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Economic Piece by Josh L. Ascough

Consumer Goods and Capital Goods; these are terms the average individual has heard before. But how much is understood about these terms?

What qualifies as Capital? Are there different kinds of Capital? What counts as Consumer goods? Throughout this article I hope to give the reader an in depth analysis of these terms, their technical and theoretical purposes, how they relate to one another, and what their qualities are.

We will treat this as a process throughout the article; from capital to consumer; with a few interchanges to give context and further, detailed analysis.

Before delving into such areas, a mundane but important question must be posed and answered; What is Economics?

Economics is the social science, formulated around the study of human action towards ends with scarce means. Economics holds the epistemological (theory of knowledge) view of a priori knowledge (knowledge that is acquired independently of experience, and proceeds from theoretical deduction); that all human action is purposeful to the individual subject; whether his own deductions be rational or not, all of his actions are purposeful towards his goal or goals. This is where the subjectivism of Economics comes into play; particularly with the regards to the Austrian School.

The subjectivism of economics has gone through a process of clarification. During its early period, it was believed that the subjectivism of economics depended on the assumption of perfect knowledge; that all men at all times must be omniscient, in order to engage in economic activity. This position however, takes the view (intentional or not) that the market is in perfect equilibrium, and adjusts to perfect equilibrium relative to the circumstances, and regards all human decisions and values are fully determined; leaving no scope for the autonomy of the human mind. This leads to no room for the entrepreneur. Another view to which economics took about subjectivism, was that all economic activity and human decisions are spontaneous with no purpose and totally unexplainable; this view of the subjectivism of economics leaves us with no hope or ability for understanding market regularities, or human action as in terms of the subjects purpose.

This view of the subjectivism of economics was revolutionised by the late, Ludwig Von Mises. Mises recognised the autonomy of the human mind; the subjectivist freedom for human choice, which bear the imprint of the external circumstances. The external circumstances do not themselves constrain or determine action, but the actions of the autonomous man do take his circumstances into account, with regards to the knowledge he holds of the external. The Mises understanding of subjectivism in economics dismisses the notion of perfect knowledge, and the omniscience of man with regards to his value and action; instead, taking the view that at any moment, markets are pervaded by widespread ignorance on the part of the market participants; there is no such concept of perfect knowledge, nor perfect equilibrium. An additional and important feature of the subjectivism of economics, recognises that error on the part of market participants, and disequilibrium, creates opportunities for the existence of the entrepreneur, and entrepreneurial activity.

Before moving on to the main area of our subject, it is additionally important to explain what an economic good consists of.

Economic Goods require a few qualities to qualify as Economic Goods:

1. Scarcity.
2. Human Need.
3. Belief of the Goods Ability to Satisfy Wants or Needs; Directly or Indirectly.
4. Command or Claim of Ownership Over the Good.

Economic goods are split into two distinct groups:

1. Good of Lower Order.
2. Goods of Higher Order.

The value or price of all economic goods are subject to marginal utility.

What is Marginal Utility?

People’s wants are ranked in terms of the importance of their satisfaction. Let us use an example of a farmer. The farmer has 5 sacks of wheat, and his wants/needs are as follows:

1. Bread For Living.
2. Bread For Health.
3. Seeds For Planting For Next Harvest.
4. Feed Farm Animals. Cattle
5. Produce Vodka.
6. Feed Pets.

Our farmer in question would use the wheat to satisfy these wants. But how does he allocate them? What value does each sack of wheat hold? To answer this, we must ask: Which want or satisfaction would I do without if one of these sacks were lost?

For example let us assume a pack of foxes were to break into the barn where the sacks are located, and ate all of the wheat inside the 2nd sack. The want to do without is the 5th. The value of each sack is equal to the sack which satisfies the lowest-ranked want, to which the supply is capable of serving.

The level of satisfaction is utility. The lowest want is the Marginal. Hence value is equal to Marginal Utility.

Capital: What Is Capital?

Capital refers to economic goods of Higher Order. Higher Order goods are economic goods to which the satisfaction of human wants or needs is done so indirectly. These economic goods are not used for consumption or the direct satisfaction, but utilised to indirectly service wants or needs, and for further production. As a brief example for the moment, the car you drive to go to the supermarket is an economic good of higher order; or capital good. You do not consume the car itself, the car is utilised to indirectly satisfy a human want or need, with acquiring economic goods of lower order for consumption, or for acquiring other economic goods of higher order or capital, for further and better indirect satisfaction.

