Man, Economy, and State Study Guide Answers Chapter 6

I have a feeling these could be expounded on a little more.

  1. How is the analysis in this chapter more general than in the preceding chapters? (pp. 367–68)
    1. It examines the end result of static value scales and time preferences. This brings us to a general or pure rate of interest.
  2. Why is there a tendency for a uniform rate of interest? (pp. 370–71)
    1. Due to the factors of arbitrage. Capitalists are always searching to store their capital in the highest rate of interest. When competition is introduced the tendency is for the market to arrive at a uniform rate of interest.
  3. What is the “classical trinity”? (p. 373)
    1. Classical trinity states that “land, labor, and capital” earn “wages, rents, and interest”. This can be modified to state that all earn a rate of interest based on the rate of time preference for each capital good and capital.
  4. In what sense do laborers sell future goods and buy present goods? (p. 373–74)
    1. Laborers are selling their labor during their action of producing a future good and buying money which is a  present good.
  5. Is it a violation of subjectivism to compare time preference schedules between individuals? (p. 385)
    1. It is not a violation, it would be nonsensical to compare the values or rankings of goods, but it is valid and purposeful to compare the schedules.
  6. What is Rothbard’s critique of “gross national product”? (p. 401)
    1. That they are not gross at all, but only partly gross. They include only purchases by capitalists of durable capital goods and the consumption of their self-owned durable capital. Rothbard argues that both durable and less durable capital is consumed in the production process and that there is no difference between nondurable and durable capital goods.
  7. What are the components of the time market? (pp. 417–18)
    1. Supply of present goods for future goods (Savings [of all])
    2. Demand for present goods by suppliers of future goods (a. Producers’ demand b. consumer demand)
  8. What is the par value of a stock? (p. 430)
    1. The amount of capital originally paid in on the formation of the company.
  9. Is there an important distinction between dividends and “retained earnings”? (p. 440)
    1. The distinction is not useful in economic analysis. Retained earnings are not necessarily reinvested; they may be held out of investment in a cash balance and later paid out as dividends.
  10. If everyone’s time preference is subjective, how can we speak of “the” natural rate of interest? Won’t it be different for different people?
    1. By comparing peoples time schedules you arrive at the competing prices for all current goods vs future goods which is the natural rate of interest. It would be different for different people based on their ability to pay future money in exchange for current goods.

Man, Economy, and State Study Guide Answers Chapter 5

  1. How does Rothbard justify study of the ERE, when Austrians are so critical of unrealistic assumptions in mainstream economics? (pp. 322–23)
    1. It is a construct which allows for the analysis of the activities of production in a monetary market economy.  Values of economy all remain constant which allow the study of the final equilibrium. This is not possible in a market economy, however it allows for study of all the interchanging action and values at a final resting point.
  2. Why is the ERE not only unrealistic, but indeed self-contradictory? (pp. 328–29)
    1. It is unrealistic as it eliminates the possibility of change which is inherent in an economy. Evenly rotating economy construct is self contradictory because change is inherent in any economy based on human action.
  3. How would Rothbard classify those goods that produce second-order capital goods? (pp. 330– 31)
    1. Land and labor is always the source of capital and consumer goods
  4. Describe the structure of production in a world of purely specific factors. (pp. 330–31)
    1. The production of consumer goods takes place as being produced by co-operating factors of the the next higher ranks, and up to the point of land and labor inputs.
  5. In the case of joint ownership, where the final product is a diamond ring, arrange the following in order of their respective waiting times to be paid: (a) the truck driver bringing diamonds to the jeweler, (b) the laborer in the diamond mine, and (c) the jeweler who sets the diamond on a ring. (pp. 334–37)
    1. 1. b 2. a 3. c
  6. What is wrong with the “freedom-to-starve” argument? (p. 339)
    1. It excludes the possibility of charity which would be abundant in a unhampered market.  It is the free society itself which furnishes the abundance of capital taking place in previous generations to allow for prosperity in the present.
  7. How can a sale be costless? (p. 341)
    1. For example, land and labor in a specific production structure have only one use, the production of product, the sale involves no cost to their owner as he can not use the land and labor for any other non specific products. The only cost for a sale would be if the producer decided to directly consume.
  8. What is the problem with so-called “cost-plus” pricing schemes for public utilities (in which the utility companies are allowed to charge consumers what their “costs” are plus a certain percentage markup)? (pp. 341–42)
    1. There is no problem as the cost-plus pricing scheme is essential for the utility as it allows them to continue to sell the good. If they earned no return the utility company would remain idle.
  9. By what process does one pure rate of interest arise in the ERE? (p. 351)
    1. The rate of net return is the pure exchange ratio between present and future goods which is the rate of interest.
  10. Can a landowner earn interest in the ERE? (pp. 351–53)
    1. Yes, if the land owner would sell the good in the future at a higher value than the present, the land owner would earn interest if he held onto the land.

