Mises AcademyAustrian Econ I:

Praxeology Through Price Theory

Robert P. MurphySpring 2011

Lecture 1April 27

Austrian Econ I1. How the Course WorksII. Purposeful ActionIII. Implications of ActionIV. Classification of Goods

V. Mengerian Hierarchy VI. The Role of Time VII. Marginal Utility

I. How the Course Works

II. Purposeful Action vs.Mindless Behavior

A. “Action” as a Viewpoint

B. Some definitions

Praxeology: the study of human action.(Contrast with “economics.”)

Means: alterable features of the environment that can be used to achieve ends.(Contrast with “general conditions of action.”)

C. Prerequisites of Action

●A subjective desire for improvement (“uneasiness” for Mises)

●A theory of how to change the situation (using means)

●Uncertainty about the future

III. Implications of Action

A. Only Individuals Act

B. Individuals Have Preferences

C. Preferences Are Subjective

D. Preferences Are a Ranking

IV. Classification of Goods

1. Producer Goods (aka Means of Production)a. Land (aka Natural Resources)b. Laborc. Capital Goods

2. Consumer Goods� Includes leisure

V. MENGERIAN HIERARCHYOF GOODS

Consumer goods are “first order” or “lowest order.”

Second-order goods are the land, labor, and capital goods used to produce first-order goods.

Third-order goods are factors used to produce second-order goods…

VI. The Role of Time

VII. Goods Valued “on the Margin”

vs.