These are very broad brush terms though, as can be seen in the brief example of the car, a much more in depth explanation is required, as there are different kinds of capital; including different types of capital in terms of purpose.

There are two fundamental facts with regards to capital goods, which exhibits the complexity with regards to capital goods (economic goods of higher order).

Capital is Heterogeneous: All forms of capital are different and diverse; they’re not all the same. For example a beer barrel is not a boiler or a blast furnace.

However, stating this, each piece of capital is also Multi-Specific: Each piece of capital can be used in multiple lines of production.

Because each piece is different, they can’t substitute for each other perfectly, however, because they can go into different lines of production, they can substitute at different ratios for different things; the economic calculation for capital comes down to calculating the relative scarcity and alternatives; for this, you need a pricing system to signal the various marginal production costs and marginal values of consumers, in order to configure what lines of production to go into, and at what quantities.

In regards to the Capital and Interest, a standard terminology for capital is used.

The standard term is: Capital Goods – Produced Means of Production.

However, this conflates Capital with Capital Goods. The distinction between the two can be summarised as follows:

Capital Good: Reproducible Means of Production.

The reason such a distinction is important is due to the different functions between Capital and Capital Goods. The late Bohm-Bawark coined the term evenly rotating economy (ERE) when referring to this issue. In the ERE, Capital Goods earn gross rent, but do not earn net rent; as only the original factors of production (labour and natural resources) – earn a net rent within the ERE. The reason for Capital Goods not earning net rent is due to the fact that they are reproducible.

For simplicity sake:

Capital Goods = Physical Goods.

Capital = Financial Goods.

To sum up when not referring to Capital Goods, Capital is within reference to the total sum of money prices for assets related to an enterprise, minus any financial obligations.

To give a further explanation to this, let us imagine a laundry shop owner. If you were to ask the owner how much Capital Goods he has in his business, this would be referring to his physical goods; washing machines = Capital Goods, the till = Capital Goods, laundry detergent = Capital Goods etc.

If you were to turn to this same laundry shop owner (don’t ask him too many times otherwise he might get bored with all the questions), and ask him how much Capital is in his business, this would be referring to if the business was sold; all debts and loans paid off, how much money he, as the owner would hold.

In the market economy capital accumulation is required for an increase in living standards, and to ensure a society is made wealthier.

Capital accumulation requires the setting aside of money; in relation to their time preference, for future consumption by forgoing current consumption. This allows for further accumulation of tools, machinery, and reproducible means of production. The accumulation of capital plus saving for a preferred time frame of future consumption, allows for higher degrees of efficiency. This may seem bizarre since if there is an immediate need for consumption, and there is no time preference for future consumption, how can there be efficiency in waiting; it may be more easily conceived if we refer to it as relative time preference.

To give an example of this in action, let us imagine a man living on an island, and he has a need for water to have a bath. If this is an immediate need (maybe he has a hot date with the girl on the next island tomorrow), he will likely cup his hands to bring water to his home. If however this is not an immediate need and he holds time spare, he could climb up a tree, grab a coconut and break it to use the shell to more efficiently gather water.

I made a quick reference to interest and I will quickly go over two important questions:

1. What are Interest Rates?
2. How is Interest possible?

• Interest Rates are prices related to time preference for capital funds.
• Interest Rates signal to investors and entrepreneurs people’s willingness to postpone consumption; or their need to have consumption sooner, rather than later.
• Sooner Consumption = High Interest Rate. Future Consumption = Low Rates.
• Interest Rates regulate and allocate how much production is geared towards present consumption verses future consumption.
• Interest Rates coordinate the capital process. When consumers wish to save for the future (for college for example), they will cut back on current consumption; such as eating out at restaurants, visits to the cinema etc. It should not be misunderstood as being “current production is down = recession”; resources have been reallocated for a future time preference, towards savings for future consumption. This coordinates signals to investors and entrepreneurs that taking out loans is now more affordable

With regards to how interest is possible, we need to delve into another question:

What is the interest problem?

The interest problem, according to Bohm-Bawark is as follows:

“Suppose a Capitalist can spend £100,000 on land, labour and capital goods. One year later, the finished product can be sold for £110,000. How can this undervaluation of the factors persist?”

