Human action and the economic order

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Chapter 1 in The Economics of Prosperity, 2023, pp 11-33 from Edward Elgar Publishing

Abstract: Differences in understanding are based largely on differences in the economic frameworks various economists use when considering questions of economic progress. Economic expansion and development is a topic of macroeconomics, and the essence of modern macroeconomics is economic modeling, a false mechanical analogy in a scientistic approach to economics. Instead of basing constructions on assumptions suitable for the problems investigated, models are constructed on arbitrary assumptions so unrealistic as to make the models irrelevant for understanding real economic problems. In focusing almost exclusively on aggregate variables they neglect the very problems that need analyzed. The social order that produces economic prosperity is the result of human action. It is simply not satisfactory to sever economics from the general principles of human action. The production of all wealth is supported by a vast structure of production. Production takes place in time, so economic theory must account for time preference and uncertainty. Economic social orders are integrated through exchange. Voluntary exchange opens the door to the division of labor which allows for increased productivity as people specialize according to efficiency and the accumulation and utilization of capital. The market division of labor is an economic order because all the productive activity is coordinated by many individual entrepreneurs. The division of labor, capital formation, and entrepreneurship all require private property to flourish.

Keywords: Economics and Finance (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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