Glossary

Sustained inflation happens only when the quantity of money grows faster than output.

Oil shocks, unions or greedy firms can raise some prices or the price level once, but cannot keep it rising year after year unless money accommodates them. That puts responsibility for inflation on whoever controls the money supply. Critics note money demand became unstable after the 1980s, weakening the short-run link.

Programs launched for an emergency acquire beneficiaries, staff and lobbies that keep them alive after the emergency ends.

Concentrated benefits organize; diffuse costs do not. Each renewal vote pits a motivated clientele against taxpayers who each lose a few dollars. Friedman himself helped design wartime income-tax withholding at the Treasury in 1942–43, and later regretted that it outlived the war.

A rule that demand deposits be fully backed by reserves, with lending done only from savings and time deposits.

Rothbard's proposed reform: it ends the multiplier, runs and bank-created credit booms, separating warehousing money from investing it.

A parable of an emperor who digs canals to cheapen trade, then is persuaded to fill them in to make more work for porters.

A tariff has the same effect on prices as a worse road. Nations spend fortunes reducing transport costs, then put them back at the border.

People do not rebel over slips of human frailty; only a long train of abuses, all tending one way, makes a design against them visible.

This is Locke's answer to the fear that a right of revolution invites constant upheaval. The phrase reappears almost word for word in the Declaration of Independence.

Being able to produce a good with fewer resources than someone else.

Adam Smith's case for trade rested on it. Ricardo showed it is neither necessary nor sufficient. Portugal can be better at both cloth and wine and still gain by buying cloth from England.

If a foreign country can supply a good cheaper than we can make it, better to buy it with part of what we produce best.

'It is the maxim of every prudent master of a family, never to attempt to make at home what it will cost him more to make than to buy.' Ricardo later showed trade pays even without any absolute advantage.

Absolute monarchy is not a form of civil government at all, because the monarch remains in the state of nature with his subjects, judge in his own case.

Against Hobbes and Filmer: escaping polecats and foxes only to be devoured by lions is no bargain. Government must be limited because rulers are men too.

The power to choose which options are voted on and in what order.

When preferences cycle, the agenda setter, a committee chair or a speaker, effectively picks the winner. Institutions that limit agenda power are a large part of constitutional design.

Rothbard's account that the 1920s Fed credit boom caused the crash, and that Hoover's and Roosevelt's interventions turned a recession into a decade-long depression.

He singles out Hoover's pressure on industry to hold wage rates up while prices fell, which raised real wages and kept unemployment high. Most economists put more weight on the monetary contraction of 1930–33 (Friedman) or on collapsing demand (Keynes).

A stateless society in which all goods and services, including security and law, are provided by voluntary markets on the basis of private property.

Rothbard coined the term and fused Austrian economics with American individualist anarchism. It is the logical endpoint of applying the non-aggression principle to the state itself.

Buying where a good is cheap and selling where it is dear, which closes the gap.

It is the simplest case of entrepreneurship, and it shows how profit-seeking spreads information: the price gap disappears because someone acted on it.

No ranked voting rule over three or more options satisfies a short list of reasonable fairness conditions at once.

Every collective decision rule has some flaw: it can cycle, ignore some preferences, or be manipulated. Buchanan’s answer was to stop treating “society” as an agent with preferences and focus on rules individuals can agree to.

How much an investment is worth only within one particular relationship, such as a die made for one car model.

Oliver Williamson built on Coase: the more specific the asset, the more a contract partner can hold you up once you've invested, so such activities tend to be brought inside the firm.

Credit expansion pushes interest rates below the rate that real savings would set, which starts more and longer projects than savings can complete; the boom ends in a bust when they are abandoned.

Mises (1912) and Hayek (1931) located the cause of the cycle in money and credit rather than in markets themselves. Critics question why entrepreneurs repeatedly make the same mistake and argue the theory fits some booms (housing 2000s) better than others.

When depositors fear a bank cannot pay, they all try to withdraw at once, and a fractionally reserved bank must fail or suspend payment.

For Rothbard the run is not irrational panic but depositors discovering a real insolvency. A 100%-reserve bank cannot be run on. Mainstream economics treats runs as coordination failures and favors deposit insurance and a lender of last resort.

Side payments and illegal resales that reappear when a legal price is below what buyers would pay.

The gap between the ceiling and the marginal buyer's willingness to pay doesn't vanish; it goes to whoever controls access, legally or not.

The social honour given to merchants, inventors and ordinary people trying out new things.

