What we can learn from Crusoe on an Island, a Stagecoach, and Your Favorite Meal
After finishing chapter one of Man, Economy and State, the two prominent concepts that I learned more about are those of marginal utility and time preference.
Murray Rothbard elaborates on isolationist economics to elucidate upon the discovery of economic principles that are derived from the actions of Robinson Crusoe (a fictional character used for illustrative purposes) who is stranded on an island.
To simplify the matter, Rothbard uses two goods that Robinson desires as his most highly valued ends, that of consuming berries and leisure. If Robinson can pick 20 berries an hour and works 10 hours a day, he can consume 200 berries a day and 14 hours of leisure.
If he decides to construct a stick, so that he can pick the berries more efficiently, increasing both his total output of berries and output per unit of time (say, per hour), he can only do this at the expense of forgoing some of his production and consumption of berries, and allocating time to produce the stick. This means that he has to lower his time preferences, preferring to save some of his berries for the time period that he will be constructing the stick, in that he will either have to pick more than he normally consumes, to have for the production of the stick, or to eat less of it than he normally does, or a combination of both.
Either way, this simple isolationist story elucidates on the principle of capital accumulation in society and what is logically necessary for its accumulation; the exercise of foresight, restraint of appetites, anticipation of future demand, and a lowering of time preferences, foregoing and delaying the consumption of some goods and/or leisure in order that you can consume more in the future, hence the saying that “savings is delayed consumption.” It does show us fundamental principles of human action and allows us to build upon them, starting at the individual level and moving towards society. Continue reading “Man, Economy, and State: Chapter One Review”