Fundamentals of Economic Analysis: A Causal-Realist Approach Joseph T. Salerno

In this first lecture of a series of lectures covering the basics of applied Austrian economics,  Joseph Salerno introduces a number of basic concepts including utility, exchange, psychic cost, choice, value, and marginal utility. 

All action is really exchange. What the actor prefers less is exchanged for something he prefers more, including gift giving. It is a fallacy to say that the goods exchanged have equal value.

What determines market prices? Buyers and sellers must know of feasible trades. They can learn from their mistakes. They prefer higher profits to lower profits. They think in discreet terms. Both participants win in market exchanges.

As with all government intervention, price controls do not achieve what their originators think they will. Trying to maintain a supply of milk by putting a price control on it will cause shortages, which are the very situations the price manipulators said they wanted to avoid.

Factors of Production are economic goods: scarce means used to achieve an individual’s ends. They are land, labor and capital. Each is examined. Incomes are earned by factor owners as production takes place. There is no separated production and distribution.

Causal-realist analysis allows imaginary constructs like the ERE — Evenly Rotating Economy — in order to isolate certain factors like interest.  There would be no profit or loss in the ERE, because those can only exist under conditions of uncertainty.