHAPTER 3—THE PATTERN OF INDIRECT EXCHANGE . . . . . . . 187
1. The Limitations of Direct Exchange . . . . . . . . . . . . . . . 187
2. The Emergence of Indirect Exchange . . . . . . . . . . . . . . 189
3. Some Implications of the Emergence of Money . . . . . . 193
4. The Monetary Unit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196
5. Money Income and Money Expenditures . . . . . . . . . . . . 198
6. Producers’ Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . 206
7. Maximizing Income and Allocating Resources . . . . . . . . 213
CHAPTER 4—PRICES AND CONSUMPTION. . . . . . . . . . . . . . . . . . 233
1. Money Prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 233
2. Determination of Money Prices . . . . . . . . . . . . . . . . . . . 238
3. Determination of Supply and Demand Schedules . . . . . 249
4. The Gains of Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . 257
5. The Marginal Utility of Money . . . . . . . . . . . . . . . . . . . 261
A. The Consumer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 261
B. The Money Regression. . . . . . . . . . . . . . . . . . . . . . . . 268
C. Utility and Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 276
D. Planning and the Range of Choice . . . . . . . . . . . . . . 279
6. Interrelations among the Prices of
Consumers’ Goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280
7. The Prices of Durable Goods and Their Services . . . . . 288
8. Welfare Comparisons and the Ultimate
Satisfactions of the Consumer. . . . . . . . . . . . . . . . . . . . . 298
Contents ix
9. Some Fallacies Relating to Utility . . . . . . . . . . . . . . . . . . 302
Appendix A: The Diminishing Marginal Utility of Money. 311
Appendix B: On Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 316
CHAPTER 5—PRODUCTION: THE STRUCTURE. . . . . . . . . . . . . . 319
1. Some Fundamental Principles of Action. . . . . . . . . . . . . 319
2. The Evenly Rotating Economy. . . . . . . . . . . . . . . . . . . . 320
3. The Structure of Production:
A World of Specific Factors . . . . . . . . . . . . . . . . . . . . . . . 329
4. Joint Ownership of the Product by the
Owners of the Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . 333
5. Cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340
6. Ownership of the Product by Capitalists:
Amalgamated Stages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 345
7. Present and Future Goods: The Pure Rate of Interest . 348
8. Money Costs, Prices, and Alfred Marshall . . . . . . . . . . . 353
9. Pricing and the Theory of Bargaining . . . . . . . . . . . . . . 362
CHAPTER 6—PRODUCTION: THE RATE OF INTEREST
AND ITS DETERMINATION . . . . . . . . . . . . . . . . . . . 367
1. Many Stages: The Pure Rate of Interest . . . . . . . . . . . . . 367
2. The Determination of the Pure Rate of Interest:
The Time Market. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 375
3. Time Preference and Individual Value Scales . . . . . . . . . 379
4. The Time Market and the Production Structure . . . . . . 390
5. Time Preference, Capitalists, and Individual
Money Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 410
6. The Post-Income Demanders . . . . . . . . . . . . . . . . . . . . . 416
7. The Myth of the Importance of the Producers’
Loan Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 420
8. The Joint-Stock Company. . . . . . . . . . . . . . . . . . . . . . . . 426
9. Joint-Stock Companies and the Producers’
Loan Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 435
10. Forces Affecting Time Preferences . . . . . . . . . . . . . . . . . 443
11. The Time Structure of Interest Rates. . . . . . . . . . . . . . . 445
Appendix: Schumpeter and the Zero Rate of Interest . . . . . 450
x Man, Economy, and State with Power and Market
CHAPTER 7—PRODUCTION: GENERAL PRICING
OF THE FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . 453
1. Imputation of the Discounted Marginal
Value Product . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 453
2. Determination of the Discounted Marginal