Anyone with financial capital in the present, who can put it to work and earn back not only the principle sum but money on top is referred to as an interest return. Why is it possible?

Before answering, it is important to mention what is known as, The Naive Productivity Theory. This is a term which was first mentioned in Bohm-Bawerk’s piece, Capital and Interest when critically referring to the Productivity Theory.

The Naive Productivity Theory notes that the return to capital goods (originary interest) is due to capital being productive.*

*Originary Interest is the ratio of the value assigned to want-satisfaction in the immediate future (current consumption) and the value assigned to want-satisfaction in periods of future consumption. It is present in market activity in the discount of future goods against present goods.

The Naive Productivity Theory however is incorrect. While it is true that capital goods are productive, and they would not be utilised were they not, this does not answer why interest is possible. If interest was possible because of The Naive Productivity Theory, then why wouldn’t entrepreneurs bid up the price of these capital goods; so instead of being able to buy capital goods for £100,000 and sell later for £110,000, they would be buying at £110,000 and selling for £110,000?

The way this is possible, is through Time Preference.

Present goods are preferred and hold a higher marginal value than future goods of comparable qualities, and need-want satisfactions.

Subjective Price Theory states that a pre-built house has a higher price than a contract for a house to be built in the future, because; ceteris paribus, consumers have more immediate wants to be satisfied.

Even if the person buying the contract at £100,000 for a house to be built and delivered in the future has no want for it, they recognise they can sell the house with a return to those on the market with more immediate wants.

I shall very briefly go over the subject of Consumption Goods.

Consumption: What Are Consumer Goods?

Consumer Goods refers to economic goods of lower order. Economic goods of lower order; or consumer goods, are goods to which the individual holds command over, that produce the satisfaction of human wants/needs directly and without further allocation of capital goods (economic goods of higher order).

Consumption goods; or goods of lower order, are the final products of the line of production which directly satisfy the want-needs and marginal values of the person who holds command over them.

Stating this however, not all consumer goods are for direct consumption. As a simple example; because I don’t want to spend too much time on consumption goods after so much time dedicated to capital/capital goods, let us take a handful of examples of what I mean by this:

• Houses.
• Printers.
• Refrigerators.
• Chicken.

Houses and chicken are an easy economic good to classify as consumer goods. Human beings need shelter and food, and so these consumer goods fulfil the purposes of direct consumption.

Printers on the other hand, can fall into two categories if they are not for the purposes of profit. On the one hand these are the final product after the coordination of capital goods (goods of higher order) and are purchased by consumers. However, saying this, they may also be used as capital goods from the perspective of the consumer. What I mean by this is that, nobody buys a printer for it to be the final product to which he will directly consume; people buy printers, in order to utilise them as personal capital goods, for the purposes of producing direct consumer goods; i.e. printing pictures, important documents, or receipts for consumer goods they’ve in addition purchased which are to either be directly consumed, or like the printer, be capital goods owned by said consumer to coordinate other goods he will directly consume.

The final example are refrigerators. Now refrigerators are not only an extremely beneficial invention, but they’re also a great example of economics at work in the home; apart from financial capital, they can be used to represent consumption goods, capital goods, and interest/time preference, all at once within the home of the consumer.

Refrigerators are consumer goods due to them being economic goods of lower order; the final outcome from the line of production and the allocation and coordination of capital goods. In addition they are capital goods for the consumer who owns the economic good in question, due to the fact they are not consumed themselves, but are utilised and can reproduce the activities they have been allocated to (keeping food fresh), to allow better satisfaction of direct needs-wants of the consumer. Finally, refrigerators represent interest/time preference in the home. Most of the time, people don’t buy 2 weeks’ worth of food for current consumption (unless they have a very big appetite). Refrigerators allow the consumer to save food for an allocated time period preferred for future consumption, for when they’re marginal utility will be higher.

There are many other areas to be talked about, particularly with regards to the division of labour, which links heavily to capital investment, allocation and coordination of capital goods and time preference, but I have taken much time over the subject we were focussed on; this may be an area to return to another time. For now I shall leave the reader with a passage from Ludwig Von Mises’s book, Planning For Freedom page 17-18, on the subject of economic organisation, economic coordination, and entrepreneurship.

“The truth is that the choice is not between a dead mechanism and a rigid automatism on the one hand and conscious planning on the other hand. The alternative is not plan or no plan. The question is: whose planning? Should each member of society plan for himself or should the paternal government alone plan for all? […] it is spontaneous action of each individual verses the exclusive action of the government.