McCloskey argues that what changed around 1700 was not capital or institutions so much as rhetoric: how people talked about the bourgeoisie. Words and ideas, not just material incentives, made innovation respectable.

The belief that destruction is good for the economy because repairing it creates work.

The glazier's gain is seen; the shoes the owner would have bought instead are not. Spending is only redirected, and society is poorer by one window.

Niskanen’s model of bureau heads seeking larger budgets, which bring salary, staff, power and prestige.

Because the bureau knows its costs and the legislature does not, it can offer a whole output for a whole budget, expanding until total cost equals total value. Output ends up too large, and the public surplus is used up.

New money benefits those who receive and spend it first, before prices rise, at the expense of those it reaches last and of people on fixed incomes.

Named after Richard Cantillon (1755), whose analysis Mises built on. It is why the channel of monetary expansion (bank credit, government spending, transfers) decides who gains.

Hayek's word for the market order: the network of exchanges among people pursuing their own, different ends.

An ‘economy’ in the strict sense (a household, a firm) serves one hierarchy of ends. A catallaxy serves many incommensurable ends at once and requires agreement only on rules, not on goals.

With many goods, rank them by relative labour cost; relative wages decide where the chain is cut between the two countries.

It turns the two-good example into a general rule. A less productive country still exports something by paying lower wages, so trade does not require being good at anything in absolute terms. This answers the 'pauper labour' fear in both directions.

Giving each branch the constitutional means and personal motive to resist encroachment by the others.

'Ambition must be made to counteract ambition' (Federalist 51). Parchment barriers aren't enough; checks work only if those holding power in each branch have an interest in using them, which a single dominant party can undermine.

Voluntary groups (churches, clubs, charities, town meetings, companies) through which citizens solve common problems without the state.

Tocqueville saw them as the school of self-government in a democracy: the habit of acting together is learned by doing, and it is what stands between isolated individuals and an all-powerful state.

The community formed when people give up their private power to punish to the public, gaining an established law, an impartial judge, and a power to enforce judgments.

Locke's three missing pieces of the state of nature are exactly what civil society supplies. People give up the right to be their own judges, not their rights themselves.

If rights are clearly defined and bargaining is costless, people bargain to the efficient outcome whoever holds the right; the law only changes who pays whom.

Coase never claimed transaction costs are zero. His point was the reverse: because they are positive in real life, how the law assigns rights does change what happens, so it should be judged by the outcome it produces.

Where people deal with each other repeatedly, a reputation for honesty is valuable, so commercial societies tend to make people more reliable in keeping their word.

Smith noted in his lectures that the Dutch, the most commercial people, were the most faithful to their word. Reputation and conscience reinforce each other.

A producer should specialise in what it gives up least to make, not in what it makes most efficiently.

It shows both sides gain from trade even when one side is more productive at everything. What matters is the difference in relative costs, not in absolute costs. It is arguably the least intuitive and most robust result in economics.

Competition is valuable because it finds out facts (cheapest methods, what people want) that nobody would otherwise know.

If we already knew the best methods, competition would be wasteful. We don't, so rivalry, imitation and the exit of losers are how a society learns. The ‘perfect competition’ model, which assumes the knowledge is given, misses the point.

A policy that gives a small group large gains while spreading larger total costs thinly over many people.

The few have a strong reason to organise and lobby; the many lose too little each to notice. Such policies survive even when they make society poorer overall.

Majority preferences can be cyclic: A beats B, B beats C, and C beats A.

Then there is no coherent “will of the majority”, and whoever controls the order of votes can produce any outcome.

The error of assuming that opposing a state-run activity means opposing the activity itself.

"We object to state education; then they say we are opposed to any education." Rejecting compulsion is not rejecting the goal.

No one can be put under another's political power without his own consent; consent may be express or tacit (by enjoying property under a government).

It makes legitimacy depend on the governed rather than on conquest or divine right. Tacit consent is the weakest link: critics like Hume asked whether a poor peasant who cannot emigrate really consents.

A view of human beings as fixed in their moral and intellectual limits, with knowledge dispersed among many people.

It favours systemic processes (markets, law, tradition) that work with human nature, and sees policy as a matter of trade-offs.

The Cartesian view that all useful institutions are, or should be, deliberate creations of reason.

Hayek contrasted it with the ‘evolutionary’ rationalism of Hume, Smith and Ferguson, which sees reason itself as shaped by inherited rules it cannot fully examine.

"Consumption is the sole end and purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer."

Smith's test for trade policy: does it let people consume more? Tariffs and bounties fail it even when they protect particular producers.

British tariffs and import bans on grain, 1815–1846.