Value Product. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465
A. Discounting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 465
B. The Marginal Physical Product. . . . . . . . . . . . . . . . . 466
(1) The Law of Returns . . . . . . . . . . . . . . . . . . . . . . 468
(2) Marginal Physical Product and Average
Physical Product . . . . . . . . . . . . . . . . . . . . . . . . . 468
C. Marginal Value Product . . . . . . . . . . . . . . . . . . . . . . 475
3. The Source of Factor Incomes . . . . . . . . . . . . . . . . . . . . 478
4. Land and Capital Goods . . . . . . . . . . . . . . . . . . . . . . . . . 479
5. Capitalization and Rent . . . . . . . . . . . . . . . . . . . . . . . . . . 488
6. The Depletion of Natural Resources . . . . . . . . . . . . . . . 496
Appendix A: Marginal Physical and Marginal Value Product. 500
Appendix B: Professor Rolph and the Discounted
Marginal Productivity Theory. . . . . . . . . . . . . . . . . . . . . 504
CHAPTER 8—PRODUCTION: ENTREPRENEURSHIP
AND CHANGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 509
1. Entrepreneurial Profit and Loss . . . . . . . . . . . . . . . . . . . 509
2. The Effect of Net Investment . . . . . . . . . . . . . . . . . . . . . 517
3. Capital Values and Aggregate Profits in a
Changing Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 527
4. Capital Accumulation and the Length of the
Structure of Production. . . . . . . . . . . . . . . . . . . . . . . . . . 537
5. The Adoption of a New Technique. . . . . . . . . . . . . . . . . 544
The Entrepreneur and Innovation . . . . . . . . . . . . . . . . . 546
6. The Beneficiaries of Saving-Investment . . . . . . . . . . . . . 547
7. The Progressing Economy and the Pure
Rate of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549
8. The Entrepreneurial Component in the
Market Interest Rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . 550
9. Risk, Uncertainty, and Insurance. . . . . . . . . . . . . . . . . . . 552
Contents xi
CHAPTER 9—PRODUCTION: PARTICULAR FACTOR
PRICES AND PRODUCTIVE INCOMES . . . . . . . . . . . 557
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557
2. Land, Labor, and Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 557
A. Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 557
B. The Nature of Labor . . . . . . . . . . . . . . . . . . . . . . . . . 564
C. Supply of Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 566
D. Supply of Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 572
E. Productivity and Marginal Productivity . . . . . . . . . . 578
F. A Note on Overt and Total Wage Rates . . . . . . . . . . 580
G. The “Problem” of Unemployment . . . . . . . . . . . . . . 581
3. Entrepreneurship and Income . . . . . . . . . . . . . . . . . . . . . 588
A. Costs to the Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588
B. Business Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 601
C. Personal Consumer Service . . . . . . . . . . . . . . . . . . . . 605
D. Market Calculation and Implicit Earnings . . . . . . . . 606
E. Vertical Integration and the Size of the Firm . . . . . . 609
4. The Economics of Location and Spatial Relations. . . . . 617
5. A Note on the Fallacy of “Distribution”. . . . . . . . . . . . . 622
6. A Summary of the Market . . . . . . . . . . . . . . . . . . . . . . . . 624
CHAPTER 10—MONOPOLY AND COMPETITION . . . . . . . . . . . . . 629
1. The Concept of Consumers’ Sovereignty. . . . . . . . . . . . 629
A. Consumers’ Sovereignty versus Individual
Sovereignty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 629
B. Professor Hutt and Consumers’ Sovereignty . . . . . . 631
2. Cartels and Their Consequences. . . . . . . . . . . . . . . . . . . 636
A. Cartels and “Monopoly Price”. . . . . . . . . . . . . . . . . . 636
B. Cartels, Mergers, and Corporations . . . . . . . . . . . . . 643
C. Economics, Technology, and the
Size of the Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 645
D. The Instability of the Cartel . . . . . . . . . . . . . . . . . . . 651
E. Free Competition and Cartels . . . . . . . . . . . . . . . . . . 653
