Front Page Titles (by Subject) G - Human Action: A Treatise on Economics, vol. 4 (LF ed.)
The Online Library of Liberty
A project of Liberty Fund, Inc.
Search this Title:
Also in the Library:
G - 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.
About Liberty Fund:
Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.
The copyright to this edition, in both print and electronic forms, is held by Liberty Fund, Inc.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
Geist, (German). Indwelling spirit of man; guiding mind or conscious intelligence. In the philosophy of Georg Hegel (1770–1831), only Geist—not matter—is reality. Hegel believed that Geist revealed to him the “truths” which he spoke and which became the official doctrines of the Prussian state and universities.
Gemeinnutz geht vor Eigennutz, (German). The welfare of the nation takes precedence over the selfishness of the individuals.
Gens du monde, (French). Rich and fashionable, sophisticated, worldly people.
Geology. The science which deals with the history of the physical development of the structure, content and life of the earth as revealed by the application of the natural sciences to the physical formations found inside and on the surface of the earth.
German pattern of socialism. See “Socialism of the German pattern.”
Gestaltpsychologie, (German). A school of psychology which holds that men grasp the meaning or reality of things according to the form, pattern, configuration or arrangement of the units or parts as they appear in the whole rather than in a breakdown or summation of the individual units, parts or sub-wholes of the wholes. Examples—a musical melody has greater significance to the hearer than the same tones played at random; three equal lines arranged as an equilateral triangle present an intellectual association of greater significance than the same lines otherwise arranged.
Thus, Gestaltpsychologie, unlike praxeology (q.v.), is not interested in studying the individual unit so much as it is concerned with the functional form or interrelationships of the units within the whole or universal.
Gettysburg Address (November 19, 1863). A short succinct speech delivered by President Abraham Lincoln (1809–65) at the dedication of a National Cemetery on the American Civil War (1861–65) battlefield at Gettysburg, Pennsylvania. It asks the living to dedicate themselves to the unfinished task “that this nation, under God, shall have a new birth of freedom; and that government of the people, by the people, for the people, shall not perish from the earth.”
Glebe. Soil or farm land. Now used primarily in poetry. Once, the cultivable land belonging to, and used for the support of, a parish church.
Gleichschaltung, (German). Forced equalization, unification or synchronization.
Gold exchange standard. A national monetary system under which: (1) the domestic monetary unit is legally defined as the equivalent of a certain fixed weight of gold, called the parity rate; (2) only money-substitutes (q.v.) are held by individuals and used in domestic business transactions, i.e., there are no domestic gold coins; (3) the national monetary authority maintains the value of all money-substitutes at the legally set parity rate by redeeming in gold such money-substitutes as a holder desires to use abroad at the legal parity rate or at rates between the gold export and import points (see “Gold points”) of such parity; (4) the national monetary authority, as the only official domestic holder of gold and foreign exchange, exchanges all imports of gold and foreign exchange into domestic legal tender money substitutes at the legal parity rate or at rates between the gold export and import points of such rates. The gold exchange standard makes it possible for the national monetary authority to keep a part of its reserves not in gold but in foreign bank balances which are redeemable in gold. It was proposed by Ricardo (1772–1823) in 1816 as a monetary system which he believed would function the same as the gold standard by maintaining the value of domestic money-substitutes at the gold parity and would have the added advantage of economizing on the use of gold. In practice, the rigid gold exchange standard has permitted the political manipulation of the quantity of money. This in turn has led to inflation, credit expansion and the flexible gold exchange standard, or more simply the flexible standard (q.v.), under which the gold parity is subject to change, usually downward, whenever the government considers it advantageous, usually to prevent a further outflow of gold.
Note: In present day popular usage this term has been corrupted to mean a monetary system for which reserves are held in foreign currencies convertible into gold, as well as in gold itself.
Gold export point. See “Gold points.”
Gold import point. See “Gold points.”
