Introduction to Economics: Part 1

0:00Okay, to start off, I'd like to get an idea, if you raise your hand, those of you who have taken a course in orthodox, regular college, micro or microeconomics, would you raise your hands? Oh, okay. How many here have read, I don't know, Beyond Ball Bay? Just give an idea of how much you've read on Austrian stuff. Certainly less. Okay. Okay, I propose to start with, the first theme here is Crusoeconomics, as Mary Lou said, where one of the reasons for this is that we form, I'm new at this thing too, not new at teaching economics, but new in this sort of format, so we're moving our way here.

0:45But to start with a, to show the distinct, one of the things that shows the distinctiveness of Austrian economics is the method by which it develops the system of discipline. And this is very different from other economic schools. So we start off with Crusoe, Romans of Crusoe landed on this so-called desert island. It's not really a desert. I mean, if it was really a desert, he'd probably have died fairly quickly. It's an island of resources and so forth, and he has technological knowledge of what I call the things to do. So, the first point I think, or theme, is how most of the economic concepts can be developed just by looking at Crusoe vis-a-vis nature. In other words, the idea of this thing is to start off very simply with one individual without bringing in other people yet, which makes it, of course, more complicated.

1:38One individual vis-a-vis nature and what happens. So I don't know, I could give a spiel first and then have a discussion. I'd rather sort of get a feel now of what any of you think, start the discussion off. What concepts can be approached through this kind of method? You start off with Poussard, he's there, it's day one, he's been shipwrecked, he's standing there on this island, and now what? Can we start with more one of those numbers? What do you think, what concepts do you think can be developed, what economic concepts? I don't think he's rapidly going to come to a conclusion if he sits there and waits for the welfare state to look after him, he's not going to get very far. That's for sure. Anything more concrete. He's going to get off his ass and start working. Right, exactly. In other words, he's got certain goals he's got to achieve pretty fast, obviously, in this situation.

2:30He's going to arrange them in hierarchical structure, that's what's most important.

3:04Let's postpone that until we get to Friday to find out what his or her theories are. Even if he doesn't own the island, even if he knows, to begin with, the island is wholly owned by somebody else, he would act the same way. Because he would want to support himself. I'd rather just start off on an unknown island. That's what it's important to make that. I should point that out. Okay, so you've got the... I don't have a mic. Friday's just arrived. Okay, so he's got certain priorities, as Lisa said. He's got to arrange them in some way. And one of the things, or one of the concepts in economics, many, most schools have this. Most support orthodox mainstream, what I call orthodox economics.

3:50It's kind of differently organized, as we'll see later. He's got priorities, okay, he's got choices. We've got water, food, shelter. This part's not broken down. We've got food being much... As you go along, I don't know if you ever saw the movie, Swiss Family Robinson, which is so much like this. A Swiss family named Robinson gets on there, and they start like this, and after a year or two, they've got a whole big thing going on, boardwalks and gardens and that sort of stuff. As you go along, as you get more affluent, your food requirements become more specialized. You look for Wheaties or whatever. So, like Kusoff, you're only starting off, and then you have this problem.

4:39And then they're closed, and whatever. So you've got this, let's call it economics, a value scale. A scale of goals or ends or purposes. Now one of the things, by the way, that's sort of interesting, When I was first, I teach in a place called Polytechnic Institute in New York where it used to be called Brooklyn Poly. And when I first came into the department, you know, the social science department, they knew I was great, I had these crazy ideas, bitterly opposed to laissez-faire and so forth and so on. This was a department of half Marxists and half liberals. So they had me give a lecture and I started off with goals and ends and means and that sort of stuff, so the basic axioms of Austrian economics. They fought this bitterly step-by-step. They refused to admit that people had goals, for example.

