Capitalism · A Treatise on Economics by Reisman, George -- Read -- Imperial Library of Trantor

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LIST OF FIGURES LIST OF TABLES PREFACE Notes INTRODUCTION 1. Procapitalist Economic Thought, Past and Present 2. Pseudoeconomic Thought Marshallian Neoclassical Economics: The Monopoly Doctrine and Keynesianism Mathematical Economics 3. Overview of This Book Notes PART ONE THE FOUNDATIONS OF ECONOMICS CHAPTER 1. ECONOMICS AND CAPITALISM PART A. THE NATURE AND IMPORTANCE OF ECONOMICS 1. Economics, the Division of Labor, and the Survival of Material Civilization 2. Further Major Applications of Economics Solving Politico-Economic Problems Understanding History Implications for Ethics and Personal Understanding Economics and Business Economics and the Defense of Individual Rights PART B. CAPITALISM 1. The Philosophical Foundations of Capitalism and Economic Activity 2. Capitalism and Freedom Freedom and Government Freedom as the Foundation of Security The Indivisibility of Economic and Political Freedom The Rational Versus the Anarchic Concept of Freedom The Decline of Freedom in the United States The Growth of Corruption as the Result of the Decline of Freedom 3. Capitalism and the Origin of Economic Institutions 4. Capitalism and the Economic History of the United States 5. Why Economics and Capitalism Are Controversial The Assault on Economic Activity and Capitalism The Prevailing Prescientific Worldview in the Realm of Economics Economics Versus Unscientific Personal Observations Economics Versus Altruism Economics Versus Irrational Self-Interest Economics Versus Irrationalism 6. Economics and Capitalism: Science and Value Notes CHAPTER 2. WEALTH AND ITS ROLE IN HUMAN LIFE 1. Wealth and Goods 2. Economics and Wealth 3. The Limitless Need and Desire for Wealth Human Reason and the Scope and Perfectibility of Need Satisfactions Progress and Happiness The Objectivity of Economic Progress: A Critique of the Doctrines of Cultural Relativism and Conspicuous Consumption The Objective Value of a Division-of-Labor, Capitalist Society 4. The Law of Diminishing Marginal Utility and the Limitless Need for Wealth 5. Applications of the Law of Diminishing Marginal Utility Resolution of the Value Paradox Determination of Value by Cost of Production Determination of Consumer Spending Patterns Say’s Law 6. “Scarcity” and the Transformation of Its Nature Under Capitalism 7. Time Preference and the Scarcity of Capital The Foundations of Time Preference The Scarcity of Capital A Word on Capital Accumulation and the Rate of Return Time Preference, Rationality, and Freedom 8. Wealth and Labor The Scarcity of Labor and Its Ineradicability Notes CHAPTER 3. NATURAL RESOURCES AND THE ENVIRONMENT PART A. NATURAL RESOURCES 1. The Limitless Potential of Natural Resources The Energy Crisis 2. The Law of Diminishing Returns The Law of Diminishing Returns and the Limitless Potential of Natural Resources Diminishing Returns and the Need for Economic Progress 3. Conservationism: A Critique PART B. THE ECOLOGICAL ASSAULT ON ECONOMIC PROGRESS 1. The Hostility to Economic Progress 2. The Claims of the Environmental Movement and Its Pathology of Fear and Hatred The Actual Nature of Industrial Civilization The Environmental Movement’s Dread of Industrial Civilization The Toxicity of Environmentalism and the Alleged Intrinsic Value of Nature The Alleged Pollution of Water and Air and Destruction of Species The Alleged Threat from Toxic Chemicals, Including Acid Rain and Ozone Depletion The Dishonesty of the Environmentalists’ Claims The Alleged Threat of “Global Warming” Why Economic Activity Necessarily Tends to Improve the Environment 3. The Collectivist Bias of Environmentalism Environmentalism and Irrational Product Liability Environmentalism and the Externalities Doctrine 4. The Economic and Philosophic Significance of Environmentalism 5. Environmentalism, the Intellectuals, and Socialism 6. Environmentalism and Irrationalism The Loss of the Concept of Economic Progress Irrational Skepticism The Destructive Role of Contemporary Education The Cultural Devaluation of Man Notes PART TWO THE DIVISION OF LABOR AND CAPITALISM CHAPTER 4. THE DIVISION OF LABOR AND PRODUCTION 1. The Division of Labor and the Productivity of Labor The Multiplication of Knowledge The Benefit from Geniuses Concentration on the Individual’s Advantages Geographical Specialization Economies of Learning and Motion The Use of Machinery 2. The Division of Labor and Society 3. Rebuttal of the Critique of the Division of Labor 4. Universal Aspects of Production Notes CHAPTER 5. THE DEPENDENCE OF THE DIVISION OF