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• Human Action: a Treatise On Economics, Vol. 2: Part 4: Catallactics Or Economics of the Market Society
• Chapter 14: The Scope and Method of Catallactics
• 1: The Delimitation of Catallactic Problems
• The Denial of Economics
• 2: The Method of Imaginary Constructions
• 3: The Pure Market Economy
• The Maximization of Profits
• 4: The Autistic Economy
• 5: The State of Rest and the Evenly Rotating Economy
• 6: The Stationary Economy
• 7: The Integration of Catallactic Functions
• The Entrepreneurial Function In the Stationary Economy
• Chapter 15: The Market
• 1: The Characteristics of the Market Economy
• 2: Capital Goods and Capital
• 3: Capitalism
• 4: The Sovereignty of the Consumers
• The Metaphorical Employment of the Terminology of Political Rule
• 5: Competition
• 6: Freedom
• 7: Inequality of Wealth and Income
• 8: Entrepreneurial Profit and Loss
• 9: Entrepreneurial Profits and Losses In a Progressing Economy
• The Moral Condemnation of Profit
• Some Observations On the Underconsumption Bogey and On the Purchasing Power Argument
• 10: Promoters, Managers, Technicians, and Bureaucrats
• 11: The Selective Process
• 12: The Individual and the Market
• 13: Business Propaganda
• 14: The “volkswirtschaft”
• Chapter 16: Prices
• 1: The Pricing Process
• 2: Valuation and Appraisement
• 3: The Prices of the Goods of Higher Orders
• A Limitation On the Pricing of Factors of Production
• 4: Cost Accounting
• 5: Logical Catallactics Versus Mathematical Catallactics
• 6: Monopoly Prices
• The Mathematical Treatment of the Theory of Monopoly Prices
• 7: Good Will
• 8: Monopoly of Demand
• 9: Consumption As Affected By Monopoly Prices
• 10: Price Discrimination On the Part of the Seller
• 11: Price Discrimination On the Part of the Buyer
• 12: The Connexity of Prices
• 13: Prices and Income
• 14: Prices and Production
• 15: The Chimera of Nonmarket Prices
• Chapter 17: Indirect Exchange
• 1: Media of Exchange and Money
• 2: Observations On Some Widespread Errors
• 3: Demand For Money and Supply of Money
• The Epistemological Import of Carl Menger’s Theory of the Origin of Money
• 4: The Determination of the Purchasing Power of Money
• 5: The Problem of Hume and Mill and the Driving Force of Money
• 6: Cash-induced and Goods-induced Changes In Purchasing Power
• Inflation and Deflation; Inflationism and Deflationism
• 7: Monetary Calculation and Changes In Purchasing Power
• 8: The Anticipation of Expected Changes In Purchasing Power
• 9: The Specific Value of Money
• 10: The Import of the Money Relation
• 11: The Money-substitutes
• 12: The Limitation On the Issuance of Fiduciary Media
• Observations On the Discussions Concerning Free Banking
• 13: The Size and Composition of Cash Holdings
• 14: Balances of Payments
• 15: Interlocal Exchange Rates
• 16: Interest Rates and the Money Relation
• 17: Secondary Media of Exchange
• 18: The Inflationist View of History
• 19: The Gold Standard
• International Monetary Cooperation
• Chapter 18: Action In the Passing of Time
• 1: Perspective In the Valuation of Time Periods
• 2: Time Preference As an Essential Requisite of Action
• Observations On the Evolution of the Time-preference Theory
• 3: Capital Goods
• 4: Period of Production, Waiting Time, and Period of Provision
• Prolongation of the Period of Provision Beyond the Expected Duration of the Actor’s Life
• Some Applications of the Time-preference Theory
• 5: The Convertibility of Capital Goods
• 6: The Influence of the Past Upon Action
• 7: Accumulation, Maintenance and Consumption of Capital
• 8: The Mobility of the Investor
• 9: Money and Capital; Saving and Investment
• Chapter 19: Interest
• 1: The Phenomenon of Interest
• 2: Originary Interest
• 3: The Height of Interest Rates
• 4: Originary Interest In the Changing Economy
• 5: The Computation of Interest
• Chapter 20: Interest, Credit Expansion, and the Trade Cycle
• 1: The Problems
• 2: The Entrepreneurial Component In the Gross Market Rate of Interest
• 3: The Price Premium As a Component of the Gross Market Rate of Interest
• 4: The Loan Market
• 5: The Effects of Changes In the Money Relation Upon Originary Interest
• 6: The Gross Market Rate of Interest As Affected By Inflation and Credit Expansion
• The Alleged Absence of Depressions Under Totalitarian Management
• 7: The Gross Market Rate of Interest As Affected By Deflation and Credit Contraction
• The Difference Between Credit Expansion and Simple Inflation
• 8: The Monetary Or Circulation Credit Theory of the Trade Cycle
• 9: The Market Economy As Affected By the Recurrence of the Trade Cycle
• The Role Played By Unemployed Factors of Production In the First Stages of a Boom
• The Fallacies of the Nonmonetary Explanations of the Trade Cycle
• Chapter 21: Work and Wages
• 1: Introversive Labor and Extroversive Labor
• 2: Joy and Tedium of Labor
• 3: Wages
• 4: Catallactic Unemployment
• 5: Gross Wage Rates and Net Wage Rates
• 6: Wages and Subsistence
• A Comparison Between the Historical Explanation of Wage Rates and the Regression Theorem
• 7: The Supply of Labor As Affected By the Disutility of Labor
• Remarks About the Popular Interpretation of the “industrial Revolution”
• 8: Wage Rates As Affected By the Vicissitudes of the Market
• 9: The Labor Market
• The Work of Animals and of Slaves
• Chapter 22: The Nonhuman Original Factors of Production
• 1: General Observations Concerning the Theory of Rent
• 2: The Time Factor In Land Utilization
• 3: The Submarginal Land
• 4: The Land As Standing Room
• 5: The Prices of Land
• The Myth of the Soil
• Chapter 23: The Data of the Market
• 1: The Theory and the Data
• 2: The Role of Power
• 3: The Historical Role of War and Conquest
• 4: Real Man As a Datum
• 5: The Period of Adjustment
• 6: The Limits of Property Rights and the Problems of External Costs and External Economies
• The External Economies of Intellectual Creation
• Privileges and Quasi-privileges
• Chapter 24: Harmony and Conflict of Interests
• 1: The Ultimate Source of Profit and Loss On the Market
• 2: The Limitation of Offspring
• 3: The Harmony of the “rightly Understood” Interests
• 4: Private Property
• 5: The Conflicts of Our Age