5:27I think, even though in their daily, in their regular scholarly work, much like their daily life, they realized that people have goals and they act on them and so forth and so on, but they were scared stiff that they've conceded one point that they have to line up a laissez-faire. Which Ludwig did they have to? That's right. They're sort of senseless. So it's really weird and hard to sit there for an hour and a half and argue if people have motives or goals or not. Anyway, it's... Okay, so they've got... they've got... they've got goals. And of course, by saying this, we're also assuming that people have goals, they have choices, they can do something about it. Which is the Austrian concept of action. Okay, so the whole concept of action comes right in here. That people act. And that they... And in order to act, you have to have goals or purposes or ends in mind.

6:16One of the things that will go along here is that one of the problems which cause confusion in economics is linguistic or semantic, the sort of words that are used are historical reasons for it. As people start, for example, economics began, well, it didn't really begin, but systematically began in the early 19th century England with agricultural. So a lot of the words are agriculturally based, we have a different language now, so it's a little difficult, we'll see if we can go on. For various reasons, this value is preferable, it's called economic utility.

7:05So this already causes confusion, because most people, when you think of utility, think of something which is useful. And this is not what we're talking about. We're talking about the subject of valuations on the part of CUSO, in this case. So in the value scale, or in the utility scale, you see the confusion that can come in in critics of the market, for example. People like Gal Braith, or whatever, or Gal Braith by the way, lay at your door here in this country, your responsibility is a good one. I object. We've got plenty of problems here. I never bought his book either.

7:54Does Gal Braith have Gold Braith or Gal Braith? I hear both ways, Gal Braith. I don't have to give you any manners. It's not a vital point. At any rate, people like him would say, well, these are not certain goods and services which he likes are useful in some kind of objective sense. There's other things which other people like are not useful. Then you can have a coral model. For example, back in the 1950s when he got launched, there were catallacts. The Marx, those days, had tail fins, if you remember, and there was a big hysteria among people like Albrecht and other left liberals, attacking tail fins was being evil, was being wasteful. I wasn't a great tail fin fan myself, I never saw anything wrong with them.

8:41So the point is that utility doesn't mean in economics what somebody says is objectively useful, whatever that's supposed to mean. It means whatever people is useful to them, what they would like to achieve, what goals they'd like. whether other people call that wrong, irrational, wasteful or whatever. Otherwise, utility and economics, and certainly Austrian economics, has a subjective connotation. It's a subjective valuation of the part of the person, the actor, the individual, the consumer. Okay, so that doesn't mean there aren't such things objectively useful or not useful. The point is that the point of economics looks at the point of view of the individual actor. This, by the way, was always a problem when working with Randians in Austrian economics.

9:36Randian believing in objective values, how can you have a theory of subjective values? It was a big problem for Randians. Of course, the answer is that we're not talking about, this is not an ethical course in ethics. Economics is not an ethical discipline. If you're dealing with ethics, you can say something might be objectively good or bad, useful or not useful. Economics analyzes the individual actor as he or she acts, so that the value is the valuation of the part of this person. In that sense, it's value-free in many objective values. It's value-free on the part of the economist, in the sense that we're not imposing our values on the individual. Let's analyze the situation. Another thing about Austrian economics, which I think is unique, is that what we're doing here is we're taking certain common sense facts, such as people act, people have goals and purposes, and basing a discipline on that formal fact without going to the question of what its purposes are, in the case of Crusoe we don't have food and shelter, etc., but basically we don't really care what the purposes of the individual are, the fact that he has certain purposes and goals to achieve, that's all we need from the discipline. So we're not interested in economics,

10:49is what he should be valuing, as I said. Or whether he's a nut for doing it or something. That's not what he should be eating butter or cornflakes or something. That's another discipline, aesthetics, ethics, whatever you want to call it. So that's one of the things which I'm confused with which come in. OK, so we're just really beginning with this. It proves that we have a value scale here. And we have concept of action. Anything else I think I can see as a concept, is applied in action, right, who saw it, okay, he's got, what has he got, he's got, to try to keep away from the actual content, like, you know, I mean, you always have that example of when he shoots deep, gets a bow and arrow or something, or catches fish with a net, basically the idea is what sort of thing, what sort of concepts come in here, what has he got, he's got his own person, he's got himself, and he's got, okay, he's got his, he's only gonna

11:47You've got to achieve his goals by yourself versus nobody else there. He's got to be doing it. You've got personal energy.