LABOR ON CAPITALISM I PART A. THE NATURE OF THE DEPENDENCIES 1. Dependence of the Division of Labor on Private Ownership of the Means of Production Socialism and Collectivism Versus Economic Planning Capitalist Planning and the Price System 2. The Dependence of the Division of Labor on Saving and Capital Accumulation 3. The Dependence of the Division of Labor on Exchange and Money 4. The Dependence of the Division of Labor on Economic Competition 5. The Dependence of the Division of Labor on the Freedom of Economic Inequality Egalitarianism and the Abolition of Cost: The Example of Socialized Medicine Government Intervention, Democracy, and the Destruction of the Individual’s Causal Role Summary PART B. ELEMENTS OF PRICE THEORY: DEMAND, SUPPLY, AND COST OF PRODUCTION 1. The Meaning of Demand and Supply 2. The Law of Demand The Concept of Elasticity of Demand Seeming Exceptions to the Law of Demand The Derivation of Supply Curves Limitations of Geometrical Analysis Confusions Between Supply and Cost The Circularity of Contemporary Economics’ Concept of Demand Notes CHAPTER 6. THE DEPENDENCE OF THE DIVISION OF LABOR ON CAPITALISM II: THE PRICE SYSTEM AND ECONOMIC COORDINATION PART A. UNIFORMITY PRINCIPLES 1. The Uniformity-of-Profit Principle and Its Applications Keeping the Various Branches of Industry in Proper Balance The Power of the Consumers to Determine the Relative Size of the Various Industries The Impetus to Continuous Economic Progress Profits and the Repeal of Price Controls The Effect of Business Tax Exemptions and Their Elimination Additional Bases for the Uniformity-of-Profit Principle Permanent Inequalities in the Rate of Profit 2. The Tendency Toward a Uniform Price for the Same Good Throughout the World Why the Arab Oil Embargo Would Not Have Been a Threat to a Free Economy Tariffs, Transportation Costs, and the Case for Unilateral Free Trade 3. The Tendency Toward Uniform Prices Over Time: The Function of Commodity Speculation Rebuttal of the Charge That the Oil Shortages of the 1970s Were “Manufactured” by the Oil Companies 4. The Tendency Toward Uniform Wage Rates for Workers of the Same Degree of Ability Equal Pay for Equal Work: Capitalism Versus Racism 5. Prices and Costs of Production PART B. ALLOCATION PRINCIPLES 1. The General Pricing of Goods and Services in Limited Supply 2. The Pricing and Distribution of Consumers’ Goods in Limited Supply 3. The Pricing and Distribution of Factors of Production in Limited Supply 4. The Free Market’s Efficiency in Responding to Economic Change A Rational Response to the Arab Oil Embargo 5. The Economic Harmonies of Cost Calculations in a Free Market More on the Response to the Oil Embargo Appendix to Chapter 6: The Myth of “Planned Obsolescence” Notes CHAPTER 7. THE DEPENDENCE OF THE DIVISION OF LABOR ON CAPITALISM III: PRICE CONTROLS AND ECONOMIC CHAOS PART A. PRICE CONTROLS AND SHORTAGES 1. Price Controls and Inflation Price Controls No Remedy for Inflation Inflation Plus Price Controls 2. Shortages 3. Price Controls and the Reduction of Supply a. The Supply of Goods Produced b. The Supply of Goods in a Local Market The Natural Gas Crisis of 1977 The Agricultural Export Crisis of 1972–73 Price Controls as a Cause of War c. The Supply of Goods Held in Storage Hoarding and Speculation Not Responsible for Shortages Rebuttal of the Accusation That Producers Withhold Supplies to “Get Their Price” Price Controls and the “Storage” of Natural Resources in the Ground d. The Supply of Particular Types of Labor and Particular Products of a Factor of Production e. Price Controls and the Prohibition of Supply The Destruction of the Utilities and the Other Regulated Industries 4. Ignorance and Evasions Concerning Shortages and Price Controls Inflation and the Appearance of High Profits The Destructionist Mentality A Defense of Inventory Repricing The Campaign Against the Profits of the Oil Companies How the U.S. Government, Not the Oil Companies, Caused the Oil Shortage The Conspiracy Theory of Shortages Rebuttal of the Charge That Private Firms “Control” Prices PART B. FURTHER EFFECTS OF PRICE CONTROLS AND SHORTAGES 1. Consumer Impotence and Hatred Between Buyers and Sellers How Repeal of Rent Controls Would Restore Harmony Between Landlords and Tenants 2. The Impetus to Higher Costs The Administrative Chaos of Price Controls 3. Chaos in the Personal Distribution of Consumers’ Goods 4. Chaos in the Geographical Distribution of Goods Among Local Markets 5. Chaos in the Distribution of Factors of Production Among Their Various Uses Hoarding 6. Shortages and the Spillover of Demand Why Partial Price Controls Are Contrary to Purpose How Price