Ricardo argued they forced cultivation of poor land, raised the price of bread and rents, and squeezed profits, the source of investment and growth. Their repeal in 1846 became the symbol of the free-trade era.

Hayek's names for grown order (cosmos) and made order (taxis), such as an organisation with a purpose.

Organisations are fine within a society; the error is trying to run the whole society as one organisation with a single purpose.

The process by which new products, methods and firms make old ones obsolete. Schumpeter called it “the essential fact about capitalism”.

Growth doesn't come from more of the same but from replacing the old. The losses are concentrated and visible; the gains are spread out and arrive later.

A state's ability to bind itself not to seize property or default on debts.

North and Weingast argued that after 1688, Parliament's control over taxes made the English crown's promises believable, and interest rates on government debt fell sharply. A state strong enough to protect property is also strong enough to take it.

Mercantilism treated wealth as gold and silver and pursued a favorable balance of trade through import restrictions and export bounties.

Smith argued this confused money with wealth and taxed consumers to enrich favored producers. The system was, in his account, largely designed by merchants and manufacturers for their own benefit.

Moral and legal rules spread because the groups that follow them prosper and grow, and others imitate them, not because people understood why they work.

It explains why tradition can contain more wisdom than reason can articulate. Group selection is controversial among biologists, and Hayek's version is loosely specified.

Assets the poor already own, mainly homes and land, that cannot be used as collateral, sold widely or invested because they lack formal legal title.

De Soto estimated it at about $9.3 trillion worldwide in 2000. The problem isn't a lack of savings but that the savings are held in a form the legal system can't see. Later studies (e.g. in Peru and Argentina) found titling raised investment and security, with smaller credit effects than he predicted.

A true belief held without ever hearing the case against it becomes a formula repeated, not understood.

Mill argued that even a false opinion helps keep the truth alive, and that where no dissenters exist, teachers should invent the strongest objections (the devil's advocate).

Rent is the surplus a better plot of land yields over the worst plot in use.

As population grows, worse land is farmed, the price of corn rises to cover its costs, and the owners of better land collect the difference. In Ricardo's words, corn is not high because rent is paid; rent is paid because corn is high.

Adding more labour and capital to a fixed amount of land yields smaller and smaller increments of output.

It drives both rent theory and the Malthusian trap. It holds for any fixed factor, holding technology constant, which is the assumption that later history broke.

Groups differ in age, location, education, culture and choices, so unequal outcomes appear even when everyone is treated the same.

Statistical gaps are often read as proof of bias. Sowell argues that even-outcome benchmarks rarely exist anywhere in the world, so the first question is what produced the gap. Critics answer that the 'explanatory' factors can themselves be shaped by past discrimination.

Interest groups that seek a bigger share of output for their members rather than a bigger total.

Olson argued that stable societies accumulate such coalitions over time, which slow adoption of new technology, reallocation of labour and entry, and so slow growth. Upheavals that destroy them can be followed by fast growth.

Splitting production into many specialized tasks, each done by a different worker.

Smith opens the Wealth of Nations with it as the main cause of growth in the productive powers of labor. Ten workers dividing pin-making made about 48,000 pins a day, where each alone might not have made twenty.

Without market prices for the means of production, a socialist planner cannot compare the costs of alternative ways to produce, so cannot tell efficient from wasteful plans.

Mises's 1920 argument: a railway can be built with countless mixes of steel, labor, timber and machines, and only money prices reduce them to one comparable unit. It launched the socialist calculation debate (Lange and Lerner replied that planners could simulate prices; Hayek extended Mises's case).

A competitive market economy disperses power, which makes political freedom possible.

When the state is the only employer, dissent has nowhere to earn a living. Markets let people cooperate without agreeing on everything, which reduces how much has to be decided politically.

Bastiat's thesis that legitimate interests, pursued through voluntary exchange, are harmonious rather than antagonistic.

A free trade happens only if both sides gain, so exchange raises total well-being without making anyone worse off. Conflict comes from plunder, not from exchange.

Franz Oppenheimer's distinction: wealth is gained either by producing and trading (economic means) or by seizing what others produced (political means).

Rothbard defines the state as the organization of the political means. Voluntary exchange is positive-sum; extraction is at best a transfer and, by weakening the incentive to produce, usually shrinks the pie.

Property rights appear when the gains from internalizing a cost or benefit grow larger than the cost of defining and enforcing the right.

Demsetz's example: when the fur trade raised the value of beaver, the Montagnais of Labrador developed family hunting territories. Property is an evolving answer to scarcity, not a fixed legal fact.