11:59And you've got technological knowledge, in a sense. They're combined, of course, but the point is you can conceptually say you've got technological knowledge. Technological, of course, in this case, is not high-tech. I mean, computer programming is not going to do him a lot of good here. Technological knowledge of how to catch fish, filling a net, getting a bow and arrow, whittling a stick and all that sort of stuff. This is low-tech, but it's tech. So he's got a technological knowledge.

12:29And he's got natural resources. He looks around and sees what's going on. There's trees, there's berries, you can eat strawberries, there's fish, there's water and so forth. and so forth, all these things are nature-given. So we've got nature-given resources and natural resources.

12:50So we're working on any concepts. Economic concepts are coming in here. Now, again, in economics, for the way, again, the semantics is different. The language was set in the early 19th century, more or less. Personal energy is defined as, in economics, labor. Now the problem here is the way, for example, and it used to be a big discussion, a controversy in the history of the end of the Jackson period in the United States, the 1830s, were the Jacksonians labor leaders, were they, in some sense, like the press, were they early accessors of the New Deal, semi-Marxists or something?

13:35They said they were in favor of labor. They kept talking about labor all the time. Since Marx, most people think of laborer or laborers as being industrial workers, as assembly body types, construction workers. Labor in the early 19th century, 18th century sense meant anybody who uses personal energy in production, in the final production yet. Anybody who transforms resources into using personal energy. This modern world would mean, not just industrial workers, but the president of the General Motor is one of the assembly workers. Anybody who's using personal energy in the production process as a laborer. So it's already, see, causes all sorts of problems if you're looking at current 20th century terminology in economics, which has 20th century concepts.

14:26Natural resources is also a similar problem. Natural resources are defining how much of the land.

14:35And again, there's, again, a difference here. One is the land includes water, rivers. Fish, when the fish are, includes offshore oil at this point. It doesn't just mean land in the sense that we're used to it. You know, this body of stuff, soil and stuff. Now it will include space, get something out of space, include radio frequencies and all that. All this is land. Land means nature given. So on one hand, it includes much more than we common sense nowadays think of as land. On the other hand, it also doesn't include buildings, for example. This building is not considered land, technically. The building is man-made, so what would be considered land would be the ground underneath the building.

15:22What about cows and things? Does that mean land? That's wild, yeah, I think wild animals. Or land. Domesticated would be something else. I haven't gotten to that yet, what something else is. As soon as man enters into the picture and transforms things, then you have something else. The land is always there for us, we always have some ground to stand on. So land always enters into the picture, but there's also this other, other thing. Another thing, anything, more discussion on this, I don't want to keep talking more time.

16:07Any problem with that? Extra? There's a problem with me right now, because I would distinguish between unowned and owned natural resources but I don't see the distinction between distinguishing between an apple tree and the apples and pears and the piece of land that it grows on, really, I don't really see that. No, those actually happen. I mean, I see certain reasons for distinguishing but not in a general category. Well, apple would be nature-giver. Not if it's growing, if it's a domestic orchard, it's science-like. I know what you're going to see in a minute. No, at this stage, though, the assumption is that the island is unowned. Yeah, and ownership doesn't even come in the picture yet. So it's not. We haven't even defined ownership.

16:53There's only one man on the will. That's right. There's one man. That's inclusive. Right. Precisely. So uninhabited. So everything that's there is land. So everything physical on the island is land. And so it's going to get in underneath it. Yeah, all that's there. The other question I have, and you If you haven't put a word opposite technical knowledge yet, or even a certain... I don't think so. I think we're sticking with that. Because I include that with labor. In the sense that the old idea of labor was to the executives and so on, our laborers too, the inventors and so on, and the technical knowledge and the personality cannot really be distinguished and separated. I think they're both laborers. I mean, they aren't from a Marxist point of view, I agree, but they should.

