Man, Economy, and State: Study Guide Answers Ch. 2

  1. Chapter 2 – Direct Exchange
    1. Do different praxeological laws apply to situations of isolation versus society? (p. 79)

      A:  No, the same praxeological laws apply.  Individuals in society seek to meet their needs simultaneously.

    2. What is Rothbard’s definition of society? (p.84.)

      A:  “The term ‘society’, then, denotes a pattern of interpersonal exchanges among human beings.”

    3. Give an example of autistic exchange. (p. 84)

      A:  An autistic exchange, as defined by Rothbard, is an exchange that does not involve interpersonal exchange.  Thus, all of the Robinson Crusoe examples in which he is the only actor are autistic.  One example of autistic exchange, as opposed to interpersonal exchange, is the exchange of leisure for labor on an individual basis.

    4. Suppose someone says, “In order for an exchange to be just, each person must give up an equal value for an equal value.”  What do you think Rothbard would say about this? (p. 85)

      A:  In order for an exchange to take place at all, each person’s valuation of the goods concerned must be unequal, at least concerning the value rankings of the two goods compared to each other.  To exchange a cup of coffee for $5, I must value the coffee more while the seller must value the money more compared to the coffee.

    5. What are three sources of ownership? (p. 93)

      A:  The three sources of ownership are “self-ownership”, “appropriation of unused nature-given factors”, and “production of capital and consumers’ goods”.

    6. What is the law of association?  How does it relate to Boulding’s example of the doctor and his gardener? (p. 98)

      A:   The law of association states that an exchange may take place even if one party is superior in both lines of production.  This law holds water because people are most productive doing the things in which they have the largest comparative advantage in for more time.  Although the doctor is a better gardener than his hired help, he is a greater degree more valuable as a doctor, and should therefore spend his time doing medical practice.

    7. In figure 16, how many horses will Smith demand at a price of 85 berries?  At that price, how many total berries will Smith offer in exchange? (p. 125)

      A:   He demands 3 horses at a price of 85 berries.  He will begin by offering his lowest possible offer of 84 berries/horse for a total of 252 berries.

    8. What will happen to the price if the total demand to hold is higher than the stock? (pp.137-40)

      A:  If total demand to hold is higher than the stock, then the buyers at the margin will bid up the price until it rises to equilibrium and clears the market.

    9. How can the principles of this chapter be applied to shares of ownership? (p.166)

      A:  A share of ownership is a claim to a certain percentage of ownership of property and therefore acts accordingly under the aforementioned laws of supply and demand.  The percentage (share) of ownership thus becomes the property of the holder and can be bought and sold as such.  The share of ownership also entitles the owner to a proportionate percentage of the revenue stream from the property.

    10. What is Rothbard’s response to Henry George? (pp. 171-72)

      A: Henry George argues against the Lockean premise of original appropriation, mixing ones labor with unused Nature, as a claim of ownership to the property.  George’s argument is that for one man to appropriate the gift of nature, he invades on the property of everyone else, since George regards land as a common, communal heritage.  Rothbard’s answer is that the concept of property is not possible without original appropriation.   Man cannot produce with his labor alone.  Even ,in the most elementary sense, he requires standing room and therefore ownership of the Nature that immediately surrounds him.  He makes a comparison of land to a wild animal, since it is more strikingly fallacious to argue that a man who obtains a cow and mixes his labor with it to produce milk does not own the cow.  Every other individual does not reserve a partial right to every piece of Nature by virtue of being born, according to Rothbard.

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