A distribution is just if it arose from just acquisition and voluntary transfer, with past injustices rectified.

It is a historical theory: you can't tell whether a distribution is just by its shape alone, only by how it came about. This puts it at odds with end-state theories such as Rawls's.

The ability to notice opportunities nobody has noticed yet, such as a good selling cheap here and dear there.

Kirzner's entrepreneur needs no capital or special knowledge, only alertness. That is why the market process works even though no one has the full picture.

Much of the value of a first job is the experience and work habits it gives, not the pay.

Pricing someone out of a low-wage job also denies them the experience that would have raised their later earnings.

In the state of nature each person holds the executive power of the law of nature: the right to judge and punish offenses against himself.

Self-love makes people partial to themselves and their friends, so punishment is seen as aggression and answered with revenge. This 'inconvenience' is the main reason to leave the state of nature.

The trade-off between inflation and unemployment exists only for inflation people did not expect; there is no lasting trade-off.

As people come to expect the higher inflation, wage demands rise, the short-run curve shifts up, and holding unemployment down requires ever faster inflation (the accelerationist result). Friedman and Edmund Phelps predicted this before the 1970s confirmed it.

A cost or benefit of an activity that falls on people who are not party to it, such as smoke from a chimney.

Arthur Pigou argued that markets over-produce activities with external costs. Coase reframed the problem as one of missing or unclear property rights plus the cost of bargaining over them.

Living and working outside the formal legal system because getting into it costs too much.

De Soto's team spent 289 days, six hours a day, legally registering a one-worker garment workshop in Lima. When legality costs that much, informality is rational, and the cost is paid by the poor.

The ways an institution learns that it is wrong and is forced to change: losses in markets, elections in politics, and very little in many bureaucracies.

What matters is not avoiding errors, which no one can do, but how fast and how cheaply they are corrected.

Money that is legal tender by decree, with no commodity backing, issued at the discretion of a central bank.

Rothbard saw inflation as a hidden tax: the issuer and first receivers gain at the expense of savers and fixed-income holders. The US dollar has lost about 96% of its 1913 purchasing power. Defenders of fiat answer that an elastic money smooths shocks that a gold standard transmits.

Let currency prices be set by the market instead of pegging them.

A fixed rate forces domestic money and prices to adjust to defend the peg, often through recession; a floating rate absorbs shocks and frees monetary policy. The Bretton Woods system ended in 1971–73, as Friedman had urged since 1953.

Saving extracted involuntarily through rising prices when credit expansion funds investment that nobody chose to save for.

It explains how a credit-driven boom can temporarily lengthen production without real saving, and why it can't last: people's time preferences haven't changed.

Public records that describe who owns what in a standard way, so assets can be pledged, divided, sold and traced by strangers.

In de Soto's account, the paper representation is what turns a house into capital: it gives the owner an address, accountability and a way to borrow against it.

Your money on yourself (care about cost and value), your money on others (cost), others' money on yourself (value), others' money on others (neither).

Most government spending falls in the fourth box, where nobody involved has a strong reason to economize or to get good value. The problem is incentives and information, not bad people.

Banks keep only a fraction of demand deposits as reserves and lend out the rest, while depositors can still withdraw on demand.

Each loan is redeposited and lent again, so a given amount of base money supports a multiple of itself in deposits. Rothbard called it inherently fraudulent: two people hold a claim to the same money, and the bank cannot pay everyone at once.

Silencing an opinion assumes infallibility: the opinion may be true, partly true, or false but useful for understanding why the truth is true.

Mill's four grounds for free speech. The phrase 'marketplace of ideas' came later (from Justice Holmes's 1919 dissent in Abrams v. United States), but the argument is Mill's.

When each country produces what it is comparatively good at, world output of every good can rise with the same labour.

Trade is not a zero-sum contest for market share. It is a way of producing more with what exists. The gain comes from imports, which are what a country gets for its exports.

A monetary system in which money is gold, or a claim redeemable in a fixed weight of gold.

Because new gold is costly to mine, the money supply grows slowly and the price level is roughly stable or gently falling over long periods. Rothbard wanted a 100% gold dollar, beyond the reach of governments and banks.

The legislative is a fiduciary power, given for a purpose (the preservation of property) and limited by it.

A trustee who acts against the purpose of the trust forfeits it. That idea turns obedience into something conditional.

Collective action producing worse outcomes than the alternative, because of the incentives and information of political actors.

Market failure is a reason to look at government action, not proof that it will help. The fair comparison is between two imperfect institutions.

The only purpose for which power can rightfully be exercised over anyone against their will is to prevent harm to others.