17:39The problem is that the things about technological knowledge are different from other resources. Once you get it, you're going to lose it. In other words, I wouldn't say it's non-scarce, but once you... It's not that personal energy is consumed, it's used up in time. That's true, technical knowledge is not... Technical knowledge is once you've got it... Once the recipe is being created, it can be passed on. Recipe is not the word for it. Mises uses that. It's a little different. Conceptually, of course, technological knowledge is important. Growth of it and stuff like that. Okay, all I was thinking of is these basic categories of economic resources.

18:25The one is land and the other is labor. And so, technical knowledge, if you're going to split it that way, it would have to go into labor. Obviously nature doesn't have technological knowledge. So, I represent something like that. Okay, another thing, of course, that he finds is this is, I like to start off my classes in microelectronics with what I call the Garden of Eden model. The Garden of Eden, either mythological or actual, there was super abundance. In definition, the Garden of Eden is super abundant. If you want to have a Pepsi trickling down your throat, you wish for it, you snap your fingers, and by God, there it is. That's the Garden of Eden. There are certain logical problems with the Garden of Eden model.

19:10Supposing what I wish for and what this gentleman wished for were a clash. But aside from that, by definition, everything is super abundant. If everything is super abundant, then there's no problem with private property ownership. Matter of fact, no problem with price or scarcity or anything. There's no economics, because if you want something, it's there. If you want a hi-fi set, it's there playing Bach, whatever you want. So that, presumably, mankind was in the Garden of Eden, in some sense, originally, and was kicked out for various sins and heresies. So, what Crusoe faces, of course, starker than what we all face, is the world of scarcity. All things are scarce, all resources, all goods and services, etc. And because they're scarce, you have to allocate, you have to have the values there.

19:57So he has to do all sorts of stuff, has to allocate his time, has to allocate his energy, has to allocate, has to have priorities, do the first things first, and so on and so on. So we live in a world of scarcity. And of course we have less scares, we are more scared to eat less than a slice of croissant obviously, croissant is an extreme scarce problem. He dies tomorrow if he doesn't get food quickly. We're not in that bad shape obviously, but we still have a world of scarcity. If things weren't scarce, everything would be free. It would be like wishing for Pepsi and throwing it in our throat. There are intellectual fashions, I don't want to shock you people, but in an intellectual world our fashion is sort of like ladies hemlines.

20:47Every five years a new gimmick comes out and everybody follows it. And one of the few benefits of advanced age is you see all these things come and go, the same junk comes back ten years later and it drops out. So about ten years ago, during the period of the New Left, for a couple of years there was a big hue and cry, not so much among economists, among some New Left economists, Left Economists, intellectuals, sociologists, people of that ilk, English professors, that we now live in a post-scarcity age, all these things, all this economic stuff about prices and all that, it all was true until 1968, but now this is 1968 by now, we're living in a post-scarcity age and everything is great, we don't need it, all this stuff is now obsolete, so I had a debate one time with a neo-Marxist professor, The conclusion of all this is you have to have socialism, whatever the problem is.

21:46If you live in a post-gear-to-the-age, therefore it would be total unemployment, then we're going to have social removal, something like that. It's kind of nonsense, but anyway. So he was telling me, you're now living in a post-gear-to-the-age, all these economic screws are obsolete. So I said, look, Professor Averill, if you live in a post-gear-to-the-age, why don't you burn your salary check? What's the point of having an income? You know what his answer was? It was unbelievable. Well, it's because I, too, am brainwashed by the capital, what's that like, capital V says. It's rough. Yeah, it's really rough. It's high. So, a few years later, the same people were saying, the post-scarcity thing drops out, the same people were saying, all resources are dying.

