Looking only at the status quo—the economy that we can observe in the present—or the changes that have happened in the recent past, we could easily conclude that the economy is a fairly static system that is far from maximizing the use of resources. It would be easy to find inefficiencies and come up with other potential solutions. But this would be an enormous mistake. The market process is primarily about figuring out how to create new value for consumers—it is not about maximizing output in current production. It is an entrepreneurial process.

The market is an entrepreneurial process

Most currencies today are government monopoly monies, but that is not how money was invented or accepted as a medium of exchange--it is only how it ended up. The economic function of money cannot simply be created from the top down.

Fiat money

The world needs economic literacy! I highly recommend it for anyone looking to get into or better their understanding of economics.

How to think about the Economy

This means that a premium or luxury product is not more expensive to buy because it is produced using rare, expensive materials—it was produced using rare, expensive materials because the good is more expensive to buy. Value determines cost, not the other way around

Value determines cost

Purchasing power—and therefore consumption power—the extent to which people are able to satisfy their wants through goods—is consequently a reflection of one's contribution to the economy (as a producer). Simply put, what we supply constitutes our ability to demand.

Purchasing power

In a world in which a newly imposed regulation is the only change that takes place, we could easily compare the state of the economy before and after and thereby assess its effect. However, as the market is a process that is in constant flux, the regulation is decidedly not the only change—it is an imposition on the market's ongoing unfolding and evolution.

Regulations

As Mises put it, the manager is the "junior partner" of the entrepreneur. Simply put, management solves an entirely different problem than entrepreneurship. It is about maximizing the outcome of a production process (typically in terms of profit). It is a fundamental error to misconstrue the market process as mere production management.

Entrepreneurship vs Management

It is easy to jump to conclusions and assume that the bread is valued more than the ingredients because additional resources were used to make it. This is false. It is the other way around: we choose to invest the resources—ingredients, manpower, time—because we expect the bread to give us greater satisfaction. It is the expected value of the bread that makes the investment worth pursuing. If it were the case that something is worth more because we use more resources to produce it, then we are not actually economizing. We economize because using more resources than necessary is wasteful.

Value

The status quo is merely the most recent expression of the process—it's yesterday's winners before they are replaced by tomorrow's. The market process is in constant flux and is characterized by renewal and progress. The market process goes well beyond simple production management. We should want businesses to have good management that streamline production, cut costs, and tweak and improve the goods they produce. But management is what takes place in production after the entrepreneur has been proven right.

The market as a constant flux

We simply cannot rely on observation and measurement to gain understanding of social phenomena, and we also cannot rely on static analysis or aggregates. It is necessary to view the economy as a process, an evolving complex adaptive system. Looking at a snapshot of the economy tells us very little about how it works but can instead mislead us and allow us to jump to conclusions. Without recognizing the process, it can be easy to conclude that a specific situation is inefficient, wrong, or unfair and also to think that it is easy to improve upon it, right the wrong, or calculate an outcome.

Economy as a process

Thus, market production is empathic—your ability to provide value for others ultimately determines the value you get in return for your efforts... The economy and society are two sides of the same coin. It is not possible to separate the market process from society and civilization. As with so many things in the economy, observable phenomena emerge from people's actions but are not created by any one person. Instead, they are patterns (order) that emerge from people's actions.

The economy and society are one

Competition is not merely the rivalry between two or more businesses producing and selling similar things, but the constant pressure to serve consumers better--both present and future. History is full of successful and influential businesses, many of them considered too big and "powerful” to compete with. Most of them are long gone and forgotten because someone figured out how to produce more value for consumers.

Competition

This is one of those books that everyone ought to read in order to better understand how the world works and the how society and economy are the same thing.

This little book was written to accomplish something big: economic literacy. It is intentionally kept very short to be inviting rather than intimidating. You will gain life-changing understanding of how the economy works in practically no time. Per Bylund will make you excited about what economics has to offer. Economic literacy is mind-opening. Sound economic reasoning is an enormously powerful tool for understanding both the economy and society. Economic literacy uncovers what is going on under the surface and why things work out as they do. There is no magic to it. In fact, economic literacy is necessary to properly understand the world. A simplified Austrian school version of Henry Hazlitt’s great Economics in One Lesson!

Entrepreneurship vs Management

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