Man, Economy, and State Study Guide Answers Chapter 4

It’s getting harder, I did my best. Hopefully I can get an astute Austrian scholar to grade my answers at some point.

  1. What is the significance of the fact that the “number
    of markets needed is immeasurably reduced”
    in a money economy? (pp. 233–35)

    1. The significance of reducing the number of isolated direct exchange markets is that the money good is always on one side of the transaction which opens possibilities for many more transactions. Therefore, purchasing money opens up ability to trade on that money market for all goods.
  2. Why doesn’t every good have a purchasing power
    that consists of an array, i.e., what is so special
    about the money commodity? (pp. 236–37)

    1. The special thing about a money commodity is that every good except money now has one market price in terms of money. This as opposed to an array of prices when viewing from a direct exchange perspective. For example, 5 horses for 1 pound of butter, 1 oz of gold for 5 horses. Now it can be said that 1 pound of butter costs 1oz of gold. That simplifies and increases possible transactions.
  3. What does it mean to “sell” money? To “buy” money?
    1. Sell – exchange money for another marketable good or service
    2. Buy – if one sells a good or labor for money, your are buying money with sale of your goods or labor
  4. Why do individuals hold cash balances? (pp. 264–65)
    1. Individuals hold cash balances when they believe holding cash has a higher marginal utility in the future than selling the money at present
  5. Why does Rothbard argue that buying more eggs
    will make the marginal utility of butter increase?
    (p. 266)

    1. “At any rate, when an individual buys a particular good, such as eggs, the more he continues to buy, the lower will be the marginal utility of addition that each successive unit has for him. This, of course, is an accordance with the law of marginal utility” When the marginal costs out weigh the marginal utility of purchasing eggs, the next most valued item on his value scale would have a lower marginal cost than eggs, for example, rather than butter which now has a higher marginal utility than eggs.
  6. Are money prices a measuring rod of subjective

    1. Money prices are simply a way to pair your ordinal value scale. They are not a measuring rod of subjective value as each individual looking at that money price may value it different based on their value scale.
  7. 7. Why did economists before Mises find difficulty
    with a marginal utility explanation of money
    demand? (p. 268)

    1. They didn’t consider looking at immediate historical past money demands. Economists before Mises explained money demand using a imaginary figment called “general price level”
  8. How does Mises’s money regression apply to fiat

    1. By using Mises’ money regression principle you can deduce that the value of fiat money will decrease day after day when looking at the historical value of any fiat money.
  9. Can an individual really know the true cost of an
    action, even ex post? (p. 277)

    1. Yes, the true cost would be the marginal cost relative to other actions that individual may take based on their value scale of action.