22:31Like, in five years, we're not going to have any resources. And therefore we have to socialize. Socialism will cure the post-scarcity age, at least that's the thing at the moment, because it won't be in abundance after then. Right, exactly, it will cure the excess of affluence. So anyway, we live in a world of scarcity, and as the world progresses, things are less scarce, but still there. Okay, so that obviously comes in and almost proves out of action. In fact, action is really, you need action because of scarcity, because you haven't achieved your goals yet. Okay, he's got, he looks around, he's got things to reach the goals, he's got natural resources, he's got personal knowledge, energy, technological knowledge, and these are his resources.

23:25Or means, equal means, to achieve the ends. Resources, means, it's the other way of saying the same thing here. He's got priorities, he's got goals, he has to achieve them, he has to use these resources and allocate them, hopefully in a proper manner. OK, another thing is that totalless takes time, right? Action takes time. No such thing as acting in a timeless banking. So each one of these things will take a different amount of time. We've got to figure out this thing in three hours, six hours, three days, two weeks. So time in the picture, one might think that this is kind of self-evident.

24:10But orthodontic economics or mainstream economics, microeconomics, time washes out, everything is moving around in a timeless universe there's already a key distinction, there's only a half hour of this thing a key distinction between Austrian economics and everybody else namely we incorporate time into the analysis could you always put time along with those other things on the line? resources, personal origins? you have to allocate time, yeah, okay things move through time, actually takes place through time And one of the problems is, in fact by the way, if you talk about randies, one of the problems with randies in theory, which is totally tangential, is that randies tend to think that time is unlimited. There's no problem with allocating time.

25:11And they do one career for 20 years, they move on to another career for another 30 years, so on and so on. There's a certain, there's a timer, sort of, not a problem. Okay. Ah, okay. You must be getting more acutely aware of that than some of us, perhaps. Yes. But there's always, I mean, time is always scarce. And that's the, that's the, anyway. The, OK, so there's another factor which enters in, which again is a thing which is Austrian's for everybody else, namely, life is uncertain. We know things are certain things, we can predict certain things, but it's uncertain. Crusoe might be a hurricane tomorrow with a whole stock of fish or something.

25:59Strawberry's going to wipe that. So we have uncertainty.

26:07So one of the things that again distinguishes the Austrian theory is that the Austrians incorporate uncertainty into the picture and have the analysis at the very beginning. Life is uncertain. Things can change. We don't have perfect knowledge of the future. You know, some things, this gives us, we already have deviations within the Austrian movement. Some Austrians are now going too far, so edging into nihilism. There's another point of saying that we can't know anything about the future, the future is sort of like a blank wall, we can't predict or forecast anything, which I think is around the bend. But basically the Austrian view is that there's no certainty of the future.

26:56knows some things, predicts some things, et cetera, et cetera. In contrast, neoclassical economics or standard textbook economics, which is essentially ball-raising at this point, so.

27:16K. L'Homme Wallach, Swiss economist, wrote in the 1970s, 1880s, his famous work It was published the same year as, I think, 1873, or something around there, in the early 1870s. In Lausanne, Switzerland, neglected during his lifetime, I think, properly so myself, rediscovered by Pareto, who was a brilliant sociologist, a very interesting person anyway, The Italian credo, which has now become more or less standard microeconomics. And many will keep referring to this. And one of the things, which is the inspiration of Eurasians, one of the theories is that everybody's got perfect knowledge.

28:07Perfect knowledge of the present, perfect knowledge of everybody else, perfect knowledge of the future. There's no uncertainty. There's no time either, of course. Oh, time, in a sense, drops out, time becomes, let me put it this way, perfect knowledge, perfect certainty. If you look at it this way, you might think it's little crackers, bunkers, but this is the orthodox mainstream economics at this point. Perfect certainty. If you live in a world, so what does this mean? It means a world without change. We know, or change can be perfectly forecast, which really means without change. Then time becomes something very different from what human beings are experiencing.

28:53Time becomes an endless round of everybody doing the same things. Knowledge is frozen. It's like a freeze frame, okay? If knowledge is frozen, of course everybody gets perfect knowledge eventually, because they don't change. I think Newland was the picture. Anyway, this is the world which the Maurasians depict. And this is why you have all the mathematics, the equations, the diagrams, because if everything is this, there's no change, there's no uncertainty, there's the perfect knowledge, everybody's got perfect knowledge, then you can just crack it out. There's no action. Action really disappears in the Maurasian universe. We'll get to that, spend some time doing it later. So this is a very different kind of economics.