Controls Actually Raise Prices The Absurdity of the Claim That Price Controls “Save Money” Applications to Rent Controls How Repeal of Our Price Controls on Oil Reduced the Price Received by the Arabs PART C. UNIVERSAL PRICE CONTROLS AND THEIR CONSEQUENCES 1. The Tendency Toward Universal Price Controls 2. Universal Price Controls and Universal Shortages Excess Demand and Controlled Incomes 3. The Destruction of Production Through Shortages The Prosperity Delusion of Price Controls: The World War II “Boom” 4. Socialism on the Nazi Pattern Notes CHAPTER 8. THE DEPENDENCE OF THE DIVISION OF LABOR ON CAPITALISM IV: SOCIALISM, ECONOMIC CHAOS, AND TOTALITARIAN DICTATORSHIP PART A. THE CHAOS OF SOCIALISM 1. Socialism 2. The Essential Economic Identity Between Socialism and Universal Price Controls 3. The Myth of Socialist Planning—The Anarchy of Socialist Production The Soviet Quota System Shortages of Labor and Consumers’ Goods Under Socialism 4. Further Economic Flaws of Socialism: Monopoly, Stagnation, Exploitation, Progressive Impoverishment 5. Socialism’s Last Gasp: The Attempt to Establish a Socialist Price System and Why It Is Impossible PART B. THE TYRANNY OF SOCIALISM 1. The Tyranny of Socialism 2. The Necessity of Evil Means to Achieve Socialism 3. The Necessity of Terror Under Socialism 4. The Necessity of Forced Labor Under Socialism Forced Labor in the Soviet Union The Imposition of Forced Labor in the United States 5. Socialism as a System of Aristocratic Privilege and a Court Society 6. From Forced Labor to Mass Murder Under Socialism 7. From Socialism to Capitalism: How to Privatize Communist Countries Notes CHAPTER 9. THE INFLUENCE OF THE DIVISION OF LABOR ON THE INSTITUTIONS OF CAPITALISM PART A. PRIVATE OWNERSHIP OF THE MEANS OF PRODUCTION 1. The General Benefit from Private Ownership of the Means of Production The Benefit of Capital to the Buyers of Products The Benefit of Capital to the Sellers of Labor The Direct Relationship Between the General Benefit from Capital and Respect for the Property Rights of Capitalists 2. The Capitalists’ Special Benefit from Private Ownership of the Means of Production Implications for Redistributionism Destructive Consequences of Government Ownership Profit Management Versus Bureaucratic Management The “Successful” Nationalizations of Oil Deposits: A Rebuttal 3. The General Benefit from the Institution of Inheritance The Destructive Consequences of Inheritance Taxes 4. The General Benefit from Reducing Taxes on the “Rich” 5. Private Ownership of Land and Land Rent How Private Ownership of Land Reduces Land Rent Land Rent and Environmentalism The Violent Appropriation Doctrine The Demand for Land Reform 6. Private Property and Territorial Sovereignty A Defense of Foreign “Exploitation” of Natural Resources PART B. ECONOMIC INEQUALITY 1. Economic Inequality Under Capitalism 2. Critique of the Marxian Doctrine on Economic Inequality Economic Inequality and the Law of Diminishing Marginal Utility Economic Inequality and the Normal Curve 3. The “Equality of Opportunity” Doctrine: A Critique Education and the Freedom of Opportunity Everyone’s Interest in the Freedom of Opportunity PART C. ECONOMIC COMPETITION 1. The Nature of Economic Competition 2. The Short-Run Loss Periods The Enemies of Competition as the True Advocates of the Law of the Jungle 3. Economic Competition and Economic Security 4. The Law of Comparative Advantage International Competition and Free Labor Markets Comparative Advantage Versus the Infant-Industries Argument How the Less Able Can Outcompete the More Able in a Free Labor Market 5. The Pyramid-of-Ability Principle Freedom of Competition and the General Gain from the Existence of Others 6. The Population Question Worldwide Free Trade Free Trade and the Economic Superiority of the United States Over Western Europe International Free Trade and Domestic Laissez Faire The Birth Rate 7. Free Immigration Refutation of the Arguments Against Free Immigration Free Immigration and International Wage Rates Capital Export 8. The Harmony of Interests in the Face of Competition for Limited Money Revenues Notes CHAPTER 10. MONOPOLY VERSUS FREEDOM OF COMPETITION 1. The Meaning of Freedom and of Freedom of Competition High Capital Requirements as an Indicator of Low Prices and the Intensity of Competition 2. The Political Concept of Monopoly and Its Application Monopoly Based on Exclusive Government Franchises Licensing Law Monopoly Tariff Monopoly The Monopolistic Protection of the Inefficient Many Against the Competition of the More Efficient Few Monopoly Based on Minimum-Wage and Prounion Legislation: The Exclusion of the Less Able and