F. The Problem of One Big Cartel. . . . . . . . . . . . . . . . . 659
xii Man, Economy, and State with Power and Market
3. The Illusion of Monopoly Price . . . . . . . . . . . . . . . . . . . 661
A. Definitions of Monopoly . . . . . . . . . . . . . . . . . . . . . . 661
B. The Neoclassical Theory of Monopoly Price . . . . . . 672
C. Consequences of Monopoly-Price Theory. . . . . . . . 675
(1) The Competitive Environment. . . . . . . . . . . . . . 675
(2) Monopoly Profit versus
Monopoly Gain to a Factor. . . . . . . . . . . . . . . . . 677
(3) A World of Monopoly Prices?. . . . . . . . . . . . . . . 680
(4) “Cutthroat” Competition . . . . . . . . . . . . . . . . . . 681
D. The Illusion of Monopoly Price on the
Unhampered Market. . . . . . . . . . . . . . . . . . . . . . . . . 687
E. Some Problems in the Theory of the Illusion
of Monopoly Price . . . . . . . . . . . . . . . . . . . . . . . . . . . 698
(1) Location Monopoly . . . . . . . . . . . . . . . . . . . . . . . 698
(2) Natural Monopoly . . . . . . . . . . . . . . . . . . . . . . . . 702
4. Labor Unions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 704
A. Restrictionist Pricing of Labor . . . . . . . . . . . . . . . . . 704
B. Some Arguments for Unions: A Critique . . . . . . . . . 716
(1) Indeterminacy . . . . . . . . . . . . . . . . . . . . . . . . . . . 716
(2) Monopsony and Oligopsony . . . . . . . . . . . . . . . . 717
(3) Greater Efficiency and the “Ricardo Effect” . . . 718
5. The Theory of Monopolistic or
Imperfect Competition . . . . . . . . . . . . . . . . . . . . . . . . . . 720
A. Monopolistic Competitive Price . . . . . . . . . . . . . . . . 720
B. The Paradox of Excess Capacity . . . . . . . . . . . . . . . . 726
C. Chamberlin and Selling Cost. . . . . . . . . . . . . . . . . . . 736
6. Multiform Prices and Monopoly. . . . . . . . . . . . . . . . . . . 739
7. Patents and Copyrights . . . . . . . . . . . . . . . . . . . . . . . . . . 745
CHAPTER 11—MONEY AND ITS PURCHASING POWER. . . . . . . . 755
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 755
2. The Money Relation: The Demand for
and the Supply of Money . . . . . . . . . . . . . . . . . . . . . . . . 756
3. Changes in the Money Relation . . . . . . . . . . . . . . . . . . . 762
4. Utility of the Stock of Money . . . . . . . . . . . . . . . . . . . . . 764
Contents xiii
5. The Demand for Money . . . . . . . . . . . . . . . . . . . . . . . . . 767
A. Money in the ERE and in the Market. . . . . . . . . . . . 767
B. Speculative Demand . . . . . . . . . . . . . . . . . . . . . . . . . . 768
C. Secular Influences on the Demand for Money . . . . . 771
D. Demand for Money Unlimited? . . . . . . . . . . . . . . . . 772
E. T he PPM and the Rate of Interest . . . . . . . . . . . . . . 773
F. Hoarding and the Keynesian System . . . . . . . . . . . . 776
(1) Social Income, Expenditures,
and Unemployment . . . . . . . . . . . . . . . . . . . . . . . . 776
(2) “Liquidity Preference”. . . . . . . . . . . . . . . . . . . . . 785
G. The Purchasing-Power and Terms-of-Trade
Components in the Rate of Interest . . . . . . . . . . . . . 792
6. The Supply of Money . . . . . . . . . . . . . . . . . . . . . . . . . . . 798
A. The Stock of the Money Commodity . . . . . . . . . . . . 798
B. Claims to Money: The Money Warehouse . . . . . . . . 800
C. Money-Substitutes and the Supply of Money. . . . . . 805
D. A Note on Some Criticisms of 100-Percent Reserve . 810
7. Gains and Losses During a Change in the Money Relation. 811
8. The Determination of Prices: The Goods Side
and the Money Side. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 815
9. Interlocal Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 818
A. Uniformity of the Geographic
Purchasing Power of Money . . . . . . . . . . . . . . . . . . . 818
B. Clearing in Interlocal Exchange . . . . . . . . . . . . . . . . 821
10. Balances of Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . 822
11. Monetary Attributes of Goods. . . . . . . . . . . . . . . . . . . . . 826
A. Quasi Money. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 826