29:39OK, uncertainty then means that each individual person, whoso and everybody else, is an uncertainty bearer. He's got to meet uncertainty. And this function of meeting uncertainty, which we'll explain later on in much more details, called entrepreneurship, he knows his goals. He's more or less of a good inventor of the resources, but now he's got to act on it, and by doing that he's got to forecast, hopefully correctly. He's got to meet conditions and try to achieve them. If he makes too many mistakes, he's dead. In our case, we make too many mistakes, except for monetary losses. So this is the Entrepreneur of the Uncertainty Error.

30:35Another thing about Krusso is given the goal, let's say his goal is getting a gallon of clean water. Given the goal, he wants to achieve the goal as rapidly as possible. Follows the definition of action. If you've got a goal, you'd rather have a gallon of water now than wait two weeks. So, this immediately brings in the Austrian concept of time preference.

31:08There's a lot of hassle about time preference. And basically it means, I think properly understood, it's an extremely important concept. Given the goal, the person prefers getting the goal now than getting it later. Otherwise, it's not really a bill. Somebody else is intervening here. There's also some disputes about that. A characteristic one is something like this. It's now the winter. If you go back to the pre-refrigerator age, you can use ice, ice boxes. In the winter, you don't need ice boxes. You don't need it very much. You really need it in the summer. Therefore, if this is December, you'd You'd prefer getting the ice in July than we're getting it now.

31:54So doesn't this contradict the concept of time preference, the preferring something now to later? The answer is it doesn't contradict it because it's not the same problem. In other words, we're assuming, we're given the goal, we're given the good, the thing itself, and the resource itself, the object that we're valuing. We're assuming a homogeneous object. where they're assuming it's the same serviceability, the same usefulness. Otherwise, it's a different object. So that ice in the summer becomes a different good, even though it's the same physical object, the same cube. It's a different good in the summer as it is in the winter. It performs different functions. It's much more important in the summer. There's nothing to do with time. Just let the, it's hotter in the summer, it may need ice more. So the answer to that is to believe they're two different products.

32:41Given the product, given the good, given the thing in the, and given the equal usefulness, people prefer getting it now and getting it later. Surely that's only true if the amount of labor to get it is the same. I mean, for example, if you've got a choice of either paying something now or letting someone buy it for you with charge tomorrow, you don't need it till the day after. Then, you know, so I think labor, you know, No, it's the total amount of resources used in time is just a resource of the same. I'm sure you're balancing the end of a goal with a value scale, what you have to do to get it. Absolutely, very sure. It's one of the keys. People prefer less labor.

33:26Right. I want it easy. Right. Any other comments on Mises? I'm going to make this into a monologue instead of a temptation.

33:45All right, a good, by the way, we have to define a good, that's important. It's always a use. A good is a thing, either a commodity or a service, either tangible or intangible, which consists of an entity, which is valued by somebody, obviously, otherwise not a good. Either by Crusoe or by us or somebody. An entity with the system of n homogeneous units. This is related to the ice problem, let's see. The n can be anything from 1 up to 100 million.

34:31The idea is that the units have to be homogeneous. In other words, they're the same. So if you have a certain grade of paperclips, certain size paperclips, you have a box of 50 paperclips, each paperclip is a unit, or the box is a unit, units can vary, but the idea is that each unit is homogeneous to the other unit, yeah? Well, Mr. President, your illustration about the ice cream contradicts the idea that anything could be colder than this. You know, if you've got a kilowatt-hour of electricity at 3.30 in the afternoon on a cold winter day when everybody's watching a football game, it's quite a different thing from a kilowatt-hour of electricity you say at 2 a.m. in the morning in the springtime.