Gold points. The upper and lower limits beyond which the foreign exchange rates for a gold standard monetary unit cannot go without making it more profitable to ship gold than to buy or sell such foreign exchange. These limits are set by the costs of shipping gold into or out of the country and such costs include both interest and insurance. The limit beyond which it becomes more profitable to export gold is known as the gold export point, while the limit beyond which it becomes more profitable to import gold is known as the gold import point.
Gold standard. A commodity money standard in which the commodity is gold. The gold standard is the sound monetary system, national or international, under which: (1) a monetary unit is defined as a certain fixed weight and fineness of gold; (2) gold coins are used in business transactions and are part of the cash holdings of individuals; (3) only standard gold coins have unlimited legal tender quality; (4) the national monetary authority is obliged to exchange without restriction gold against monetary units and monetary units against gold at the fixed rate or at such rate plus a sum not to exceed the costs of handling or minting; (5) the national monetary authority maintains the value of any and all subsidiary coins and paper money-substitutes at par with gold by remaining ready to redeem them on demand in gold at the parity rate and thus retire them from circulation; (6) there are no restrictions on the ownership of monetary gold or its movement into or out of the country.
The gold standard is an historical development of the market economy and as such a social institution for facilitating trade, both within and across national boundaries. The gold standard greatly limits the ability of banks and political authorities to manipulate short-term market interest rates, the quantity of money and the purchasing power of the monetary unit. It thus acts as a deterrent of the trade cycle (q.v.). See also “Credit expansion” and “Monetary theory of the trade cycle.”
Goodwill. The renown a business acquires on account of past achievements. Goodwill is present in all social relations. Catallactics, of course, deals only with commercial goodwill.
Goods-induced changes in purchasing power. Price changes brought about by changes in the supply of and/or the demand for individual goods and services.
Goods of higher orders. See “Goods, orders of.”
Goods of the first, or lowest, order. See “Goods, orders of.”
Goods, orders of. Economic goods (and services) are of different orders, depending on how far they are removed from their final production as a consumer’s good (or service). Goods of the first or lowest order are goods ready for consumption by the final user (consumers’ goods). Goods of the second order are producers’ goods or factors of production (q.v.) which are one stage removed from being consumers’ goods. Goods of the third order are two stages removed from consumers’ goods and so on. Producers’ goods and factors of production are referred to as “goods of the higher orders,” or, when appropriate, “goods of the highest order.”
Gossen’s law of the saturation of wants (first law of Gossen). The continuance, increase or repetition of the same kind of consumption yields a continuously decreasing satisfaction or pleasure up to a point of satiety. This law first propounded in 1854 by Hermann Heinrich Gossen (1810–58), in a rare and little-known German book, was rediscovered more than twenty years later by Robert Adamson (1852–1902), a Scottish Professor of Logic and Philosophy, and reported to the eminent English economist, William Stanley Jevons (1835–82), who brought it to the attention of the economic profession.
Government. The social apparatus established for the monopolistic exercise of the compulsion and coercion which, because of man’s imperfection, is necessary for the prevention of actions detrimental to the peaceful interhuman cooperation of a definite system of social organization. Because men are not faultless, government (the police power) is an indispensable and beneficial institution, as without it no lasting social cooperation or civilization could be developed or preserved. A durable system of government must rest on the might of an ideology acknowledged by the majority. The concept of a perfect system of government is both fallacious and self-contradictory, since this institution of men is based on the very imperfection of men. From the liberal (q.v.) viewpoint, the task of government consists solely and exclusively in guaranteeing the protection of life, health, liberty and private property against violent attacks. As far as the government confines the exercise of its violence to the suppression and prevention of antisocial actions, there prevails what reasonably and meaningfully can be called liberty.