Laissez faire does not mean: let soulless mechanical forces operate. It means: let individuals choose how they want to cooperate in the social division of labor and let them determine what the entrepreneurs should produce. […]”

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Economic Piece by Josh L. Ascough

Portions of this article are parts of a larger collection of my upcoming work titled: “The Long Road Against Statism”

“Taxes are the price we pay for a civilised society” is what we are told; by politicians, progressives, watermelon environmentalists, and other self-declared benevolent busy bodies. Yet this very notion is predicated on the premise of “assumed consent”; nay, the very concept of “societal good” or “public good” via government coercion is crystallised in the notion of assumed consent.

All of these concepts and notions are rooted in the belief that the individual is under obligation to accept the assumed consent of his neighbour to sacrifice the individual’s values on the individual’s behalf; that no man may truly own his existence, nor be master of his own destiny. The nature of this premise is rooted in the desire to control how our fellow man operates; how he uses his property and values, and how much of his values and property are permitted for him to assess and access.

These parasitic piranhas show their true colours when questioned; they demand their fellow man have his resources, values and property extracted by the external, yet refuse to voluntarily relieve themselves from their own property further. These “Men of State” bestow upon themselves entitlement to the values and properties of others, but do not view themselves in the same light.

This is the mind-set of the “Statist Entitlement Complex”: You must accept the assumed consent from the external to extract your property and values, because it has been deemed that your values and property are not permitted in your possession on the basis of the assumed consent via the societal good, which has been made the mandatory good on your behalf through assumed consent.

This apparent “societal good” via government coercion based within the premise of assumed consent, cannot operate on acknowledging the existence of the individual or his self-ownership; it must view the individual as expendable to the State and the tribe.

With this said, we conclude at the beginning of this article, that taxation is not the price we pay for a civilised society; taxation is the price we pay for assuming consent to Tribalism, Collectivism, Statism, and the externally defined sacrifice on the behalf of the sovereign individual.

With the introduction to this article, we require starting from the position of a priori knowledge; an axiom that man, the individual is sovereign.

This axiomatic truth, by recognising the sovereignty of the individual, as well as the sentience of the individual, acknowledges that value is subjective; as one man seeing higher value in his self-interested pursuit of service to others, may not be recognised or adopted by another fellow to the same degree, and that all sovereign individuals strive for the maximisation of their values; even he who chooses the maximisation of his value to pursue service to others over himself is his own sovereign self, and is operating in rational self-interest and the expansion of his own moral value, so long as he views this to be of higher value to himself over other values he may hold or strive for. Furthermore, this axiom acknowledges that all values face trade-offs; the sovereign individual can trade long term values and his future existence for short term values and current existence and vice versa, yet in addition, we acknowledge the objective reality of what is needed for the full pursuit of these values: Action.

Action requires ideas to be processed and progressed into action.

Ideas require thought to be interpreted and crystallised into ideas.

Thought requires values in order for the manifestation of thoughts.

Values require needs in order to assess which are of higher value.

Needs require life in order for a potential need to exist.

It is not “I think therefore I am.” It is, “I am therefore I think.” Hence the process which is the heir to this notion is: “I think therefore I act.“

All human action is purposeful to the sovereign individual towards the goals he sees as of value; these goals can be ends in and of themselves, or ends that once achieved, are developed into means for the purposeful action towards other goals and values.

Through this understanding of our a priori of human beings, our axiom of the sovereign individual and that all individuals strive for the maximisation of their subjective value; trading those which hold lesser value to them for those which hold higher value, we come to the other notion.

No individual can perform a sacrifice to which he consents to. A sacrifice requires the termination of a higher value in exchange for that which is of lower value to the individual: if the action has truly been consented to by the individual, it must be of higher value to him, hence he made no sacrifice; he gained a value. A sacrifice can only occur therefore, via external forces assuming consent over the individual to act on his behalf.

If we continue down this path of assuming consent over the individual to sacrifice his values on his behalf, for the abstract higher plane known as “societal good”; to him both economically and socially, we risk reverting ourselves to poverty, not just in economic terms, but poverty in moral terms.

In his 1954 book, The Income Tax: Root of All Evil, Frank Chodorov gave several political, philosophical and economic arguments against the Income Tax.