Man, Economy, and State Study Guide Answers Chapter 3

  1. Name two different problems with direct exchange.
    1. Both demands of the producer and consumer have to line up without a medium of exchange such as money. You can not divide up a lot of commodities when directly exchanging which eliminates a lot of market possibilities.
  2. Explain the term medium of exchange.
    1. Mediums of exchange are used when a more marketable commodity is acquired to purchase a good. For example, when  someone does not desire your good you can exchange your good for a good desired by that someone to complete the transaction.
  3. Why are some goods more marketable than others?
    1. Some goods such as a plow can not be divided or the good would be rendered useless if divided. Some goods are also durable and hold their value over time, and are universally accepted as a medium of exchange.
  4. In what sense is a telescope relatively unmarketable (i.e., difficult to sell)?Couldn’t the owner lower its price until he found a buyer?
    1. A telescope can not be divided and has very few productive uses. Of course the owner can lower the price until he found a buyer.
  5. What does it mean to purchase money?
    1. “Consumers obtain their money by purchasing it through the sale of their own goods — either durable consumers’ goods or services in productions.”
  6. What is the price of money?
    1. The amount of goods or services required to obtain the money.
  7. Rothbard says that the unit of money is a weight. How does this apply to the U.S. dollar?
    1. U.S. dollars are no longer backed by a commodity. The weight of a U.S. dollar would be the weight of the paper it is printed on.
  8. Why does the marginal utility of money decline as its supply increases? (p. 218)
    1. Marginal utility declines as supply increases because as you gain more money the last gram of gold acquired was not as valuable as the first gram of gold. “Therefore, it is true of money, as any other commodity, that as its stock increases, its marginal utility declines”
  9. How does a person decide whether to work for himself or an employer? (pp. 221–22)
    1. Whatever occupation provides the highest psychic advantage.  Let us say that either a person can work for an employer for 10oz of gold or for himself at 10oz of gold. “If nonexchangeable psychic factors countervail, such as a great preference for being self-employed in the use of his labor, then he may accept the 10oz self employed income”
  10. How does the owner of a durable good decide whether to rent or sell it? (pp. 225–27)
    1. Whichever option yields the highest money income, or more precisely the highest present value of money income.

Man, Economy, and State Study Guide Answers Chapter 2

  1. Do different praxeological laws apply to situations of isolation versus society?
    1. Same laws apply as you would just increase number of actors and compare them based on the actions of one actor in a isolated environment. Isolation of the actor is the first step to understanding the motives of the actor with other human beings.
  2. What is Rothbard’s definition of society?
    1. “There is no reality to society apart from the individuals who compose it and whose actions determine the type of social pattern that will be established.”
  3. Give an example of autistic exchange.
    1. Exchanging labor for investment in capital goods such producing as a stick to harvest berries faster. Autistic exchange consist of any exchange that does not involve some form of interpersonal exchange of services.
  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?
    1. Rothbard would say that is not true.  “The essence of the exchange is that both people make it because they expect that it will benefit them; otherwise they would not have agreed to the exchange.”
  5. What are three sources of ownership?
    1. Self – ownership
    2. Appropriation of unused nature-given factors
    3. Production of capital of consumers’ goods
  6. What is the law of association? How does it relate to Boulding’s example of the doctor and his gardener?
    1. That exchange may beneficially take place even when one party is superior in both lines of production
    2. The doctor exchanges value to a hired man who is inferior as a gardener to himself, because thereby he can devote himself to his medical practice which per unit of labor holds a greater value
  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?
    1. A third horse, 84×3 = 252 berries
  8. What will happen to the price if the total demand to hold is higher than the stock?
    1. The price will increase until an equilibrium price has been reached
  9. How can the principles of this chapter be applied to shares of ownership?
    1. Direct exchange principles can be applied to shares of ownership by granting the owner of the shares a fraction of ownership in exchange for goods which also gives ownership over the revenue stream from the entity which shares were purchased.
  10. What is Rothbard’s response to Henry George?
    1. George asserts that land is a common communal heritage. George argues that man is not entitled to an original, nature-given factor and for one man to appropriate this gift is alleged to be an invasion of common heritage. Rothbard argues that this is self contradictory position. A “man can not produce anything without the cooperation of original nature-given factors”.

Man, Economy, and State Study Guide Answers Chapter 1

I am reading Man, Economy, and State and am following the study guide to get a greater understanding. Man, Economy, and State is a treatise on Economic Principles. The Austrian school of economics is based on books such as the leading Ludwig Von Mises Mises’ Human Action and later Murray Rothbard’s Man, Economy, and State.