the Disadvantaged Government-Owned and Government-Subsidized Enterprises as Monopoly The Antitrust Laws as Promonopoly Legislation Socialism as the Ultimate Form of Monopoly 3. Further Implications of the Political Concept of Monopoly: High Costs Rather Than High Profits Patents and Copyrights, Trademarks and Brandnames, Not Monopolies All Monopoly Based on Government Intervention; Significance of Monopoly 4. The Economic Concept of Monopoly 5. The Alleged Tendency Toward the Formation of a Single Giant Firm Controlling the Entire Economic System: A Rebuttal Incompatibility With the Division of Labor—Socialism as the Only Instance of Unlimited Concentration of Capital Inherent Limits to the Concentration of Capital Under Capitalism Government Intervention as Limiting the Formation of New Firms The Incentives for Uneconomic Mergers Provided by the Tax System In Defense of “Insider Trading” 6. Economically Sound Mergers The Trust Movement 7. The Predatory-Pricing Doctrine More Than One Firm in an Industry as the Normal Case “Predatory Pricing” in Reverse: The Myth of Japanese “Dumping” The Chain-Store Variant of the Predatory-Pricing Doctrine Contract Pricing The Predatory-Pricing Doctrine and the Inversion of Economic History The Myth of Predation With Respect to Suppliers The Myth of Standard Oil and the South Improvement Company 8. Marginal Revenue and the Alleged “Monopolistic Restriction” of Supply Competitors’ and Potential Competitors’ Costs—Ultimately, Legal Freedom of Entry—as Setting the Upper Limit to Prices in a Free Market Ricardo and Böhm-Bawerk on Cost of Production Versus the Elasticity of Demand Pricing Under Patents and Copyrights Contract Pricing and Radical Privatization Private Streets Eminent Domain 9. Cartels Cartels and Government Intervention 10. “Monopoly” and the Platonic Competition of Contemporary Economics The Doctrine of Pure and Perfect Competition Implications of Marginal-Cost Pricing The Alleged Lack of “Price Competition” 11. A Further Word on Cost of Production and Prices Notes CHAPTER 11. THE DIVISION OF LABOR AND THE CONCEPT OF PRODUCTIVE ACTIVITY PART A. THE ROLE OF MONEYMAKING IN PRODUCTIVE ACTIVITY 1. The Division of Labor and Productive Activity The Doctrine That Only Manual Labor Is Productive 2. Productive Activity and Moneymaking Consumptive Production 3. Productive Expenditure and Consumption Expenditure 4. Capital Goods and Consumers’ Goods Classification of Capital Goods and Consumers’ Goods Not Based on Physical Characteristics Government a Consumer Producers’ Labor and Consumers’ Labor Producers’ Loans and Consumers’ Loans Government Borrowing Capital Goods and Consumers’ Goods Internally Produced; Other Revenues Capital and Wealth Capital Value and Investment Productive Expenditure and Capital Value Common Confusions About Capital Goods Answers to Misconceptions of the Concepts Presented Adam Smith on “Productive and Unproductive Labor” 5. Critique of the Concept of Imputed Income 6. Critique of the Opportunity-Cost Doctrine PART B. THE PRODUCTIVE ROLE OF BUSINESSMEN AND CAPITALISTS 1. The Productive Functions of Businessmen and Capitalists Creation of Division of Labor Coordination of the Division of Labor Improvements in the Efficiency of the Division of Labor 2. The Productive Role of Financial Markets and Financial Institutions The Specific Productive Role of the Stock Market 3. The Productive Role of Retailing and Wholesaling 4. The Productive Role of Advertising PART C. BUSINESSMEN AND CAPITALISTS: CLASSICAL ECONOMICS VERSUS THE MARXIAN EXPLOITATION THEORY 1. The Association Between Classical Economics and the Marxian Exploitation Theory 2. Correcting the Errors of Adam Smith: A Classical-Based Critique of the Conceptual Framework of the Exploitation Theory Smith’s Confusion Between Labor and Wage Earning The Conceptual Framework of the Exploitation Theory Smith’s Failure to See the Productive Role of Businessmen and Capitalists and of the Private Ownership of Land The Primacy-of-Wages Doctrine A Rebuttal to Smith and Marx Based on Classical Economics: Profits, Not Wages, as the Original and Primary Form of Income Further Rebuttal: Profits Attributable to the Labor of Businessmen and Capitalists Despite Their Variation With the Size of the Capital Invested A Radical Reinterpretation of “Labor’s Right to the Whole Produce” Implications for the Incomes of “Passive” Capitalists Acceptance of the Conceptual Framework of the Exploitation Theory by Its Critics 3. Necessary Revisions in Classical Economics 4. The Labor Theory of Value of Classical Economics Harmonization of the Labor Theory of Value With Supply and Demand and the Productive