Evenly Rotating Economy: Difference between revisions
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The '''Evenly Rotating Economy''' is a fictitious system in which there are no [[price]] changes whatever – i.e., there is perfect price stability. The concept is used to illustrate the function of [[Entrepreneur|entrepreneurship]] and to demonstrate meaning of [[profit]] and [[loss]] by hypothesizing a system where they are absent.<ref name="Mises_evenly_rotating_economy">[[Ludwig von Mises]]. [http://mises.org/humanaction/chap14sec5.asp XV. The Scope and Method of Catallactics], 5. The State of Rest and the Evenly Rotating Economy, [[Human Action]], online version, referenced 2011-02-05.</ref> | The '''Evenly Rotating Economy''' is a fictitious system in which there are no [[price]] changes whatever – i.e., there is perfect price stability. The concept is used to illustrate the function of [[Entrepreneur|entrepreneurship]] and to demonstrate meaning of [[profit]] and [[loss]] by hypothesizing a system where they are absent.<ref name="Mises_evenly_rotating_economy">[[Ludwig von Mises]]. [http://mises.org/humanaction/chap14sec5.asp XV. The Scope and Method of Catallactics], 5. The State of Rest and the Evenly Rotating Economy, [[Human Action]], online version, referenced 2011-02-05.</ref> | ||
On the | On the evenly rotating economy, [[Ludwig von Mises]] writes: | ||
<blockquote>"The same market transactions are repeated again and again. The goods of the higher orders pass in the same quantities through the same stages of processing until ultimately the produced consumers' goods come into the hands of the consumers and are consumed. No changes in the market data occur. Today does not differ from yesterday and tomorrow will not differ from today...Therefore prices--commonly called static or [[equilibrium]] prices--remain constant too."<ref name="Mises_evenly_rotating_economy">[[Ludwig von Mises]]. [http://mises.org/humanaction/chap14sec5.asp XV. The Scope and Method of Catallactics], 5. The State of Rest and the Evenly Rotating Economy, [[Human Action]], online version, referenced 2011-02-05.</ref></blockquote> | <blockquote>"The same market transactions are repeated again and again. The goods of the higher orders pass in the same quantities through the same stages of processing until ultimately the produced consumers' goods come into the hands of the consumers and are consumed. No changes in the market data occur. Today does not differ from yesterday and tomorrow will not differ from today...Therefore prices--commonly called static or [[equilibrium]] prices--remain constant too."<ref name="Mises_evenly_rotating_economy">[[Ludwig von Mises]]. [http://mises.org/humanaction/chap14sec5.asp XV. The Scope and Method of Catallactics], 5. The State of Rest and the Evenly Rotating Economy, [[Human Action]], online version, referenced 2011-02-05.</ref></blockquote> | ||
The imaginary construction of the | The imaginary construction of the evenly rotation economy is in [[equilibrium]], all prices are [[final prices]], and the rate of [[originary interest]], the discount of future [[goods]] against present [[goods]], is the same for all commodities.<ref name="Mises_final_goods">[[Ludwig von Mises]]. [http://mises.org/humanaction/chap14sec5.asp XVIII. The Scope and Method of Catallactics], 5. The State of Rest and the Evenly Rotating Economy, [[Human Action]], online version, referenced 2011-02-12.</ref><ref name="Mises_originary_interest">[[Ludwig von Mises]]. [http://mises.org/humanaction/chap19sec2.asp XIX. The Rate of Interest], 2. Originary Interest, [[Human Action]], online version, referenced 2011-02-12.</ref> | ||
==References== | ==References== | ||
Revision as of 04:12, 14 February 2011
The Evenly Rotating Economy is a fictitious system in which there are no price changes whatever – i.e., there is perfect price stability. The concept is used to illustrate the function of entrepreneurship and to demonstrate meaning of profit and loss by hypothesizing a system where they are absent.[1]
On the evenly rotating economy, Ludwig von Mises writes:
"The same market transactions are repeated again and again. The goods of the higher orders pass in the same quantities through the same stages of processing until ultimately the produced consumers' goods come into the hands of the consumers and are consumed. No changes in the market data occur. Today does not differ from yesterday and tomorrow will not differ from today...Therefore prices--commonly called static or equilibrium prices--remain constant too."[1]
The imaginary construction of the evenly rotation economy is in equilibrium, all prices are final prices, and the rate of originary interest, the discount of future goods against present goods, is the same for all commodities.[2][3]
References
- ↑ 1.0 1.1 Ludwig von Mises. XV. The Scope and Method of Catallactics, 5. The State of Rest and the Evenly Rotating Economy, Human Action, online version, referenced 2011-02-05.
- ↑ Ludwig von Mises. XVIII. The Scope and Method of Catallactics, 5. The State of Rest and the Evenly Rotating Economy, Human Action, online version, referenced 2011-02-12.
- ↑ Ludwig von Mises. XIX. The Rate of Interest, 2. Originary Interest, Human Action, online version, referenced 2011-02-12.