Front Page Titles (by Subject) B - Human Action: A Treatise on Economics, vol. 4 (LF ed.)
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B - Ludwig von Mises, Human Action: A Treatise on Economics, vol. 4 (LF ed.) 
Human Action: A Treatise on Economics, in 4 vols., ed. Bettina Bien Greaves (Indianapolis: Liberty Fund, 2007). Vol. 4.
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Babbittry. A derogatory term for the ethics and practices of small independent businessmen operating under the relatively free market conditions existing in the United States before the massive governmental interventions of the 1920s and 1930s. The term comes from the novel Babbitt (1922) in which the author, Sinclair Lewis (1885–1951), derides the behavior and character of George Follansbee Babbitt, a fictional middle-class real-estate agent.
Balance of payments. The separate and reciprocal summation of the monetary figures for (1) the goods, including money, and services given, and (2) the goods, including money, and services received by an individual or a group of individuals, as frequently those living within national or other geographical boundaries during any particular period of time. Since the monetary figures for both the items received (debit side) and the items given (credit side) are always equal, the two summations (of payments) are likewise always equal, i.e., in balance.
It is customary to list and subtotal separately the monetary and non-monetary items. If the monetary receipts exceed the monetary outflow, the balance of payments is said to be favorable. If the monetary outflow exceeds the monetary receipts, the balance of payments is said to be unfavorable. This is a carryover from the days of mercantilism (q.v.) when the precious metals were considered more valuable than any other goods or services. This viewpoint, still widely accepted, ignores the fact that at the time of every transaction, each party prefers and considers of greater value the item he receives, whether it is money, other goods or services. Thus, no one ever pays out money unless he prefers what he receives in return.
During periods when a nation is substituting fiduciary media (q.v.) for a part of its monetary stock (gold), Gresham’s law (q.v.) goes into operation and the nation experiences a net outflow of its monetary stock (gold), i.e., an unfavorable balance of payments.
Banking School. This group was opposed by the Currency School (q.v.) in the nineteenth-century controversy over the laws which should govern the Bank of England and form the basis of the British monetary system. Drawing on the writings of Adam Smith (1723–90), the Banking School espoused what has become known as the “Banking Principle” or “Principle of Fullarton.” This principle holds that as long as a bank maintains the convertibility of its banknotes into specie (gold), for which it should keep “adequate” reserves, it is impossible for it to overissue its banknotes against sound commercial paper with fixed short-term (90 days or less) maturities.
The Banking School reasoned that under these conditions, the issuance of such banknotes was helpful to business activity, did not raise prices, and the quantity issuable would be independently determined and limited by the needs of trade (business) rather than the desires of the issuing bank. They claimed that noteholders would promptly present for redemption all banknotes issued in excess of the needs of trade (business) under the socalled “law of reflux.” Some held that the “banking principle” was valid even if convertibility was not maintained.
The Banking School adherents failed to realize that the banks were free to increase the demand for their fiduciary banknotes by reducing the interest rate charged on bank loans. The British Bank (Peel’s) Act of 1844 prohibited the issuance of further banknotes by the Bank of England against anything except 100% gold reserves. However, the Act did permit the expansion of demand deposits subject to transfer or withdrawal by check against short-term commercial paper of the type approved by the “banking principle.” This paved the way for currently popular banking theories based on fractional reserves, “elastic currency,” circulation credit and credit expansion (q.v.). For the consequences, see “Monetary theory of the trade cycle.”
Banknotes. Money-substitutes issued by banks in the form of non–interestbearing promissory notes, payable to bearer on demand, which circulate freely as a substitute for the sum of money stated on their face. Banknotes differ from fiat money (q.v.) in that fractional reserves (less than 100%) are kept by the issuing bank or its agents for their redemption. Banknotes are money-substitutes and “money in the broader sense.” Only the reserves held for their redemption are “money in the narrower sense.” The amount of banknotes issued in excess of the reserves maintained for their redemption is fiduciary media (q.v.).