Role of Businessmen and Capitalists Other Classical Doctrines and the Rise in Real Wages Classical Economics’ Limitations on the Labor Theory of Value The Actual Significance of Quantity of Labor in Classical Economics 5. The “Iron Law of Wages” of Classical Economics Diminishing Returns and the Malthusian Influence Ricardo’s Reservations Adam Smith’s Mistaken Belief in the Arbitrary Power of Employers Over Wage Rates Ricardo’s Confusions Concerning the “Iron Law of Wages” The Actual Meaning Ricardo Attached to “A Fall in Wages” Classical Economics’ Mistaken Denial of the Ability to Tax Wage Earners 6. Marxian Distortions of Classical Economics; The Final Demolition of the Exploitation Theory Notes PART THREE THE PROCESS OF ECONOMIC PROGRESS CHAPTER 12. MONEY AND SPENDING 1. The Quantity Theory of Money The Quantity Theory of Money as the Explanation of Rising Prices 2. The Origin and Evolution of Money and the Contemporary Monetary System The Potential Spontaneous Remonetization of the Precious Metals The Government and the Banking System 3. The Quantity of Money and the Demand for Money Changes in the Quantity of Money as the Cause of Changes in the Demand for Money 4. The Demand for Money: A Critique of the “Balance of Payments” Doctrine The Balance of Payments Doctrine and Fiat Money The Balance of Payments Doctrine Under an International Precious Metal Standard Inflation as the Cause of a Gold Outflow Unilateral Free Trade and the Balance of Trade 5. Invariable Money Invariable Money and the Velocity of Circulation The Contribution of the Concept of Invariable Money to Economic Theory Notes CHAPTER 13. PRODUCTIONISM, SAY’S LAW, AND UNEMPLOYMENT PART A. PRODUCTIONISM Productionism Versus the Anti-Economics of Consumptionism 1. Depressions and Alleged “Overproduction” 2. Machinery and Unemployment 3. Alleged Inherent Group Conflicts Over Employment 4. Make-Work Schemes and Spread-the-Work Schemes 5. War and Government Spending 6. Population Growth and Demand 7. Imperialism and Foreign Trade 8. Parasitism as an Alleged Source of Gain to Its Victims 9. Advertising as Allegedly Fraudulent but Economically Beneficial 10. Misconception of the Value of Technological Progress 11. Increases in Production and Alleged Deflation 12. Consumptionism and Socialism PART B. SAY’S (JAMES MILL’S) LAW 1. Monetary Demand and Real Demand 2. The Referents of Say’s Law and Its Confirmation by Cases Apparently Contradicting It 3. Partial, Relative Overproduction Say’s Law and Competition 4. Say’s Law and the Average Rate of Profit Production and the Fallacy of Composition 5. Falling Prices Caused by Increased Production Are Not Deflation The Anticipation of Falling Prices Economic Progress and the Prospective Advantage of Future Investments Over Present Investments Falling Prices and Accumulated Stocks Falling Prices Resulting from a Larger Supply of Labor PART C. UNEMPLOYMENT 1. The Free Market Versus the Causes of Mass Unemployment Full Employment, Profitability, and Real Wages Government Interference 2. Unemployment and the 1929 Depression 3. Unemployment, the New Deal, and World War II Why Inflation Cannot Achieve Full Employment Inflation Plus Price and Wage Controls World War II as the Cause of Impoverishment in the United States Prosperity Based on the Return of Peace A Rational Full-Employment Policy Appendix to Chapter 13: Inventories and Depressions Inventories and Capital “Excess” Inventories, Malinvestment, and the Deficiency of Inventories Inflation and Credit Expansion as the Cause of Malinvestment in Inventories Why “Excess” Inventories and Monetary Contraction Are Associated Notes CHAPTER 14. THE PRODUCTIVITY THEORY OF WAGES PART A. THE MARXIAN EXPLOITATION THEORY 1. The Influence of the Exploitation Theory 2. Marx’s Distortions of the Labor Theory of Value Implications for Value Added and Income Formation 3. Marx’s Version of the Iron Law of Wages The Rate of Exploitation Formula 4. Implications of the Exploitation Theory PART B. THE PRODUCTIVITY THEORY OF WAGES 1. The Irrelevance of Worker Need and Employer Greed in the Determination of Wages 2. Determination of Real Wages by the Productivity of Labor 3. The Foundations of the Productivity of Labor and Real Wages: Capital Accumulation and Its Causes Saving as a Source of Capital Accumulation Technological Progress as a Source of Capital Accumulation The Reciprocal Relationship Between Capital Accumulation and Technological Progress The Economic Degree of Capitalism, the Wage “Share,” and Real Wages Other Factors, Above All Economic Freedom and Respect for Property Rights, as Sources of Capital Accumulation The Undermining of Capital Accumulation