Greenbacks. Officially, United States Notes, first issued by the U.S. Treasury in 1862 as legal tender fiduciary paper money to help finance the Civil War (1861–65). Their value in gold at one time (1864) was below 40 cents. In 1879, they became redeemable in gold. However, when the United States went off the gold standard in 1933, the greenbacks again became irredeemable. The highest amount outstanding was $450,000,000. There are still $347,000,000 outstanding, an almost insignificant part of the nation’s legal tender today (1974).
Gresham’s Law. Popularly stated: “Bad money drives out good money.” More correctly stated: When a government recognizes more than one kind of money as legal tender, there is a tendency for the legally overvalued money to become the universally used medium of exchange, while the legally undervalued money disappears as a medium of exchange.
The earliest known recognition of this phenomenon is found in The Frogs (405 ) by the Athenian playwright, Aristophanes (448?–?380 ). A translation reads: “The course our city runs is the same towards men and money. She has true and worthy sons. She has ... coinsuntouched with alloys, gold or silver, each well minted, tested each and ringing clear. Yet, we never use them! Others always pass from hand to hand, sorry brass just struck last week and branded with a wretched brand. So with men we know for upright, blameless lives and noble names. These we spurn for men of brass. . . .” It was first discussed at length by a Frenchman, Nicholas Oresme (1320?–82), Bishop of Lisieux after 1377. In his undated Tractatus de Origine, Natura et Mutationibus Monetarium he opposed the mutation of coins by Princes for their own gain. He declared such a debasement of coins unjust and intolerable because it demoralizes people, disturbs trade and leads to the disappearance of the precious metals from the country. The Polish astronomer, Copernicus (1473–1543), wrote in his De Monetae Cudendae: “That it is impossible for goodweighted coin and base and degraded coin to circulate together, That all the good coin is hoarded, melted down or exported; and the degraded coin alone remains in circulation.”
This phenomenon was first called “Gresham’s Law” in 1857, when the English economist, Henry D. McLeod (1821–1902) attributed it to Sir Thomas Gresham (1519–79). A highly successful merchant, Sir Thomas, as a royal agent, advised England’s Queen Elizabeth (1533–1603) on monetary reform. He pointed out that her father, Henry VIII (1491–1547), in “abasinge his quoyne” brought about a fall in the foreign exchange value of English coins and the departure of all fine gold from the realm. Actually, Gresham’s Law is only a special case of the more general economic law that in a market economy no commodity is ever allocated to perform a function for which it is known that a cheaper commodity would serve as well.
Gross (market) rate of interest. See “Interest, gross (market) rate of.”
Guilds, or Guild system (originally “gilds”). Associations or corporations which originated in the Middle Ages. The most important were the Merchant Guilds and later the Craft Guilds which in fact were legal monopolies whose members were granted the exclusive right to practice a specified trade or craft within defined local areas. The Craft Guilds set wage rates, hours of work, apprenticeship terms and protected their privileges by holding membership below the demand for their services. The Guild system disintegrated with the rise of free market (liberal) ideas and industries with which they were unable to compete.
Guild socialism. An outgrowth of British (Fabian) socialism that emerged in the second decade of the twentieth century, gained considerable support after World War I and then faded into obscurity. It proposed the public ownership of all industries and the separate management of each industry by its workers, organized into a national guild or labor union. Its sponsors considered it an ideal social system which would eliminate “unearned income” (q.v.) and extend the principles of political democracy into the industrial realm. It was primarily an impractical reaction of some “democratic socialists” to the apparent dangers of an all powerful government, as noted in the Germany of the Hohenzollerns and later in the Soviet Union.
Guinea. The principal English gold coin during the period of legal bimetalism, from 1663 until the Act of 1816. Originally issued to pass as the legal equivalent of 20 shillings of silver, this ratio for many years overvalued silver so that the guinea passed at a premium. In 1717, a Royal decree forbade anyone to receive a guinea at any rate or value higher than 21 shillings. Since the Act of 1816, the guinea has become merely a nominal term for 21 shillings. Certain “quality” goods and services are still quoted in guineas rather than pounds sterling (q.v.).