Market Theory and the Price System. Israel M. Kirzner

Чтение книги онлайн.

Читать онлайн книгу Market Theory and the Price System - Israel M. Kirzner страница 5

Market Theory and the Price System - Israel M. Kirzner The Collected Works of Israel M. Kirzner

Скачать книгу

consciousness of the existence and the nature of economic law. The recognition of “laws” in economic affairs implies the understanding that apparent chains of causation prevail in social events, just as in the physical world. Acts of individuals in the market are perceived as taken in consequence of definite acts, prior or anticipated, of other individuals. What goes on in the market at any one time is to be ascribed to what has gone on in the past, or to past anticipations as to what will go on in the future. Market phenomena do not emerge haphazardly in a vacuum; they are understood to be uniquely “determined” by market forces.

      While the essential concept of a law of economics is thus quite parallel to that of a law of physical nature, the two kinds of law have little further in common. Laws of physical nature are inferred from the observation of sequences of physical events. Economic laws, as we shall see, are founded on our understanding of the influence that a given event will have upon the actions of individuals.

      To be sure, the laws of physical nature are also operative in the spheres of human activities. A heater raises room temperature, and ice lowers the temperature in the ice box; human beings are more comfortable at some temperatures than at others, and food keeps better at some temperatures than at others. These physical, physiological, or biological laws must be considered in any attempt to “explain” why men buy heaters or ice. The recognition of economic law involves the insight that, even after the physical, physiological, and psychological sciences have been utilized to the utmost in tracing the influences that have helped determine an economic “event,” there still remain significant elements that have not been traced back to prior causes. These elements, in the absence of an economic theory, would have to be considered as undetermined by any causal forces. The recognition of economic law means the perception of determinate causal chains constraining the course of events insofar as these are left undetermined by physical, physiological, or psychological laws.

      Consider, for example, the consequences upon the price of ice of a sudden sharp reduction in the quantity available for sale. The most complete application of the physical sciences (while it might throw a great deal of light on why such a reduction in the supply has occurred, or upon the possible alternative ways consumers might be able to do without ice) can in itself tell us nothing about why subsequent ice purchases are carried out at higher prices. Our explanation of the higher prices being the consequence of the reduced supply thus invokes the concept of economic laws, which we understand as explaining the result of the particular change that has occurred when other aspects of the situation have remained unchanged.

      The nature and existence of economic law, and its manifestation in the interplay of market forces, must now be briefly traced back to the actions of the individual human being.

       THE INDIVIDUAL AND ECONOMIC BEHAVIOR

      The possibility of perceiving chains of cause and effect uniquely economic is due to the presence in human action of categories that have no parallel in the realm of physical laws. And because the mind of the individual investigating causation in economic affairs is capable of directly understanding these categories (since, as we shall see, they are self-evident to the human mind), he is capable of directly grasping the existence of economic laws. The human mind is immediately conscious of the fundamental and all-pervasive category embedded in the web of all conscious human action. This category is purpose. Actions are undertaken for specific purposes. We are aware of the purposive character of our own actions, and we understand that the conscious actions of other human beings also are purposive. However much we may either despise or fail to understand the particular purposes behind the actions of our fellows, we do not doubt that their actions aim at securing for themselves some situation that they prefer over what they expect to prevail in the absence of their actions.

      Moreover, because we assume all action to be purposive, and because we live in a world which offers at each instant the possibility of many different kinds of action, we are immediately aware, too, that every human action must be the embodiment of a choice among alternatives. At each instant man must choose between the courses of action (including inaction) that are open to him. Any such adopted course, we understand, has been adopted as preferable to the rejected courses of action.

      Thus, human action involves the categories of purpose, of alternatives, of choice among these alternatives, of the preferred (that is, the adopted) alternative, and of the rejected alternatives. These categories suffuse all transactions of men, both in isolation and in the market. They are the categories upon which economic theory depends for its very existence.

      Economic theory approaches complex social and market phenomena by searching for the individual actions from which these phenomena arise. Any such individual action is understood as having involved the adoption of one alternative and the rejection of others. The adopted alternative is understood as having been compared with, and preferred over, the other alternatives; that is, it was considered as being either the means to the attainment of the most cherished possible purpose or the most efficient of the available means to the attainment of a specific purpose. Economic theory understands that each action inevitably involved a cost. The adopted alternative has been adopted at the expense of the rejected alternatives. The rejected alternatives, which in themselves may have been highly desirable, have been renounced for the sake of the adopted alternative. Economic theory “explains” individual actions, therefore, by tracing them to the circumstances that made them “profitable”; that is, to the circumstances that made the “costs” worthwhile. Changes in the patterns of human action are traced in this way either to changes in the terms on which alternatives are available relative to each other, or to changes in the framework of purposes within which the worthwhileness of the relevant costs are valued.

      Market phenomena lend themselves readily to analysis in this way as soon as it is realized that the terms on which alternatives are offered to an individual are, in a market economy, determined in large part by the actions of other individuals rather than merely by natural events. It becomes illuminatingly possible to view every transaction in the market as, on the one hand, a consequence of the particular complex of alternatives presented to the individual by the market before the action was undertaken, and, on the other hand, as in some way affecting the complex of alternatives that will be subsequently faced by the individual market participants. Even the most intricately entangled web of market phenomena can be reduced to the elementary actions that they consist of. Systematic analysis of market phenomena in this way is able to yield propositions linking changing patterns in prices, qualities and quantities of output, of consumption, and the like, to logically prior changes in the “data.” These logically prior changes may be either in the circumstances (arising both inside and outside the market) affecting the alternative opportunities open to individuals pursuing their purposes, or in the structure of purposes with reference to which individuals appraise the relative usefulness of opportunities open to them.

      To revert to an example mentioned several pages previously, a sharp decrease in the quantity of ice supplied to the market can easily be linked, by this kind of reasoning, to a subsequent price rise. As ice purchasers find the availability of ice sharply reduced (other things being unchanged), they find it necessary to restrict the obtainable limited quantities of ice to only the most important of the uses to which the previously larger quantity of ice had been put. Thus, any additional ice block that they contemplate to purchase after the decrease in supply involves the potential fulfillment of a purpose held more important than the purpose whose fulfillment, before the decrease in supply, depended on the purchase of an additional ice block. It follows that some of the alternatives that, before the decrease in supply, were more important than an additional ice block may now be less important than an additional ice block. An alternative whose sacrifice for the sake of an additional ice block had hitherto been considered as not worthwhile will now be considered, perhaps, as highly “profitable.” In other words, the cost that individuals will be prepared to incur (that is, the price that they will be willing to offer) for an

Скачать книгу