B. Bills of Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . 827
12. Exchange Rates of Coexisting Moneys . . . . . . . . . . . . . . 828
13. The Fallacy of the Equation of Exchange. . . . . . . . . . . . 831
14. The Fallacy of Measuring and Stabilizing the PPM . . . 843
A. Measurement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 843
B. Stabilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 847
15. Business Fluctuations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 851
16. Schumpeter’s Theory of Business Cycles . . . . . . . . . . . . 854
xiv Man, Economy, and State with Power and Market
17. Further Fallacies of the Keynesian System . . . . . . . . . . . 859
A. Interest and Investment . . . . . . . . . . . . . . . . . . . . . . . 859
B. The “Consumption Function”. . . . . . . . . . . . . . . . . . 860
C. The Multiplier . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 866
18. The Fallacy of the Acceleration Principle. . . . . . . . . . . . 868
CHAPTER 12—THE ECONOMICS OF VIOLENT
INTERVENTION IN THE MARKET . . . . . . . . . . . . 875
1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 875
2. A Typology of Intervention . . . . . . . . . . . . . . . . . . . . . . . 877
3. Direct Effects of Intervention on Utility . . . . . . . . . . . . 878
4. Utility Ex Post: Free Market and Government . . . . . . . . 885
5. Triangular Intervention: Price Control. . . . . . . . . . . . . . 892
6. Triangular Intervention: Product Control . . . . . . . . . . . 900
7. Binary Intervention: The Government Budget . . . . . . . 907
8. Binary Intervention: Taxation . . . . . . . . . . . . . . . . . . . . . 914
A. Income Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 914
B. Attempts at Neutral Taxation. . . . . . . . . . . . . . . . . . . 919
C. Shifting and Incidence: A Tax on an Industry. . . . . . 927
D. Shifting and Incidence: A General Sales Tax . . . . . . 930
E. A Tax on Land Values. . . . . . . . . . . . . . . . . . . . . . . . . 934
F. Taxing “Excess Purchasing Power” . . . . . . . . . . . . . . 937
9. Binary Intervention: Government Expenditures . . . . . . 938
A. The “Productive Contribution” of
Government Spending. . . . . . . . . . . . . . . . . . . . . . . . 938
B. Subsidies and Transfer Payments. . . . . . . . . . . . . . . . 942
C. Resource-Using Activities . . . . . . . . . . . . . . . . . . . . . 944
D. The Fallacy of Government
on a “Business Basis” . . . . . . . . . . . . . . . . . . . . . . . . . 946
E. Centers of Calculational Chaos . . . . . . . . . . . . . . . . . 952
F. Conflict and the Command Posts . . . . . . . . . . . . . . . 953
G. The Fallacies of “Public” Ownership . . . . . . . . . . . . 955
H. Social Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 957
I. Socialism and Central Planning. . . . . . . . . . . . . . . . . 958
10. Growth, Affluence, and Government . . . . . . . . . . . . . . . 962
A. The Problem of Growth . . . . . . . . . . . . . . . . . . . . . . 962
B. Professor Galbraith and the Sin of Affluence . . . . . . 973
11. Binary Intervention: Inflation and Business Cycles . . . . . 989
A. Inflation and Credit Expansion . . . . . . . . . . . . . . . . . 989
B. Credit Expansion and the Business Cycle . . . . . . . . . 994
C. Secondary Developments of the Business Cycle . . 1004
D. The Limits of Credit Expansion . . . . . . . . . . . . . . . 1008
E. The Government as Promoter of
Credit Expansion . . . . . . . . . . . . . . . . . . . . . . . . . . . 1014
F. The Ultimate Limit: The Runaway Boom . . . . . . . 1018
G. Inflation and Compensatory Fiscal Policy . . . . . . . 1021
12. Conclusion: The Free Market and Coercion . . . . . . . . 1024
Appendix A: Government Borrowing. . . . . . . . . . . . . . . . . . 1025
Appendix B: “Collective Goods” and “External Benefits”:
Two Arguments for Government Activity. . . . . . . . . . . 1029
POWER AND MARKET
CHAPTER 1—DEFENSE SERVICES ON THE FREE MARKET. . . . 1047
CHAPTER 2—FUNDAMENTALS OF INTERVENTION . . . . . . . . . . 1057
