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Economic Theories

Theories accurately describe why specific results have been achieved in the past; and why, given the same circumstances, the same result will occur in the future.

We tend to underestimate the importance of theory in most of the activities in our lives. The overlooked importance of theory has a particular importance in economics. Economists frequently confuse correlation with causation. By not testing observations with sound theory they frequently recommend actions detrimental to their desired results.

In this section will  will discuss many important theories in economics.

Subjective Theory of Value

... economic value is not an inherent property of a good, but determined by the preferences of those who wish to acquire the good.

The subjective theory of value holds the view, developed by the Austrian School, that economic value is not an inherent property of a good. Rather, it is determined by the preferences of those who wish to acquire the good.

The theory, held by the Austrian economists and by the Anglo-Saxon followers of the English economist, W. Stanley Jevons (1835-1882) and the American economist, John Bates Clark.(1847-1938), that the value of economic goods is in the minds of individual men and therefore is neither constant nor inherent in the goods themselves; that values of the same good vary, as the judgments of the individuals making the valuations vary, from person to person and from time to time for the same person. Also referred to as "subjective-value theory" and "marginal theory of value."

Praxeology

The word praxeology refers to the systematic study of purposeful human action. Praxeology provided a foundational concept in the theories developed by Ludwig von Mises.

The science or general theory of (conscious or purposeful) human action. Ludwig von Mises defines action as "the manifestation of a man's will. Accordingly, he considers the use of the adjectives "conscious or purposeful" to be redundant. Praxeology is a manifestation of the human mind and deals with the actions open to men for the attainment of their chosen ends. Praxeology starts from the a priori category of action and then develops the full implications of such action. Praxeology aims at knowledge valid for all instances in which the conditions exactly correspond to those implied in its assumptions and inferences. Its statements and propositions are not derived from experience, but are antecedent to any comprehension of historical facts.

Economic Activity

Purposeful activity resulting from human action.

At the base of all economics lies the human activities of production and consumption. Production serves the purpose of providing goods for consumption. Some goods are produced either for trade or production of other goods.

This section will deal with many of these economic activities.

Carl Menger

Carl Menger -
The Father of The Austrian School of Economics

 

Economic Reasoning