Here are my answers to Robert Murphy’s Study Guide to Chapter 1. Other chapters will be new posts after this.

  1. If an infant cries immediately after birth, is this action in the praxeological sense? What if the infant, several months later, has learned that crying will often lead to attention from parents? (pp. 1–2)
    1. If an infant cries after birth it is not a developed purposeful action. This action is reflexive, not indicating purposeful action.
      If an infant cries several months later due to learned knowledge of attention received from parents it is an action in the praxeological sense as the action was built on purposeful behavior.
  2. When doctors in the 1800s used leeches in an attempt to help patients, was this an example of human action?
    1. Yes. It is an action based on knowledge, even if in error, to achieve a medical solution, or end. Therefore it is human action.
  3. Suppose a man is strumming his guitar while sitting on the sidewalk in a large city, and that his only purpose is to listen to the enjoyable music. How should the guitar be classified? What if passersby begin giving the man loose change, so that he now views the guitar as a means to earning money?
    1. The guitar should be classified as a good in use to achieve leisure of listening to to music. In using the guitar as means to earning money it is a producers’ good.
  4. Suppose that a boy, on June 4, is offered the choice of seeing a fireworks show that day, or in exactly one month. If the boy chooses the show in the future, has he violated the law of time preference?
    1. The show in a month will be more valuable as it is July 4th, a celebration day in America. He has not violated the law of time preference as the show will hold more value in the future than on that day.
  5. Suppose someone says, “I like steak more than burgers, and I like burgers more than hot dogs, but my preference for steak over burgers is definitely stronger than my preference for burgers over hot dogs.” What do you think Rothbard would say about this statement?
    1. That valuing items in units of satisfaction as there are no unit of satisfaction. Value rankings are always ordinal. It is not within the action axiom to say someone valued steak over burgers as stronger than burgers over hot dogs as that would be a cardinal comparison which does not bear weight in economic praxeology. Rothbard states that all action aims at exchanging a less satisfactory state for a more satisfactory state.
  6. Imagine that a chemist measures two bottles of water, and finds that the first contains 8.002 ounces of water, while the second bottle contains 8.001 ounces of water. The chemist concludes that the bottles of water are definitely different objects. How should the economist treat them?
    1. The economist should treat containers of water (H20) as units of water. The total units of water would be 16.003 units of water to an economist.
    2. To the chemist the bottles of water are not interchangeable so they should be considered as Water A and Water B as they are different units from the chemists point of view.
  7. What are the two ways that capital increases productivity?
    1. By increasing supply of the good being produced. In the example of picking berries, holding out on immediate consumption of berries to create a technological device to pick berries faster, such as a stick.
    2. The increase in capital goods such as a stick may allow for increased production of a new good other than berries due to the less time required for picking berries.
  8. What are the definitions of consumption, saving, and investment?
    1. Consumption – enjoyment of consumer goods
    2. Saving – restricting consumption
    3. Investment – transfer of labor and land for an increase in capital goods
  9. If capital goods increase the productivity of labor, why don’t people create as many capital goods as possible?
    1. In some scenarios, time preference would argue present consumption of the good is more important as berries, for example, would spoil if not consumed.  Investing land and labor solely for formation of capital goods would eliminate the ability to survive in the present.
  10. Suppose that a farmer normally sets aside 10 percent of his harvest as seed corn. His son says, “That’s silly! We should sell all of our harvest and make as much money as possible.” What would this policy lead to?
    1. Destruction of future production as seed corn is the capital requirement for future corn harvests. Saving corn seed to invest in future harvests is an example of wise capital good formation.

Favorite Soaps and Men’s Grooming Products

I started buying my own soap and toothpaste as a kid off the internet when investigating ways to stay as healthy as possible. Buying fluoride free toothpaste was my first purchase and back in 2007 there were not as many companies manufacturing it as today.  Also I started to purchase natural Dr. Bronner’s soap. It is now 10 years later and I now have favorites in the natural soap and grooming market!