and Real Wages by Government Intervention The Nonsacrificial Character of Capital Accumulation Under Capitalism Appendix to Section 3: An Analytical Refinement Concerning the Rate of Economic Progress 4. The Productivity Theory of Wages and the Interpretation of Modern Economic History The Cause of Low Wages and Poor Working Conditions in the Past How Real Wages Rose and the Standard of Living Improved 5. A Rise in the Productivity of Labor as the Only Possible Cause of a Sustained, Significant Rise in Real Wages The Futility of Raising Money Wage Rates by Means of an Increase in the Quantity of Money or Decrease in the Supply of Labor The Futility of a Rise in the Demand for Labor Coming at the Expense of the Demand for Capital Goods The Futility of Raising the Demand for Labor by Means of Taxation The Limited Scope for Raising Real Wages Through a Rise in the Demand for Labor 6. Critique of Labor and Social Legislation Redistributionism Labor Unions Minimum-Wage Laws Maximum-Hours Legislation Child-Labor Legislation Forced Improvements in Working Conditions 7. The Employment of Women and Minorities 8. The Productivity Theory of Wages and the Wages-Fund Doctrine 9. The Productivity Theory of Wages Versus the Marginal-Productivity Theory of Wages The Productivity Theory of Wages and the Effect of Diminishing Returns Notes CHAPTER 15. AGGREGATE PRODUCTION, AGGREGATE SPENDING, AND THE ROLE OF SAVING IN SPENDING Spending Not a Measure of Output Shortcomings of Price Indexes 1. Gross National Product and the Issue of “Double Counting”: A Is A Versus A Is A+ 2. The Role of Saving and Productive Expenditure in Aggregate Demand The Demand for A Is the Demand for A The Demand for Consumers’ Goods and the Demand for Factors of Production as Competing Alternatives Compatibility With the Austrian Theory of Value Application to the Critique of the Keynesian Multiplier Doctrine Saving Versus Hoarding Saving as the Source of Most Spending The “Macroeconomic” Dependence of the Consumers on Business Saving as the Source of Increasing Aggregate Demand, Both Real and Monetary Saving as the Source of Rising Consumption 3. Aggregate Economic Accounting on an Aristotelian Base The Consumption Illusion of Contemporary National-Income Accounting Gross National Revenue More on the Critique of the Multiplier 4. Importance of Recognizing the Separate Demand for Capital Goods for the Theory of Capital Accumulation and the Theory of National Income The Inverse Relationship Between National Income and Economic Progress in an Economy With an Invariable Money Overthrow of the Keynesian Doctrines of the Balanced-Budget Multiplier and the Conservatives’ Dilemma Notes CHAPTER 16. THE NET-CONSUMPTION/NET-INVESTMENT THEORY OF PROFIT AND INTEREST PART A. THE POSITIVE THEORY 1. The Nature and Problem of Aggregate Profit The Treatment of Interest The Rate of Profit Not Based on Demand and Supply of Capital, but on the Difference Between the Demand for Products and the Demand for Factors of Production Determinants of the Average Rate of Profit in the Economic System Different from Determinants of the Rate of Profit of the Individual Company or Industry Critique of the Doctrine That the Interest Rate on Government Bonds Expresses the Pure Rate of Return to Which Risk Premiums Are Added The Path of Explanation: Net Consumption and Net Investment The Problem of Aggregate Profit: Productive Expenditure and the Generation of Equivalent Sales Revenues and Costs 2. Net Consumption and the Generation of an Excess of Sales Revenues Over Productive Expenditure Net Consumption: Its Other Sources, Wider Meaning, and Relationship to the Saving of Wage Earners Confirming the Critique of the Exploitation Theory 3. The Net-Consumption Theory Further Considered Why Businessmen and Capitalists Cannot Arbitrarily Increase the Rate of Net Consumption and the Rate of Profit The Net-Consumption Rate and the Gravitation of Relative Wealth and Income Accumulated Capital as a Determinant of Net Consumption An Explanation of High Saving Rates Out of High Incomes Net Consumption and Time Preference 4. Net Investment as a Determinant of Aggregate Profit and the Average Rate of Profit Net Investment Versus Negative Net Consumption The Prolongation of Net Investment Under an Invariable Money Net Investment as the Result of the Marginal Productivity of Capital Exceeding the Rate of Profit Net Investment as a Self-Limiting Phenomenon Capital Intensification and the Tendency Toward the Disappearance of Net Investment Under an Invariable Money The Process of Capital Intensification 5. The Addition to the Rate of Profit Caused by Increases in the Quantity