5

Gross Wage Rates and Net Wage Rates

What the employer buys on the labor market and what he gets in exchange for the wages paid is always a definite performance which he appraises according to its market price. The customs and usages prevailing on the various sectors of the labor market do not influence the prices paid for definite quantities of specific performances. Gross wage rates always tend toward the point at which they are equal to the price for which the increment resulting from the employment of the marginal worker can be sold on the market, due allowance being made for the price of the required materials and to originary interest on the capital needed.

In weighing the pros and cons of the hiring of workers the employer does not ask himself what the worker gets as take-home wages. The only relevant question for him is: What is the total price I have to expend for securing the services of this worker? In speaking of the determination of wage rates catallactics always refers to the total price which the employer must spend for a definite quantity of work of a definite type, i.e., to gross wage rates. If laws or business customs force the employer to make other expenditures besides the wages he pays to the employee, the take-home wages are reduced accordingly. Such accessory expenditures do not affect the gross rate of wages. Their incidence falls upon the wage earner. Their total amount reduces the height of take-home wages, i.e., of net wage rates.

It is necessary to realize the following consequences of this state of affairs:

• 1.It does not matter whether wages are time wages or piecework wages. Also where there are time wages, the employer takes only one thing into account; namely, the average performance he expects to obtain from each worker employed. His calculation discounts all the opportunities time work offers to shirkers and cheaters. He discharges workers who do not perform the minimum expected. On the other hand a worker eager to earn more must either shift to piecework or seek a job in which pay is higher because the minimum of achievement expected is greater.Neither does it matter on an unhampered labor market whether time wages are paid daily, weekly, monthly, or as annual wages. It does not matter whether the time allowed for notice of discharge is longer or shorter, whether agreements are made for definite periods or for the worker’s lifetime, whether the employee is entitled to retirement and a pension for himself, his widow, and his orphans, to paid or unpaid vacations, to certain assistance in case of illness or invalidism or to any other benefits and privileges. The question the employer faces is always the same: Does it or does it not pay for me to enter into such a contract? Don’t Ipay too much for what Iam getting in return?
• 2. Consequently the incidence of all so-called social burdens and gains ultimately falls upon the worker’s net wage rates. It is irrelevant whether or not the employer is entitled to deduct the contributions to all kinds of social security from the wages he pays in cash to the employee. At any rate these contributions burden the employee, not the employer.
• 3. The same holds true with regard to taxes on wages. Here too it does not matter whether the employer has or has not the right to deduct them from take-home wages.
• 4. Neither is a shortening of the hours of work a free gift to the worker. If he does not compensate for the shorter hours of work by increasing his output accordingly, time wages will drop correspondingly. If the law decreeing a shortening of the hours of work prohibits such a reduction in wage rates, all the consequences of a government-decreed rise in wage rates appear. The same is valid with regard to all other so-called social gains, such as paid vacations and so on.
• 5. If the government grants to the employer a subsidy for the employment of certain classes of workers, their take-home wages are increased by the total amount of such a subsidy.
• 6. If the authorities grant to every employed worker whose own earnings lag behind a certain minimum standard an allowance raising his income to this minimum, the height of wage rates is not directly affected. Indirectly a drop in wage rates could possibly result as far as this system could induce people who did not work before to seek jobs and thus bring about an increase in the supply of labor.7

[7. ]In the last years of the eighteenth century, amidst the distress produced by the protracted war with France and the inflationary methods of financing it, England resorted to this makeshift (the Speenhamland system). The real aim was to prevent agricultural workers from leaving their jobs and going into the factories where they could earn more. The Speenhamland system was thus a disguised subsidy for the landed gentry saving them the expense of higher wages.