Body Wash and All in One Soap

Dr Bronner’s Peppermint Castile Soap

Dr Bronner’s is a great soap for everyday use. It cleans great, requires very little to build a lather, and leaves skin free and clear of chemicals. I found this product early and continue to use it today.  Walgreens has even started to sell this product in their stores.


REF (Reference of Sweden) 551

When I don’t shampoo with Dr. Bronner’s this is my favorite shampoo. It is packed with natural oils and cleans great leaving hair shiny and nourished. It is fairly expensive however and can only be found at salons.

Bar Soap

Nubian Heritage Indian Hemp and Haitian Vetiver Bar Soap

This soap is very soft and smooth. A great change from Dr. Bronner’s on occasion. Lathers great, cleans great, and leaves the skin moisturized. It does not strip your skin of their natural oils like most mainstream soaps. It doesn’t leave a film. Just a smooth lather that works great.


Himalaya Botanique Pomegranate Neem Fluoride Free Toothpaste

Finding an awesome natural toothpaste was not as easy I hoped. I went through many brands over the years such as Jason’s, Nature’s Answer, and Tom’s. None of them had the clean mouth feel and taste that I enjoy. This toothpaste blew me away. Its clean mouth feel and fresh taste keeps me buying this brand. It is made in India. The tube seems to last forever as well due to the small amount required for brushing.

Razor and Shaving Cream

Dollar Shave Club 4x Razor

This is a great razor from DSC. The club is a subscription which delivers a new pack of razor heads every month. Durable and the 4x razor heads shave close and smooth.

Dollar Shave Club Dr. Carter’s Shave Butter

This ‘shave butter’ is so smooth! The 4x razor glides and shaves perfectly with this product. It is a very buttery feel that applies great with very little product. The after-shave feel is great and soft. I recently have started to use this product and am hooked.


Those are all my current favorites. I hope you try some out. Please comment if you have any recommendations or if you ended up trying one of these! Enjoy!

Manjaro Linux Distribution and Cool Applications

Manjaro is a great rolling release distribution based on Arch Linux. Arch Linux built a great community and repository started in 2002. It has grown over the years and Manjaro is an awesome newer distribution which builds in an installer and some nice features which make for an easier installation. Rolling release means you always have up to date software.

One of the best things about Arch based distributions is the Arch User Repository. This repository contains PKGBUILD scripts which install a plethora of software not in the repositories. You can use AUR helpers to install from AUR easier.

Steam now runs on Linux. Games such as Counter Strike and Cities Skylines run great on Linux. There are lots of games supporting it coming out every day because of Steams support. This used to be the only problem with Linux but now with top games coming out on it there is nothing to complain about.

LibreOffice 5 is very high quality and can easily replace Microsoft Office on all platforms.

OwnCloud is a great web application that runs a cloud storage system. There are clients for all platforms and the linux sync client works great to my shared server.

Try Manjaro yourself by burning the image to a disc or USB key. It can revive older computers and make your new computers even faster.

Download Manjaro

My Story Modding Xbox 1st Generation Consoles

Installing a modchip into Xbox (first generation) was a blast. You could boot up custom software and play games that were copied. My favorite software to use on it was Xbox Media Center. When I first started modding it was called Xbox Media Player. It is currently called Kodi and runs on almost all platforms. I setup a Linux file server running Ubuntu to share Music and Movie directories throughout the house to our 2 modded Xboxes and computers.

Xbox Media Center

I modded about 5 Xboxes with Team Xecuter Modchips like this one:

Xecuter 3 Modchip

The TV show The Screensavers on TechTV segment with Kevin Rose introducing the audience to Xbox Modding got me interested. I researched it heavily mostly on Xbox-Scene, an internet community for Xbox and modding.

The skill I needed to learn to do this was fairly advanced soldering. You need to install a pin connector and solder the pins to the board. You also need to solder a tiny wire to a tiny point on the back of the motherboard. I screwed up a couple Xboxes by rushing and shorting something out by soldering two pins together or something like that.

You could find needed software in torrent form or on an IRC FTP site called #xbins.

This was a fun hobby as a young teenager was a fun community to be involved in.