Sublime

we may form an opinion as to the proportion which the taxation of a people bears to its real prosperity, by observing whether its external appearance is flourishing; whether, after having discharged the calls of the State, the poor man retains the means of subsistence, and the rich the means of enjoyment;

Friedrich Hayek’s book The Fatal Conceit: Errors of Socialism expressed with clarity and authority what I had long felt but was unable to express, namely the unwisdom of powerful intellects, including Albert Einstein, when they believed that a powerful brain can devise a better system and bring about more “social justice” than what historical evolu

1. Nothing is free. To acquire anything requires an expenditure of time, energy, or money. (Not even natural resources can be used without an application of effort — whether that be cutting down a tree or picking up an apple.) 2. Anything you want that you can’t provide entirely for yourself requires an exchange with someone else. 3. A one-sided trans

In my Far from Equilibrium Economics and Finance course, the first two articles I have my PhD students read are Friedrich von Hayek’s Economics and Knowledge (1937) and The Use of Knowledge in Society (1945) , von Hayek’s classic papers that describe a market economy as a solution to the division of knowledge problem. The third article I have them

Contrary to a popular impression, profits are achieved not by raising prices, but by introducing economies and efficiencies that cut costs of production.

What matters for business is not the general behavior of prices, but the price differentials between selling prices and costs (the “natural rate of interest”).

These days, most of our arguments about justice are about how to distribute the fruits of prosperity, or the burdens of hard times, and how to define the basic rights of citizens. In these domains, considerations of welfare and freedom predominate. But arguments about the rights and wrongs of economic arrangements often lead us back to Aristotle’s

Practically speaking, the opponents to a reform in Massachusetts are not a hundred thousand politicians at the South, but a hundred thousand merchants and farmers here, who are more interested in commerce and agriculture than they are in humanity, and are not prepared to do justice to the slave and to Mexico, cost what it may.