Bank of England. The central bank of the United Kingdom. It was granted its original charter in 1694 in return for a £1,200,000 loan at 8% interest to the British government. The charter permitted it to issue £1,200,000 of Bank of England notes redeemable on demand in gold, supposedly obtainable from funds deposited with the Bank. It has always acted as the government’s banker. During the first half of the nineteenth century, the Bank’s policies were discussed and investigated in detail by British economists. (See “Banking School” and “Currency School.”) The Peel Act of 1844 (q.v.) set up separate departments for the Bank’s banking and note issue functions.
Up until World War I, it was the unquestioned symbol of financial integrity and the stability of the gold standard. Since 1925, it has enjoyed a monopoly in the issue of banknotes. Originally a private institution, it was nationalized in 1946. Its banknotes have full legal tender power. The Bank serves as fiscal agent for the British government and maintains reserves for countries in the “Sterling Bloc” (q.v.). It performs all functions of a central bank (q.v.), and it is responsible for controlling the quantity of British money. For a short history of the British pound, see “Pound sterling.”
Barbarian. Originally from the Greek for foreigners, meaning those who spoke an unintelligible language and had outlandish manners. It has come to mean a rude, crude, untutored, uncultured, cruel, almost savage person who is ignorant of civilized customs and human dignity.
Bear. A financial term for a person who, anticipating lower prices, sells for future delivery a commodity, currency or security which he does not own with the expectation he will be able to buy it at a lower price before he is required to make delivery. A bear is said to sell short. The operations or transactions of bears have the effect on market prices of an increased supply and thus tend to reduce prices.
Begriffsjurisprudenz, (German). Literally, ideal jurisprudence. A school of German jurists which believed that ideal laws are based on a logical analysis of legal concepts.
Behaviorism. A sociological school which asserts that human minds are not capable of making rational choices. It studies human action according to the methods of animal and infant psychology. It seeks to investigate reflexes and instincts, automatisms and unconscious reactions, without reference to consciousness and aiming at ends. Behaviorists consider all human actions to be implicit reactions to prior conditioning. They seek to improve mankind by subjecting people to an “ideal” conditioning from birth. In choosing such an “ideal” conditioning, the behaviorists would be acting in violation of their basic concept that all human actions are determined by some automatic mechanism.
Bellicosity. Desire or disposition to stir up a fight or be warlike; inclination to be aggressive.
Bernoulli’s doctrine de mensura sortis. Daniel Bernoulli (1700–82), an eminent mathematician and physical scientist, realized that equal or proportional changes in man’s wealth or “physical fortune” did not produce equal or proportional changes in utility or satisfaction, which he called “moral fortune,” and that such changes in “moral fortune” were related to his previous wealth or fortune as well as the physical changes in it. Accordingly, he resorted to logarithms to develop a mathematical formula or doctrine for computing the expectation of changes in “moral fortunes” that would result from any given physical changes in any person’s previously held fortune. The suppositions of this doctrine were dependent upon the selection of arbitrary constants for human valuations. However, such valuations are not only unmeasurable but also variable from man to man and for the same man at different times. In distinguishing between “physical” and “moral” fortunes, Bernoulli’s contribution made it clear that simple arithmetic (addition and subtraction) is not applicable to problems involving human valuations of different physical quantities.
Betriebsführer, (German). Shop managers.
Bill of exchange. A negotiable document drawn up and signed by one party (usually, but not necessarily, a seller) on a second party (usually a buyer) providing that the second party unconditionally promises to pay to the order of bearer or a third party, but which may be the drawer or first party, a specified sum on sight (upon acceptance by the second party) or upon a specified or determinable date. The bill becomes valid only upon the signed acceptance by the second party. A bill payable at a future date is a credit instrument discountable at banks in advance of maturity, depending upon the credit of the parties signing the bill. At certain times and places in history, bills of exchange have been used as media of exchange. See “Medium of exchange.”
Bimetallism. A monetary system which attempts to maintain a fixed exchange ratio between the metals gold and silver.
Biological competition. The antagonistic rivalry in which living beings are engaged in a life and death struggle for a part of the existing means of survival which are insufficient for the minimum needs of all. This situation is inherent in nature and among wild animals incapable of social cooperation. It can exist among men (1) in those rare instances where the means of survival are insufficient for total survival for groups which are lost or otherwise isolated from civilization, or (2) where men fail to realize that the voluntary social cooperation of an unhampered market economy can increase the supply of scarce goods beyond the quantity needed for the general survival of a growing but intelligently limited population.
