Basics of Economics: Action and Exchange

Econ_2013_D_BoE_AE — with Robert P. Murphy

Cost: $49   Length: 6 Lectures
Format: Independent Study
Status: Open for enrollment
Program: Basics of Economics

This course covers chapters 1-6 of Robert Murphy’s Lessons for the Young Economist.

This is a six-week course that offers an introduction to the Austrian understanding of action and barter exchange. This course, titled “Action and Exchange,” is the first of a three-part series that uses the instructor’s Lessons for the Young Economist as the main textbook.

Independent Study

Independent study courses are courses that were presented live in the past. These courses are now offered at a discount to anyone who wants to study independently. All courses include lecture recordings, slides, a complete hyper-linked syllabus, automatically-graded quizzes, and a discussion forum. Professors are not available for academic support for these independent study courses.

The Scope of the Course

The course will begin with an analysis of economics itself. Is it a science? Yes, but its methods differ from those of the natural sciences such as physics and chemistry. We walk through the Misesian understanding of economics as a subset of “human action” and explain how it’s possible to derive knowledge of objective reality through introspection and logical deduction. According to Mises, this is the way we discover economic laws — a method that is more analogous to geometry than to physics. Although we will use the discussion in Lessons for the Young Economist as a springboard, in the lectures we will elaborate by giving more specifically “Austrian” points to make sure the student understands what Mises was and was not saying. Although even some free-market fans of Mises think one can safely skip the “philosophical” part of his work, we will explain why he thought a solid foundation in economics was so important — just as it is in building a house.

After defining the scope of economic science and the procedure by which we “do economics,” we move on to some basic concepts and definitions, including consumer vs. producer goods,opportunity cost, and saving. We then walk through the basics of “Robinson Crusoe economics,” in which we illustrate fundamental economic principles in a hypothetical one-man economy. The economic principles or laws that we develop here — such as the fact that people make decisions on the margin — are true for all people, whenever they act. We merely keep things simple by illustrating the concepts in the fictitious scenario of a lone man on a tropical island.

Once we understand economic principles in the context of an isolated person, we then show the importance of private property in a world of multiple people. The institution of property is essential if society is to reap the advantages of the division of labor, specialization, and trade.

Finally, we will very rigorously explain how prices are formed in a barter economy, i.e., an economy in which people trade goods directly with each other, rather than using money. The specific example we work with is a small “market” made up of siblings who are trading Halloween candy.

By the end of the six-lecture course, the student who has read the text and watched the lectures will have a solid command of the foundations of economic science. He or she will understand why the institution of private property is essential for modern civilization. Finally, the student will really understand how it’s possible for subjective rankings of goods in the minds of individuals can yield objective trade ratios among goods in a barter economy. This was no small feat, as it eluded even the great classical economists. Yet this impressive result will be taught in an understandable manner so that even junior high students will understand it.


All readings will be free and online. A fully hyper-linked syllabus with readings for each weekly topic will be available for all students.