The subjective utility of individuals—both of consumers and producers—alone (a “monistic causal explanation”) determines how much productive energy and savings will go into producing goods (i.e., size)—both total size and specific sizes.
“The price of the final product is determined by the valuations and demands of the consumers, and this price determines what the cost will be.” – Murray Rothbard
“Costs of production, then, are at the mercy of final price, and not the other way around. It is ironic that it is precisely in the ERE that this causative phenomenon should be the clearest.” – Murray Rothbard
Related:
- 3-1a4b7 The monetary account will increasingly explain the world—especially as it pertains to the human actions—though never exhaustively
- 11-1d There is no objective risk
- 13-4d2 There is no objective value
- 13-4d4 Value is subjective
- 13-4d5 Prices are derived from subjective values
- 13-7 Value scales consist of specific units, and associated subjective utilities
- On the irony of the ERE (evenly rotating economy)
- Consumers ≠ Producers (see Lachmann’s Ch. III and VI on how knowledge informs preferences)
- The economy is driven by both but they are not the same—in the ERE consumers and producers are synonymous because there is no knowledge creation (i.e., recalibration is unnecessary in the ERE)
- 13-4d4e All the consumer has to do is to think about himself—in contrast, the entrepreneur (e.g., producer, investor, operator) is primarily about others
- Cost becomes irrelevant only in the ERE (because in essence men as consumers determine everything in there)—in reality, that is, where there’s knowledge creation, cost does matter because most people don’t know better (i.e., the ability to control cost as producers under uncertainty varies)revisit
- Since cost is about opportunity costs, it’s rooted in individual knowledge—and since knowledge is subjective and created individually, the cost varies.revisit
- The low cost producers get to stay in the game
- The economy is driven by both but they are not the same—in the ERE consumers and producers are synonymous because there is no knowledge creation (i.e., recalibration is unnecessary in the ERE)