Bloc. A combination of two or more groups or parties willing to make a common cause, esp. as in European countries, or in the U.S. Congress.
Bohemian. A devotee of art, music, literature or other intellectual pursuits who attempts to show his disdain for social conventions by adopting an odd or bizarre mode of life or dress.
Bolshevik, (Russian). Literally, “a member of the majority.” Actually, a Russian revolutionary communist. The term acquired this meaning in 1903 when the Russian Social Democratic Party split into the “Bolshevik” and “Menshevik” (q.v.) factions. In the Russian Revolution of November 1917, the Bolsheviks, under the leadership of Nikolai Lenin (1870–1924), over-turned the Provisional Government established earlier that year and founded the Union of Soviet Socialist Republics.
Bona fide, (Latin). In good faith; real; true; authentic; genuine.
Bondman. Slave, serf, villein.
Bourgeois, n. or adj., bourgeoisie, n. (French). The merchants, professional persons (doctors, lawyers, professors), employers and white-collar workers, as distinguished from (1) the clergy; (2) the nobility and the landed gentry; and (3) the manual workers and peasants called the proletariat. See “Proletarian.”
Bourse, (French). A continental European stock exchange. As a rule such stock exchanges also trade in foreign exchange. The term also applies to commodity exchanges.
Bretton Woods Conference (and Agreement). The United Nations Monetary and Financial Conference called by President Franklin D. Roosevelt (1882–1945). Representatives of 44 countries met at Bretton Woods, New Hampshire, July 1–22, 1944. The Conference approved agreements for the “International Monetary Fund” (q.v.) and the “International Bank for Reconstruction and Development” which was to provide financial assistance for “war-torn” and “underdeveloped regions.” The idea for an international stabilization fund and an international bank originated with the U.S. government in the fall of 1941. After several years of technical preparation and preliminary international discussions, tentative proposals were readied for the Conference. The American proposal was prepared under the direction of Harry Dexter White (1892–1948) who died mysteriously shortly after being exposed as a Communist. The British draft was largely the work of Lord Keynes (1883–1946). See “Keynesians.”
British Labor Party. See “Labor Party (British).”
Bucolic. Pastoral; relating to a shepherd’s life or rural affairs.
Buddhism, Buddhist monks. An ancient religion in most Asian countries except for Siberia and the Arab lands. It was started by Gautama Buddha (563?–?483 ) whose teachings have been variously interpreted and emphasized by the many different subdivisions or sects. Members are in general asked to live peaceful, highly moral lives of self-denial while treating even their enemies and animals with respect. A Buddhist believes that when his body dies, his soul is reborn in another body and retains the sorrows of previous sins. Good Buddhists are generous almsgivers.
Buddhist monks live in poverty on the gifts received from others. They must obey strict rules requiring great patience, pacifism and abstinence. They are taught that life is full of pain and sorrow due to man’s desires, lusts, cravings and passions. They seek the highest possible bliss, or Nirvana, in the complete elimination from their lives of these inherent characteristics of human nature.
Bullion. Monetary metals as merchandise in any form but that of standard coins. Gold and silver bullion are usually in the form of bars or ingots, but they may also be in the form of refined ores or nonstandard coins, such as worn or foreign coins that are valued solely for their weight and fineness.
Bull market. Period of rising prices on the stock exchange and/or commodity markets. Period of optimism in the financial markets with a general expectation of still higher prices in the future. A bull market is usually accompanied by an upsurge in buying on margin, i.e., buyers borrowing a part of the funds with which they pay for their purchases.
Bureaucrat. An employee or official whose actions and duties are guided and determined by rules, regulations and budgetary specifications established by law or other higher authority. The employment of bureaucrats and bureaucratic management is the only appropriate method for handling governmental affairs, for which market processes, economic calculation and the profit motive are unable to provide sufficient guidelines.
Burgher. A freeman or inhabitant who enjoys all the privileges of a citizen of a town or borough.
Business cycle. See “Trade cycle.”