From pages 12 – 13, Chodorov gives a description as to how Income Taxation is, an essence of Socialism:

“…when this amendment became part of the Constitution, in 1913, the absolute right of property in the United States was violated. That, of course, is the essence of Socialism. Whatever else Socialism is, or is claimed to be, its first tenet is the denial of private property. All brands of Socialism, and there are many, are agreed that property rights must be vested in the political establishment. None of the schemes that are identified with this ideology, such as the nationalization of industry, or socialized medicine, or the abolition of free choice, or the planned economy, can become operative if the individual’s claim to his property is recognized by the government. It is for that reason that all Socialists, beginning with Karl Marx, have advocated income taxation, the heavier the better.“

What Chodorov says is in relation to the distinction between Direct Taxation, and Indirect Taxation. While Indirect Taxation still extorts a portion of resources from the individual, and operates as all taxation, on the basis of assumed consent, Indirect Taxation recognises the original claim of ownership to be within the hands of the individual wielding command over the resource. The Indirect Taxation requires the individual to first consent to a particular act; buying a product for example with the Sales Tax. Direct Taxation on the other hand, such as the Income Tax, does not require the individual to consent to a particular act, and does not treat the resource to be the property of the owner, who holds the official claim. Direct Taxation, such as Income Tax, sees the income as a loan by The State; the individual labourer holds no claim of ownership for his fruits, his fruits are loans by The State holding a claim as original, official owner of the property.

This type of taxation holds consequences for the productivity of the economy and the living standards of all individuals. There are two core consequences:

1. Lack of Saving.
2. Reduction in Incentive.

Through income taxation, individuals hold a reduced amount of expendable income, which means the marginal utility of goods affordable to them decreases and the opportunity cost between consumption for more urgent needs and current value, and saving for future consumption and future living standards increases; the man who is taxed up to 40% has a much smaller surplus bracket for saving consumption for the future, and finds himself prioritising current, short term consumption of goods whose marginal utility are high; in other words, living for the day, by the day.

When individuals have large portions of the fruits of their labour extorted, they are less inclined to save; which places a major problem into economic progress and productivity, as the only way to ensure economic progress and the increase in the standard of living, is to increase the per head capita investment, which is only possible if people are saving and investing to allow the expansion of capital investment, and the furthering of the division of labour.*

*(One could make the argument that the Income Tax and top-down imposed disincentive for saving creates the incentive for central banks to artificially lower interest rates and expand credit beyond the money supply, creating inflationary booms and beginning the process of the boom/bust cycle. Though this is not a piece on monetary policy and I don’t intend to make it one.)

Finally on the first note, the forced disincentive for saving reduces the judgement the individual is capable (or maybe allowed is the right word) of making towards his property, and how to best allocate his resources to maximise his quality of life.

“In other words, your ownership entitles you to use your judgement as to what you will do with the product of your labour-consume it, give it away, sell it, save it. Freedom of disposition is the substance of property rights.“

~ Frank Chodorov – The Income Tax: Root of All Evil page 18.

On the second note as to the dangers of Direct Taxation, it creates a disincentive for individual productivity and production. If an individual has his resources extorted heavily and continuously, he will become disinterested with furthering his productivity and with continuing his production; as he sees his fruits, and the productivity he could place with them, restricted by the State, and since no one can consume more than they have produced (unless you’re the government and have the magic power of ignoring economic realty at the expense of everyone else), the living standards of the individual reduce. This is why the greatest enemy to the individual, especially the poor man, is not “income inequality”, but income extortion and inflation of the money supply, and devaluation of his resources; leading him straight into the welfare trap.

“Interference with this freedom of disposition is, in the final analysis, interference with your right to life. At least, that is your reaction to such interference, for you describe such interference with a word that expresses a deep emotion: you call it “robbery”…if you find that this robbery persists, if you are regularly deprived of the fruits of your labor, you lose interest in laboring. the only reason you work is to satisfy your desires, and if experience shows that despite your efforts your desires go unsatisfied, you become stingy about laboring. You become a “poor” producer.“

Frank Chodorov – The Income Tax: Root of All Evil page 18.

As stated above with the philosophical argument for the sovereign individual on the subject of a priori knowledge in accordance with human action being purposeful, if faced with a direct tax, the sovereign individual’s unseen consequences are enacted. He has not been permitted the maximum capabilities of his ability to proceed with the objective, purposeful process for attaining his ends via the means he holds command over; he has been denied his full ability to act.