1. Types of Intervention . . . . . . . . . . . . . . . . . . . . . . . . . . . 1057
2. Direct Effects of Intervention on Utility . . . . . . . . . . . 1061
A. Intervention and Conflict. . . . . . . . . . . . . . . . . . . . . 1061
B. Democracy and the Voluntary . . . . . . . . . . . . . . . . . 1065
C. Utility and Resistance to Invasion . . . . . . . . . . . . . . 1067
D. The Argument from Envy. . . . . . . . . . . . . . . . . . . . 1068
E. Utility Ex Post . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1069
CHAPTER 3—TRIANGULAR INTERVENTION . . . . . . . . . . . . . . . 1075
1. Price Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1075
2. Product Control: Prohibition . . . . . . . . . . . . . . . . . . . . 1086
Contents xv
3. Product Control: Grant of Monopolistic Privilege . . . 1089
A. Compulsory Cartels . . . . . . . . . . . . . . . . . . . . . . . . . 1094
B. Licenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1094
C. Standards of Quality and Safety . . . . . . . . . . . . . . . 1096
D. Tariffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1101
E. Immigration Restrictions . . . . . . . . . . . . . . . . . . . . . 1107
F. Child Labor Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 1111
G. Conscription. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1113
H. Minimum Wage Laws and Compulsory
Unionism . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1114
I. Subsidies to Unemployment . . . . . . . . . . . . . . . . . . 1115
J. Penalties on Market Forms . . . . . . . . . . . . . . . . . . . 1115
K. Antitrust Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1117
L. Outlawing Basing-Point Pricing . . . . . . . . . . . . . . . 1121
M. Conservation Laws. . . . . . . . . . . . . . . . . . . . . . . . . . 1122
N. Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1133
O. Franchises and “Public Utilities” . . . . . . . . . . . . . . 1138
P. The Right of Eminent Domain. . . . . . . . . . . . . . . . 1139
Q. Bribery of Government Officials . . . . . . . . . . . . . . 1141
R. Policy Toward Monopoly. . . . . . . . . . . . . . . . . . . . . 1143
Appendix A: On Private Coinage . . . . . . . . . . . . . . . . . . . . 1144
Appendix B: Coercion and Lebensraum. . . . . . . . . . . . . . . . 1146
CHAPTER 4—BINARY INTERVENTION: TAXATION. . . . . . . . . . . 1149
1. Introduction: Government Revenues
and Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1149
2. The Burdens and Benefits of Taxation
and Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1151
3. The Incidence and Effects of Taxation . . . . . . . . . . . . . 1156
Part I: Taxes on Incomes . . . . . . . . . . . . . . . . . . . . . . . 1156
A. The General Sales Tax and the
Laws of Incidence. . . . . . . . . . . . . . . . . . . . . . . . . . . 1156
B. Partial Excise Taxes; Other Production Taxes. . . . . 1162
C. General Effects of Income Taxation . . . . . . . . . . . . 1164
D. Particular Forms of Income Taxation . . . . . . . . . . . 1171
(1) Taxes on Wages . . . . . . . . . . . . . . . . . . . . . . . . . 1171
(2) Corporate Income Taxation . . . . . . . . . . . . . . . 1171
(3) “Excess”Profit Taxation . . . . . . . . . . . . . . . . . . . 1173
xvi Man, Economy, and State with Power and Market
(4) The Capital Gains Problem . . . . . . . . . . . . . . . . 1174
(5) Is a Tax on Consumption Possible? . . . . . . . . . . 1180
4. The Incidence and Effects of Taxation . . . . . . . . . . . . . 1183
Part II: Taxation on Accumulated Capital . . . . . . . . . . 1183
A. Taxatuin on Gratuitous Transfers:
Bequests and Gifts. . . . . . . . . . . . . . . . . . . . . . . . . . . 1185
B. Property Taxation . . . . . . . . . . . . . . . . . . . . . . . . . . . 1185
C. A Tax on Individual Wealth . . . . . . . . . . . . . . . . . . .1190
5. The Incidence and Effects of Taxation . . . . . . . . . . . . . 1191
Part III: The Progressive Tax . . . . . . . . . . . . . . . . . . . 1191
6. The Incidence and Effects of Taxation . . . . . . . . . . . . . 1196
Part IV: The “Single Tax” on Ground Rent . . . . . . . . 1196
7. Canons of “Justice” in Taxation. . . . . . . . . . . . . . . . . . . 1214