35:17But it's never the same. I don't think it's ever the same. I mean, the ice cube in July will be any given ice cube. See, the thing is, it's up to the person. It's up to the individual. Here I am. I don't care which block of ice. Let's say it's the same size. It's the same hour. I'm buying a block of ice. I don't care which block of ice I'm getting. It's homogeneous to me. It's physically homogeneous, and it's homogeneous to me. But you can't tell, you see, as an outside observer, an economist, or a statistician, you can't really be sure that something's ingenious, because each individual, different individuals might have different valuations on them. That's the point. See, one of the things about Austrian economics is that it provides very, and one of the reasons why it's not popular among economists is it provides very little room for economists to do much.

36:09As economists can teach this, can explain the beauty of it, We can't really, we can't advise government, there are various reasons to get down to it, probably still already, but we can't advise businessmen either. We haven't got really any, there's very little job opportunities for Austrian economists, except for teaching, and writing, and whatever. And so the economist doesn't have that, the outside observer doesn't have that much of a role, because you can't really say that, multi-technical, for example, and neoclassical economics is totally different, they say this is the objective unit, and therefore it's the same. Good. Let's take, I think John Stuart Mill, and this is, and was classically economist as well as philosopher, lousy philosopher, not too hot on classically economist either.

36:54Anyway, he's a very bright guy, totally screwed up. Mill is looking at the market, he has a concept called economic man, very pernicious concept, and he's looking at the market, he sees that, according to the economic analysis, Goods tend to have the same price. We haven't gotten the price yet, but it's pretty clear now that if you have a block of ice, some of these two people, three or four ice dealers in the same block, let's say, the prices will tend to be about equal because of those... Zeke over here is selling ice for, you know, whatever, $50 a pound. I don't know how you sell ice anymore. $50 a cube. Somebody else is selling it for $30 a cube. Zeke is not going to last very long.

37:40I mean, sometimes, you have to lower the price in order to stay in business. So Miller's observing the world, and he's saying, well, there are situations where they have different prices for the same good continue almost permanently. Therefore, it's irrational. Every one of these people are non-economic men. They're wrong, they're whatever. You mean they're just not following this idea? Well, yeah. And the point of it, he was looking at the physical object There's extensions to it. I mean, the one I used to have to charge more money might give premium delivery service, the other you have to get out. The good is all those things together.

38:39There's a whole bunch of stuff that's involved, which most people don't look at. For example, New York, they have a very posh restaurant with food tests, probably the poshest in the country. And they sell ice cream, let's say, let's assume, probably it's not the same ice cream. Let's assume for a minute, it's the same ice cream as McDonald's or Breyer's or something, a fast food store. And yet, you know, the test will charge 10 times as much McDonald's for the same ice cream. And the reason is you're not just buying the ice cream, you're buying the whole ambiance, you're buying the servile waiter, you're buying the expectation of a baby scene, Jackie Onassis at the next table, and stuff like that, because you don't get it at McDonald's. You're also getting a whole package of chairs up here. Exactly. Precisely. You're buying a whole package. A whole bag of ice cream masses.

39:24Precisely. In that case though, the good is the ice cream, period. That's the only thing that can be defined as a good. No, no, in this case the good is the whole package. The reason why it's a different price, and it stays a different price, is you're buying the ice cream plus the whole service, the whole ambiance. It's a different good. Yeah. In other words, the ice cream, even though it might be the same physical ice cream. It's simply not comparable to what the people hold at all. I'm just trying to understand this. Yeah. Ice cream is a good. When you add all these other things to where you buy your ice cream, that's also a good, but it's not the same good as just ice cream. The ice cream is the whole package. I mean, you don't buy the pure ice cream.

40:12You never do. Ice cream themselves never go in the same package. It's more convenient to assume it's the same good, but everything else washes out. But then how can this definition have any meaning at all then? Because that's always the case. Well in fact we're going back to what he was saying about ice cubes. Ice cube in winter is not a lot of value to you because all you do is pretend you're looking outside on the branch instead. But in summer you can't do that. So that's your utility for ice cream. I don't have any difficulty understanding why things have different values. I'm trying to understand the definition of good, because that's used all the time.