This indicates that he has in addition, been denied his full ability to process his ideas, manifest his thoughts, asses his values, nor recognise his needs; he ultimately has been denied the maximisation of his a priori knowledge of purposeful human action; he has been denied the maximisation to life.

There would be many who would say that a direct tax is a fair tax, based on either one of two principles:

1. Ability To Pay.
2. Relation To Benefits Received.

Both of these reasons given for the justification of a direct tax are in the negative however.

With regards to the ability to pay principle, there is no clear standard about what is meant by someone’s “ability” to pay. For example, let’s say two people; person A and person B. Person A earns £50,000 per year, Person B earns £28,000. A has no savings, person B has loans from undergrad and graduate tuitions to pay off. B has no children, A has 4 children. Who in the example has the greater ability to pay? There’s no unit to measure who has the greater ability to pay.

One way people try to argue around this, is by stating that when people give charity to their church, or to an animal rights organisation let’s say, they are encouraged to give within their means by the priest or animal rights organisation representative; the argument pertaining that it is the same with taxes. However, the priest doesn’t come to your house if you refuse to give 20-40% of your income; nor does PETA take you to court for charity evasion (though knowing PETA I can see them threatening to do so). The State however does. There is no means to resign from the government. In addition do people truly only give to charity based on their means? Of course not. People give to charity because they subjectively believe there is a value in doing so. Carl Menger once addressed these values as the satisfaction of imaginary needs; because these were values that did not directly or indirectly benefit the individual’s human needs, though he recognised said individuals’ were achieving the value of needs they believed required satisfying.

As a final note on this current principle, the market and in turn market prices obey the law of one price. Everyone expects to spend the same money on bread, cars, iPhone’s, iPad’s etc. People with a greater ability to pay don’t pay more for these goods. If people were expected or required to pay more for these goods based on their ability to pay; for example if someone earning £50,000 had to pay £3,000 for an iPhone, yet the individual earning £18,000 only had to pay £500, there would be no incentive for people to work harder, to acquire a higher income, or to save for the future. This would in effect cause equal income, as no one would hold any incentive for greater productivity, and the economy would collapse.

The other principle as mentioned is that the direct tax is in relation to the benefits a person receives from society. There are a few things wrong with this.

The individual earning £50,000 is able to do so because he is providing higher productivity that is valued more, and is of greater service to consumers; whether directly or indirectly; so by this terminology, said individual is giving back to society based on his productive efforts, and is being paid in proportion to how productive he is. In addition the market is not government. People engage in market activity based on mutual, consensual exchange; government on the other hand is coercion. When people engage in market exchange, they do so because they perceive there to be a benefit, this benefit is subjective. However, because tax is non voluntary, they do not indicate any sort of benefit. While there is no form of a just tax or a fair tax, if the aim is to add a layer of consent to a tax and to ensure the maximisation of an individual’s ability to command the resources he holds a claim to, the better methodology is to pursue an indirect tax system; such a system would not only ensure that people pay a tax only when engaging in a consensual action, and provide ability and incentive for savings; such a tax system would also ensure governments inability to directly extort resources simply based on ownership, and force governments to adopt a more fiscally responsible position, based within their means, and to limit government to focusing on their primary focus; which is the protection of life, liberty and property.

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Opinion Piece by Josh L. Ascough

It is no crime for anyone to be ignorant over the subject of Economics; it is a specialised social science after all. However, it always seems to be the loudest voices with ill-conceived “good intentions” who vocalise their opinions on the subject without ever having read a book on the subject (cough cough; The Guardian).

I have spent the last few months, since April 2020, working with the Croydon Constitutionalists in publishing articles dedicated to economic areas; delving into Central Banks, Cronyism, Economic Fallacies, The Gold Standard, Education, Unemployment, Cryptocurrency and hopefully more in the future. It should be noted however, by myself mostly, that the work of attempting to educate the layman cannot just come from myself via the knowledge I have gathered over the time I have been engaged in the subject of Economics, so this article will be a short and sweet one, giving a list of the top 10 books anyone and everyone can acquire to grasp an understanding of Economics. The books in this list have been chosen based on a number of factors; such as affordability and how friendly the books are to first time readers of the subject. You don’t need to acquire all of these books (unless you’re an Economics junkie like myself), as not all of them cover similar areas, however, I’m certain any number of these books will be valuable to the reader.