A. The Just Tax and the Just Price . . . . . . . . . . . . . . . . 1214
B. Costs of Collection, Convenience, and Certainty. . 1216
C. Distribution of the Tax Burden . . . . . . . . . . . . . . . . 1218
(1) Uniformity of Treatment. . . . . . . . . . . . . . . . . . 1218
a. Equality Before the Law: Tax Exemption . . 1218
b. The Impossibility of Uniformity. . . . . . . . . 1221
(2) The “Ability-to-Pay” Principle . . . . . . . . . . . . . 1224
a. The Ambiguity of the Concept . . . . . . . . . . 1224
b. The Justice of the Standard. . . . . . . . . . . . . 1227
(3) Sacrifice Theory. . . . . . . . . . . . . . . . . . . . . . . . . 1231
(4) The Benefit Principle . . . . . . . . . . . . . . . . . . . . 1236
(5) The Equal Tax and the Cost Principle . . . . . . . 1240
(6) Taxation “For Revenue Only”. . . . . . . . . . . . . . 1244
(7) The Neutral Tax: A Summary. . . . . . . . . . . . . . 1244
D. Voluntary Contributions to Government . . . . . . . . 1245
CHAPTER 5—BINARY INTERVENTION: GOVERNMENT
EXPENDITURES . . . . . . . . . . . . . . . . . . . . . . . . . . . 1253
1. Government Subsidies: Transfer Payments . . . . . . . . . 1254
2. Resource-Using Activities: Government
Ownership versus Private Ownership. . . . . . . . . . . . . . 1259
3. Resource-Using Activities: Socialism . . . . . . . . . . . . . . 1272
4. The Myth of “Public” Ownership. . . . . . . . . . . . . . . . . 1276
5. Democracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1279
Appendix: The Role of Government Expenditures
in National Product Statistics . . . . . . . . . . . . . . . . . . . . 1292
Contents xvii
CHAPTER 6—ANTIMARKET ETHICS: A PRAXEOLOGICAL
CRITIQUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1297
1. Introduction: Praxeological Criticism of Ethics . . . . . . 1297
2. Knowledge of Self-Interest: An Alleged
Critical Assumption . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1300
3. The Problem of Immoral Choices . . . . . . . . . . . . . . . . 1303
4. The Morality of Human Nature . . . . . . . . . . . . . . . . . . 1306
5. The Impossibility of Equality . . . . . . . . . . . . . . . . . . . . 1308
6. The Problem of Security . . . . . . . . . . . . . . . . . . . . . . . . 1313
7. Alleged Joys of the Society of Status . . . . . . . . . . . . . . . 1315
8. Charity and Poverty . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1318
9. The Charge of “Selfish Materialism” . . . . . . . . . . . . . . 1321
10. Back to the Jungle?. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1324
11. Power and Coercion. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1326
A. “Other Forms of Coercion”: Economic Power . . . 1326
B. Power Over Nature and Power Over Man . . . . . . . 1329
12. The Problem of Luck . . . . . . . . . . . . . . . . . . . . . . . . . . 1333
13. The Traffic-Manager Analogy. . . . . . . . . . . . . . . . . . . . 1334
14. Over- and Underdevelopment. . . . . . . . . . . . . . . . . . . . 1334
15. The State and the Nature of Man. . . . . . . . . . . . . . . . . 1335
16. Human Rights and Property Rights . . . . . . . . . . . . . . . 1337
Appendix: Professor Oliver on Socioeconomic Goals . . . . . 1340
A. The Attack on Natural Liberty . . . . . . . . . . . . . . . . 1341
B. The Attack on Freedom of Contract . . . . . . . . . . . 1344
C. The Attack on Income According to Earnings . . . 1347
CHAPTER 7—CONCLUSION: ECONOMICS
AND PUBLIC POLICY . . . . . . . . . . . . . . . . . . . . . . . 1357
1. Economics: Its Nature and Its Uses . . . . . . . . . . . . . . . 1357
2. Implicit Moralizing: The Failures
of Welfare Economics . . . . . . . . . . . . . . . . . . . . . . . . . . 1360
3. Economics and Social Ethics . . . . . . . . . . . . . . . . . . . . . 1363
4. The Market Principle and the Hegemonic Principle . . . 1365
BIBLIOGRAPHY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1371
INDEX OF NAMES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1395
INDEX OF SUBJECTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1405
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