The Online Library of Liberty

A project of Liberty Fund, Inc.

• Editor’s Note
• Foreword to the Fourth Edition
• Foreword to the Third Edition
• Introduction
• 1: Economics and Praxeology
• 2: The Epistemological Problem of a General Theory of Human Action
• 3: Economic Theory and the Practice of Human Action
• 4: Résumé
• Part 1. Human Action
• Chapter 1: Acting Man
• 1: Purposeful Action and Animal Reaction
• 2: The Prerequisites of Human Action
• On Happiness
• On Instincts and Impulses
• 3: Human Action As an Ultimate Given
• 4: Rationality and Irrationality; Subjectivism and Objectivity of Praxeological Research
• 5: Causality As a Requirement of Action
• 6: The Alter Ego
• On the Serviceableness of Instincts
• The Absolute End
• Vegetative Man
• Chapter 2: The Epistemological Problems of the Sciences of Human Action
• 1: Praxeology and History
• 2: The Formal and Aprioristic Character of Praxeology
• The Alleged Logical Heterogeneity of Primitive Man
• 3: The a Priori and Reality
• 4: The Principle of Methodological Individualism
• I and We
• 5: The Principle of Methodological Singularism
• 6: The Individual and Changing Features of Human Action
• 7: The Scope and the Specific Method of History
• 8: Conception and Understanding
• Natural History and Human History
• 9: On Ideal Types
• 10: The Procedure of Economics
• 11: The Limitations On Praxeological Concepts
• Chapter 3: Economics and the Revolt Against Reason
• 1: The Revolt Against Reason
• 2: The Logical Aspect of Polylogism
• 3: The Praxeological Aspect of Polylogism
• 4: Racial Polylogism
• 5: Polylogism and Understanding
• 6: The Case For Reason
• Chapter 4: A First Analysis of the Category of Action
• 1: Ends and Means
• 2: The Scale of Value
• 3: The Scale of Needs
• 4: Action As an Exchange
• Chapter 5: Time
• 1: Time As a Praxeological Factor
• 2: Past, Present, and Future
• 3: The Economization of Time
• 4: The Temporal Relation Between Actions
• Chapter 6: Uncertainty
• 1: Uncertainty and Acting
• 2: The Meaning of Probability
• 3: Class Probability
• 4: Case Probability
• 5: Numerical Evaluation of Case Probability
• 6: Betting, Gambling, and Playing Games
• 7: Praxeological Prediction
• Chapter 7: Action Within the World
• 1: The Law of Marginal Utility
• 2: The Law of Returns
• 3: Human Labor As a Means
• Immediately Gratifying Labor and Mediately Gratifying Labor
• The Creative Genius
• 4: Production
• Part 2: Action Within the Framework of Society
• Chapter 8: Human Society
• 1: Human Cooperation
• 2: A Critique of the Holistic and Metaphysical View of Society
• Praxeology and Liberalism
• Liberalism and Religion
• 3: The Division of Labor
• 4: The Ricardian Law of Association
• Current Errors Concerning the Law of Association
• 5: The Effects of the Division of Labor
• 6: The Individual Within Society
• The Fable of the Mystic Communion
• 7: The Great Society
• 8: The Instinct of Aggression and Destruction
• Current Misinterpretations of Modern Natural Science, Especially of Darwinism
• Chapter 9: The Role of Ideas
• 1: Human Reason
• 2: World View and Ideology
• The Fight Against Error
• 3: Might
• Traditionalism As an Ideology
• 4: Meliorism and the Idea of Progress
• Chapter 10: Exchange Within Society
• 1: Autistic Exchange and Interpersonal Exchange
• 2: Contractual Bonds and Hegemonic Bonds
• 3: Calculative Action
• Part 3: Economic Calculation
• Chapter 11: Valuation Without Calculation
• 1: The Gradation of the Means
• 2: The Barter-fiction of the Elementary Theory of Value and Prices
• The Theory of Value and Socialism
• 3: The Problem of Economic Calculation
• 4: Economic Calculation and the Market
• Chapter 12: The Sphere of Economic Calculation
• 1: The Character of Monetary Entries
• 2: The Limits of Economic Calculation
• 3: The Changeability of Prices
• 4: Stabilization
• 5: The Root of the Stabilization Idea
• Chapter 13: Monetary Calculation As a Tool of Action
• 1: Monetary Calculation As a Method of Thinking
• 2: Economic Calculation and the Science of Human Action

4

Action as an Exchange

Action is an attempt to substitute a more satisfactory state of affairs for a less satisfactory one. We call such a willfully induced alteration an exchange. A less desirable condition is bartered for a more desirable. What gratifies less is abandoned in order to attain something that pleases more. That which is abandoned is called the price paid for the attainment of the end sought. The value of the price paid is called cost. Cost is equal to the value attached to the satisfaction which one must forego in order to attain the end aimed at.

The difference between the value of the price paid (the costs incurred) and that of the goal attained is called gain or profit or net yield. Profit in this primary sense is purely subjective, it is an increase in the acting man’s happiness, it is a psychical phenomenon that can be neither measured nor weighed. There is a more and a less in the removal of uneasiness felt; but how much one satisfaction surpasses another one can only be felt; it cannot be established and determined in an objective way. A judgment of value does not measure, it arranges in a scale of degrees, it grades. It is expressive of an order of preference and sequence, but not expressive of measure and weight. Only the ordinal numbers can be applied to it, but not the cardinal numbers.

It is vain to speak of any calculation of values. Calculation is possible only with cardinal numbers. The difference between the valuation of two states of affairs is entirely psychical and personal. It is not open to any projection into the external world. It can be sensed only by the individual. It cannot be communicated or imparted to any fellow man. It is an intensive magnitude.

Physiology and psychology have developed various methods by means of which they pretend to have attained a substitute for the unfeasible measurement of intensive magnitudes. There is no need for economics to enter into an examination of these rather questionable makeshifts. Their supporters themselves realize that they are not applicable to value judgments. But even if they were, they would not have any bearing on economic problems. For economics deals with action as such, and not with the psychical facts that result in definite actions.

It happens again and again that an action does not attain the end sought. Sometimes the result, although inferior to the end aimed at, is still an improvement when compared with the previous state of affairs; then there is still a profit, although a smaller one than that expected. But it can happen that the action produces a state of affairs less desirable than the previous state it was intended to alter. Then the difference between the valuation of the result and the costs incurred is called loss.

CHAPTER 5

Time