40:59This implies, when you say an entity consisting of n homogeneous units, that's supposed to imply that goods are the same in the market, right? We have ice, and it's ice. Period. You might say that those glasses of water tomorrow when nobody's here is a different good, but right now there's seven units of homogeneous supply. These six glasses, I don't care which glasses I'm taking off, these are homogeneous to me, at least. If you were to want to nitpick, there's a degree beyond which, because even the glass that you've got your hand on is closer to you and it is slightly better for you in the other one that's further away, so there's never, what I'm saying is because they are physically identifiable units, they're never exactly the same.

41:46The thing is in life, the thing is mostly, yeah, in life it washes out, you don't really care about whether it's two inches or six inches. It's up to the individual again, whether he cares or doesn't care, that's the point. So I mean, in other words, if you have 5,000 paperclips all the same size in a bowl, you know, I don't care about which paperclips are homogenous, and most people would be homogenous. I understand that. I'm trying to understand the definition of good, as it's going to relate to our discussion about economics, because in other forms of economics, assume that ice cream is ice cream, and so it should have the same value everywhere, if every person cracked, whereas Austrian...

42:35should recognize that a good in a given transaction is completely different than it can be based on the value judge. See, the point is, what you're doing is you're diminishing the role of the outside economist, the observer, who's trying to figure out what's going on. You're less able to figure out what's going on. It's going to be a life situation. So that you can't then say it's irrational. I see this, I'll give you an example, we had the first Austrian composer, please say. I was just going to say, maybe the distinction is that you want to describe a good as a physical object. That's the only way an objective observer can describe it, that's the only way these other economists could appreciate it. Ice cream is what is in this thing. While Austrian would say, you are observing the entire, all characteristics of it, all benefits of it, possible in other words, which is only something you can observe and it's something that no one can observe.

43:30Well, it depends on the individual. See, in most cases, Mel would be right. In most cases. I mean, empirically. But it doesn't have to be. Let me give you an example. The first Austrian conference, the first modern Austrian conference outside of old Austria, the first one in modern time, was held in 1973 at a wild place. 1974. I think it was 1974. Summer of 1974. A crazy place called Royalton College of Vermont. It's in southeastern Vermont, it's a place which is more or less of the income and standard living of 1850. It's got no supermarkets, it's got no movies, it's sort of like a slice out of the happily forgotten past. The college was a fake college, it was a weird town, it was a college where an entrepreneur was essentially a crook.

44:20So it was a fake holiday, a fake law school, a fake hotel, anyway, it's a hilarious thing to sometimes go into the anecdotes of this ambiance. So one of the things was that they had two grocery stores, a teeny town with a population of about 400. It's like a Potemkin village, there's a big village green, or common, and houses on the outside and nothing else beyond them. So like a Potemkin village in a movie, you have these fake houses, push them and make them fall out. The two grocery stores, right across the street from each other, they're like 10 feet, and we observe that the prices are totally different, the same product, one store, I don't know, the same cake of soap, charging 50 cents, the other store is 25 or something, so this is getting mind-blowing here, I don't know what's going on, we're supposed to be economists, how do we analyze this?

45:14So somebody found him, he finally found one of the villagers there. And said, how come this is going on, how come the Zeke's store over here is charging different prices than the Jake's? So a lot of the things in this town are two groups of people, everybody, there's two groups of people in town, each group hates each other's guts. One group only goes to the Zeke's, the other group only goes to Jake's, and none of them will cross-compete, and no marginal buyers will shift from one to the other. That's a non-competing grocery store. Well, so that happens. I mean, it's a little nutty, but I mean, it's far of life. So usually, the price of the cell will be the same. In this peculiar situation where everybody's got values where it's Zeke's. I must go to Zeke's. Going to Zeke's is somehow more important than the actual price of the product.

45:59Then the price is different. So that's what happens. And generally, it's true, the price of the same thing will be the same.