of Money The Impact of Increases in the Quantity of Money on the Net-Investment and Net-Consumption Rates Increases in the Quantity of Money and the Perpetuation of Net Investment The Increase in the Quantity of Commodity Money as an Addition to Aggregate Profit Summary Statement of the Determinants of the Rate of Profit 6. Increases in the Real Rate of Profit Dependent on Increases in the Production and Supply of Goods Net Investment Without Increasing Capital Intensiveness Capital-Saving Inventions 7. The Inherent Springs to Profitability Wage Rate Rigidities and Blockage of the Springs Capital Intensiveness and the Monetary Component in the Rate of Profit Capital Intensiveness Under Rapid Obsolescence PART B. THE NET-CONSUMPTION/NET-INVESTMENT THEORY AND ALTERNATIVE THEORIES 1. Exposition and Critique of the Productivity Theory in Its Traditional Form 2. Exposition and Critique of the Time-Preference Theory in Its Traditional Form The Contradiction Between Böhm-Bawerk’s “First Cause” and the Doctrine of the Purchasing-Power Premiums The Discounting Approach The Disappearance of the Higher Value of Present Goods at the Margin: Böhm-Bawerk’s Abandonment of the Time-Preference Theory 3. The Classical Basis of the Net-Consumption Theory Appendix to Section 3: Critique of Ricardo’s Doctrine of the Falling Rate of Profit 4. Other Proponents of the Net-Consumption/Net-Investment Theory Notes CHAPTER 17. APPLICATIONS OF THE INVARIABLE-MONEY/NET-CONSUMPTION ANALYSIS 1. The Analytical Framework 2. Why Capital Accumulation and the Falling Prices Caused by Increased Production Do Not Imply a Falling Rate of Profit Confirmation of Fact That Falling Prices Caused by Increased Production Do Not Constitute Deflation More on the Relationship Between Technological Progress and the Rate of Profit Ricardo’s Insights on Capital Accumulation The Rate of Profit and the Demand for Money 3. Why Capital Accumulation Does Not Depend on a Continuous Lengthening of the Average Period of Production The Average Period of Production and the Limits to Technological Progress as a Source of Capital Accumulation 4. Implications for the Doctrine of Price Premiums in the Rate of Interest 5. Implications for the Process of Raising Real Wages 6. How the Taxation of Profits Raises the Rate of Profit The Influence of the Monetary System 7. How Government Budget Deficits Raise the Rate of Profit The Need to Reduce Government Spending The Government’s Responsibility for the Emphasis of Today’s Businessmen on Short-Term Results 8. Profits, the Balance of Trade, and the Need for Laissez Faire in the United States 9. Implications for the Theory of Saving Net Saving and Increases in the Quantity of Money Why the Actual Significance of Saving Lies at the Gross Level Net Saving and the Rate of Profit 10. More on Saving and “Hoarding”: “Hoarding” as a Long-Run Cause of a Rise in the Rate of Profit Implications for the Critique of Keynesianism 11. Critique of the Investment-Opportunity and Underconsumption/Oversaving Doctrines The Basic Error of Underconsumptionism How the Demand for Capital Goods and Labor Can Radically and Permanently Exceed the Demand for Consumers’ Goods Consumption as the Purpose of Production and the Progressive Production of Consumers’ Goods Over Time The Ratio of Demands Between Stages More on the Average Period of Production A Rise in the Demand for Capital Goods and Fall in the Demand for Consumers’ Goods: The Cross-Hatching of Production 12. More on Why Savings Cannot Outrun the Uses for Savings Capital Intensiveness and Land Values The Housing Outlet and Consumer Interest The Automatic Adjustment of the Rate of Saving to the Need for Capital Notes CHAPTER 18. KEYNESIANISM: A CRITIQUE 1. The Essential Claims of Keynesianism Neo-Keynesianism 2. The Unemployment Equilibrium Doctrine and Its Basis: The IS Curve and Its Elements The Grounds for the MEC Doctrine The Keynesian Solution: “Fiscal Policy” 3. Critique of the IS-LM Analysis The Declining-Marginal-Efficiency-of-Capital Doctrine and the Fallacy of Context Dropping The Marginal-Efficiency-of-Capital Doctrine and the Claim That the Rate of Profit Is Lower in the Recovery from a Depression Than in the Depression The Unemployment Equilibrium Doctrine and the Claim That Saving and Net Investment Are at Their Maximum Possible Limits at the Very Time They Are Actually Negative The Marginal-Efficiency-of-Capital Doctrine’s Reversal of the Actual Relationship Between Net Investment and the Rate of Profit The Contradiction Between the Marginal-Efficiency-of-Capital Doctrine and the Multiplier Doctrine A Fall in Wage Rates as the Requirement for the Restoration of