Evenly Rotating Economy: Difference between revisions
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The unchanging evenly rotating economy leaves "no room for the [[entrepreneur|entrepreneurial function]]."<ref name="humanaction_ch26sec2">[[Ludwig von Mises]]. [http://mises.org/humanaction/chap26sec2.asp XXVI. Economic Calculation Under Socialism], 2. Past Failures to Conceive the Problem, [[Human Action]], online version, referenced 2011-04-23.</ref> That is, future prices will be the same as current prices and the [[entrepreneur]] has no reason to combine factors of production anew based on the anticipation of future prices; their is no future price as different from the current price, and therefore, no [[entrepreneur]]. | The unchanging evenly rotating economy leaves "no room for the [[entrepreneur|entrepreneurial function]]."<ref name="humanaction_ch26sec2">[[Ludwig von Mises]]. [http://mises.org/humanaction/chap26sec2.asp XXVI. Economic Calculation Under Socialism], 2. Past Failures to Conceive the Problem, [[Human Action]], online version, referenced 2011-04-23.</ref> That is, future prices will be the same as current prices and the [[entrepreneur]] has no reason to combine factors of production anew based on the anticipation of future prices; their is no future price as different from the current price, and therefore, no [[entrepreneur]]. | ||
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> | 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> In the evenly rotating economy, all the factors of production are employed in such a way that they provide the highest valued service possible .<ref name="humanaction_ch26sec6">[[Ludwig von Mises]]. [http://mises.org/humanaction/chap19sec2.asp XXVI. Economic Calculation under Socialism], 6. The Differential Equations of Mathematical Economics, [[Human Action]], online version, referenced 2011-4-25.</ref> | ||
==References== | ==References== | ||
Revision as of 19:49, 25 April 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 unchanging evenly rotating economy leaves "no room for the entrepreneurial function."[2] That is, future prices will be the same as current prices and the entrepreneur has no reason to combine factors of production anew based on the anticipation of future prices; their is no future price as different from the current price, and therefore, no entrepreneur.
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.[3][4] In the evenly rotating economy, all the factors of production are employed in such a way that they provide the highest valued service possible .[5]
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. XXVI. Economic Calculation Under Socialism, 2. Past Failures to Conceive the Problem, Human Action, online version, referenced 2011-04-23.
- ↑ 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.
- ↑ Ludwig von Mises. XXVI. Economic Calculation under Socialism, 6. The Differential Equations of Mathematical Economics, Human Action, online version, referenced 2011-4-25.