No: 10 – Free Market Environmentalism by Terry Anderson.

This book is in last place for the simple fact that it is the least affordable on the list, though if you are willing to pay £50+ for a book (that is pennies compared to what I’ve happily paid for other books), then this is a highly worthwhile read. Terry Lee Anderson is a former Executive Director of the Property and Environmental Research Centre and has a number of books relating to Environmentalism. Free Market Environmentalism however gives the reader an introductory, yet highly detailed take on the environmental and economic policies, as well as theory of free market environmentalism. From pollution, land use, to fossil fuels and green energy, Free Market Environmentalism is a worthwhile book for those concerned about environmental issues, and would like to hear the theory from a Environmental Researcher before delving into the purely economic argument.

No: 9 – Chaos Theory by Robert P. Murphy.

Less of a technical economics book, and more based on social and economic theory, Chaos Theory delves into the theoretical concept of Anarcho-Capitalism as a social and economic system, and how such a system would work in practise. Robert P. Murphy is an American Economist based in the tradition of the Austrian School of Economics, and is an Assistant Professor at the Free Market Institute, Texas Tech University. While I am a little biased, subscribing to the Austrian School and this being the book that fully converted me to Anarcho-Capitalism, I must say that the book doesn’t pull any punches; Murphy eloquently explains the theoretical basis of a society absent from the state, with detailed discussions on subjects such as market-based military defence, property protection, courts and prisons, as well as answering common questions, such as the always classic…who will build the roads?

No: 8 – The Economic Point Of View by Israel Kirzner.

The Economic Point of View, like Chaos Theory, focuses less on the technical side of Economics, and focuses more on the history of the epistemology of Economics. Israel Kirzner is a British-born American Economist who holds close theoretical ties to the Austrian School, and is a retired professor of Economics at New York University. The book looks at the history of economic thought in regards to what perspective economics and economists are meant to take; it delves into the different points of view economists have held since the classical economists of the time of David Hume and Adam Smith, to the Austrian understanding of Praxeology; the study and theory of human action based within Apriori knowledge, that all human action is purposeful to the subject. While this can be a difficult book to grasp if you have no experience reading philosophical writings, for those who have studied or are interested in philosophy, this is a great book for gaining an insight into the history and epistemology of Economics.

No: 7 – Liberalism by Ludwig Von Mises.

It took a lot to not put Mises in the number 1 spot or even close, however I need to think critically about what is approachable for those unfamiliar with the social science of Economics, and Mises has always been, and will always be one of the titans of Economics. Liberalism, as the title suggests, takes a look at the history of the Liberal tradition as a political, social, and economic philosophy. Mises delves into the connections and relationship between Capitalism and Liberalism, the problems with Interventionism, Socialism, and other command/planned economic systems, as well as the struggles Liberalism faced during the early 20th century from Socialism and Fascism. Ludwig Von Mises was many things during his life; he was an Austrian Economist, Historian, Logician and Sociologist; he was a champion of Liberalism, and a staunch intellectual fighter for freedom. If you are less interested in technical economics, but more interested in learning about the social science, social values and political arguments for the market economy, this will surely be a strong start.

No: 6 – Fascism vs Capitalism by Llewellyn H. Rockwell Jr.

If there is one thing more irritating than someone calling a Social Democracy “Socialism”, it’s someone calling Capitalism “Fascism”, and Rockwell Jr’s book Fascism vs Capitalism is the perfect book for ending that blending of terms for rhetorical arguments sake, once and for all. Llewellyn Rockwell Jr. is an American author, a Libertarian and a self-classified Anarcho-Capitalist. In addition he is also the founder of the Mises Institute; a non-profit institute dedicated to promoting the Austrian School of Economics. In Fascism vs Capitalism, Rockwell Jr. takes no particular stance for or against Capitalism or Fascism, but lays out the political, social, and economic differences between a Fascist system and a Capitalist system. Rockwell Jr. examines the strongly contrasting systems, while taking note of pro-fascist trends in recent decades, as well as the larger history of the two systems. If you’re not particularly interested in learning about economics, but want to understand what different systems means, this is the perfect book for clarification.

No: 5 – The Income Tax: The Root Of All Evil by Frank Chodorov.