Net Investment and Profitability Along With Full Employment Wage Rates, Total Wage Payments, and the Rate of Profit Critique of the “Paradox-of-Thrift” Doctrine Critique of the Saving Function Critique of the “Liquidity-Preference” Doctrine 4. The Economic Consequences of Keynesianism The Growth in Government Budget Deficits, Inflation, and Deflation Keynesianism and Economic Destruction Why Keynesianism Is Not a Full Employment Policy Keynesianism Versus the Rate of Profit: “The Euthanasia of the Rentier” and “The Socialization of Investment” Notes CHAPTER 19. GOLD VERSUS INFLATION PART A. INFLATION OF THE MONEY SUPPLY VERSUS ALTERNATIVE THEORIES OF RISING PRICES 1. The Analytical Framework of the Quantity Theory of Money The Vital Demand/Supply Test for All Theories of Rising Prices The Elimination of Less Supply as the Cause of an Inflationary Rise in Prices 2. Refutation of the “Cost-Push” Doctrine in General 3. Critique of the “Wage-Push” Variant 4. Critique of the “Profit-Push” Variant 5. Critique of the “Crisis-Push” Variant 6. Critique of the Wage-Price Spiral Variant 7. Critique of the “Velocity” Doctrine 8. Critique of the “Inflation-Psychology” Doctrine 9. Critique of the Credit-Card Doctrine 10. Critique of the Consumer-Installment-Credit Doctrine 11. Critique of the Consumer-Greed Doctrine 12. The Meaning of Inflation PART B. THE DEEPER ROOTS AND FURTHER EFFECTS OF INFLATION 1. The Connection Between Inflation and Government Budget Deficits Budget Deficits and the Monetary Unit 2. The Motives and Rationale for Deficits and Inflation The Welfare State Inflation and War Finance Inflation and the “Easy Money” Doctrine Inflation as the Alleged Cure for Unemployment The Underlying Influence of the Socialist Ideology 3. Inflation and Deficits Versus Representative Government and Economic Freedom 4. Inflation as the Cause of a Redistribution of Wealth and Income 5. Inflation and the Destruction of Capital Reversal of Safety Tax Effects The Prosperity Delusion and Overconsumption Malinvestment The Withdrawal-of-Wealth Effect 6. Consequences of the Destruction of Capital Reduction of the Real Rate of Return The Gains of Debtors Less Than the Losses of Creditors The Impoverishment of Wage Earners The Stock Market and Inflationary Depression 7. Inflation as the Cause of Depressions and Deflation Gold Clauses and Prospective Inflation of Paper as the Cause of Deflation in Gold 8. Inflation as the Cause of Mass Unemployment 9. The Inherent Accelerative Tendencies of Inflation The Welfare-State Mentality Inflation to Solve Problems Caused by Inflation Recessions as Inflationary Fueling Periods Indexing and the Wage and Interest Ratchets The Current State of Inflation Inflation and the Potential Destruction of the Division of Labor PART C. GOLD 1. Freedom for Gold as the Guarantee Against the Destruction of Money A Proper Gold Policy for the Government 2. The Case For a 100-Percent-Reserve Gold Standard Falling Prices Under the 100-Percent-Reserve Gold Standard Would Not Be Deflationary The 100-Percent-Reserve Gold Standard as the Guarantee Against Deflation Further Virtues of the 100-Percent-Reserve Gold Standard The Moral Virtue of the 100-Percent-Reserve Gold Standard The Monetary Role of Silver 3. The 100-Percent-Reserve Gold Standard as the Means of Ending Inflation Without a Depression The 100-Percent-Reserve Gold Standard, Liquidity, and the Dismantling of the Welfare State Notes EPILOGUE CHAPTER 20. TOWARD THE ESTABLISHMENT OF LAISSEZ-FAIRE CAPITALISM 1. Introduction The Importance of Capitalism as a Conscious Goal The Capitalist Society and a Political Program for Achieving It 2. Privatization of Property: Importance of Fighting on Basis of Principles 3. The Freedom of Production and Trade Appropriate Compromises The Case for the Immediate Sweeping Abolition of All Violations of the Freedom of Production and Trade 4. Abolition of the Welfare State Elimination of Social Security/Medicare Elimination of Public Welfare Elimination of Public Hospitals Firing Government Employees and Ending Subsidies to Business Escaping from Rent Control With the Support of Tenants 5. Abolition of Income and Inheritance Taxes 6. Establishment of Gold as Money 7. Procapitalist Foreign Policy Freedom of Immigration Friendly Relations With Japan and Western Europe 8. Separation of State from Education, Science, and Religion Abolition of Public Education Separation of Government and Science Separation of State and Church 9. A General Campaign at the Local Level 10. The Outlook for the Future Notes A BIBLIOGRAPHY OF WRITINGS IN DEFENSE OF CAPITALISM INDEX

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