No one likes taxes; Libertarians especially, and most if not all liberty-minded individuals at some point in their lives will say “Taxation is Theft”. However if there’s one tax most liberty-minded individuals oppose the most, it’s the Income Tax, and in his book (the title speaking for itself), Chodorov embarks on explaining to the reader the history of the Income Tax, as well as the general difference morally and economically between indirect taxes such as the Sales Tax; which require a consenting act before the tax can occur, and direct taxes such as the Income Tax; which treat property and the fruits of a man’s labour as loans by the government, and that under direct taxes no man owns his property or his labour. Frank Chodorov was a member of what was referred to as the Old Right, a group of Libertarian thinkers who were against Interventionism and opposed the New Deal brought about by FDR; he was a staunch advocate of free markets, individualism, and peace. The Income Tax: The Root Of All Evil gives the reader both economic and moral arguments against direct taxation as well as social implications of such forms of taxation.

No: 4 – That Which Is Seen And That Which Is Unseen by Frederic Bastiat.

If there was a competition for the most overlooked Economist in history, Frederic Bastiat would be in the top. In his essay, Bastiat explores the unseen outcomes of economic choices and actions; such as the unseen productivity of savings vs the seen productivity of consumption. Frederic Bastiat was a French economist, writer and a member of the French Liberal School, who developed the concept in economics known as Opportunity Cost, and introduced the parable of The Broken Window fallacy. While Bastiat’s essay contains little technical economics, it is a highly important piece of writing which assists the reader in understanding the unseen outcomes of economic choices and actions, as well as give the reader the understanding that all economic activity is subject to trade-offs.

No: 3 – The Origins Of Money by Carl Menger.

Getting into the top 3, Carl Menger’s book, The Origins Of Money, offers exactly what it states. The Origin Of Money gives a detailed economical and historical examinations as to how a form of money is created; dispelling the myth that money is a creation of government, Menger explains the qualities a good requires in order to qualify first as a medium of exchange, and then later as a money, while also delving into the different forms money has taken over the years; from animal skins, copper, tobacco leaves to gold. Carl Menger was an Austrian Economist born in 1840 and was the founder of the Austrian School of Economics, and would late go on to influence the work of Economists such as Ludwig Von Mises and Eugen Von Bohm-Bawerk.

No: 2 – Economics In One Lesson by Henry Hazlitt.

The choice for 2nd and 1st for this list was a difficult one, however, I believe Hazlitt’s book Economics In One Lesson should be placed here for the semantic reason that Hazlitt was not a trained economist; though this lends a strength to the book as there are few technical terms you would find in most economics books, and places more emphasis on explaining concepts and activities within the economic sphere. Economics In One Lesson does an amazing job of explaining fallacies, debunking faulty solutions to problems with assessments on productive solutions, and examining alongside explaining misunderstood concepts. While brining things back to basics with areas such as supply and demand, Hazlitt doesn’t treat the reader as stupid, and treats the reader with respect by explaining why it is understandable that some falsehoods appear more attractive than the truth, while not watering down why these more attractive ideas are incorrect. Henry Hazlitt, born in 1894, was an American Journalist who primarily wrote on the topics of business and economics for The Wall Street Journal and The New York Times, and is a highly regarded figure among Libertarian and Conservative circles.

No: 1 – Principles Of Economics by Carl Menger.

While Economics In One Lesson is friendlier for first time readers of economics, Carl Menger’s book; Principles of Economics, presents the revolutionary theory of where value comes from, which hugely assists any reader whether they be well versed or new with unravelling many areas of economics. Principles Of Economics takes a look at where and how economic goods receive value, the qualities a good requires in order to qualify as an economic good, and the differentiations between consumption goods; referred to as goods of lower order, and capital goods; referred to as goods of higher order. It was in this piece that Carl Menger came up with the economic theory known as Marginal Utility and subjective value for economic goods, leading to what has been called “the Marginal Revolution”. Menger, with his theory of Marginal Utility and the subjectivity of value, rejects the Cost-of-Production Theory of Value as advocated by Adam Smith and David Richardo, as well as rejecting the Labour Theory of Value as promoted by Karl Marx.

While there are many additional books on Economics, I have found these to be the best in terms of affordability and friendliness to first time readers, who are looking to understand Economics from different angles. It is my hope that the reader will take up one or all of these books to begin a journey into understanding not just the science of Economics, but to comprehend just how vast the subject is.

“Man himself is the beginning and the end of every economy.” ~ Carl Menger

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