It rules out coercing people for their own good or to enforce majority morals. Harm is necessary but not sufficient: some harms (losing to a competitor) are part of a free society, and Mill made exceptions such as selling oneself into slavery.

When the money price is held down, sellers cut quality, service and maintenance instead.

The real price of a unit includes its condition. A controlled rent can rise in effect even when the number on the lease doesn't.

Unowned resources become property when someone first mixes their labor with them, by clearing, farming, building or otherwise putting them to use.

Unlike Locke, Rothbard drops the proviso that 'enough and as good' be left for others: the first user owns outright, and later arrivals acquire only by trade or gift. Merely declaring a claim, without use, gives no title.

Leonard Read's 1958 essay, narrated by a pencil, showing that no single person knows how to make one.

Millions cooperate without a master mind, each knowing only a sliver, coordinated by prices. It is Hayek's knowledge problem told as a story.

Matt Ridley's image for innovation as the recombination of existing ideas, which exchange makes possible.

The more ideas are in circulation and the more people trade, the more combinations are possible, which is why growth can accelerate rather than taper off.

Trade with strangers you may never meet again, as opposed to personal exchange among kin and neighbours kept honest by reputation.

Big gains from specialization need large markets, which means dealing with strangers. That requires third-party enforcement of contracts, which most societies in history never achieved.

Labor makes the far greater part of the value of things: cultivated land yields ten, even a hundred times what the same land yields left wild.

This is why enclosure can increase what is left for everyone. Locke contrasted a day-laborer in England with a king of a large territory in America who 'feeds, lodges, and is clad worse'.

Inclusive institutions protect property and open markets and politics to many; extractive ones concentrate power and income in a narrow elite.

Acemoglu and Robinson use paired cases (the two Nogales, the two Koreas) to argue that institutions, not geography or culture, mainly explain why nations fail. Critics question how far the categories can be measured.

A total allowable catch split into shares that fishers own and can trade.

A share in a fixed total turns a race for fish into ownership of a future stream of catch, so fishers gain from a healthy stock and the least efficient boats sell out.

Institutions are the humanly devised constraints that structure interaction: formal rules (laws, constitutions), informal norms, and how they are enforced.

North argued they are the main reason some societies grow and others don't: they set the payoff to producing versus predating, and they shape what organizations form and learn.

A 'middle way' of a market economy steered by government orders such as price controls, which Mises argued is unstable.

Each control produces results its sponsors didn't want (shortages, diverted production), which invites a further control. The government must eventually either repeal or extend control to everything.

Grow the money supply at a fixed, announced rate every year, roughly the economy's long-run real growth rate.

A rule cannot overreact, cannot be pressured, and gives everyone a stable expectation. Money demand turned unstable in the 1980s and targets were dropped, but the idea that central banks should follow predictable rules lives on in inflation targeting and the Taylor rule.

The key question about any institution is who decides, with what knowledge, under what incentives.

Knowledge is costly and scattered. Institutions that leave decisions with people who have the knowledge and bear the consequences tend to do better than those that don't.

Practical, local, fleeting knowledge: an empty ship returning, a machine half-idle, a stock about to spoil.

This knowledge can't be put into statistics without losing what makes it useful. By the time it is aggregated and reported it is stale, and the averages hide exactly the local differences that matter.

Each person owns himself and his labor; by mixing labor with something unowned in the commons, he makes it his property without anyone's permission.

It explains how private property can arise without universal consent, which Locke thought impossible to get. It is the root of the liberal case that property is prior to the state.

Ricardo's view that goods exchange, within a country, roughly in proportion to the labour needed to make them.

It gave him a simple yardstick for his models. Its limits show up in his trade theory: across borders, labour does not move, so prices are not set by labour content. Later economists replaced it with marginal utility and opportunity cost, and Marx took it in another direction.

A moral law knowable by reason that binds everyone even without government: no one ought to harm another in life, health, liberty or possessions.

Because this law comes first, rights are not gifts of the state. Government's laws are legitimate only insofar as they serve and enforce it.

Using the law to take from some what belongs to them and give it to others to whom it does not belong.

The test: does the law do for one citizen what he could not do himself without committing a crime? Tariffs, subsidies and privileges all pass this test of plunder.

Locke separated the power to make laws, the power to execute them, and the power over war, peace and alliances.

If those who make laws also execute them, they may exempt themselves from their own laws. Montesquieu later developed the separation of powers further, and it shaped the US Constitution.

A central bank that lends freely to solvent but illiquid banks in a panic, so runs cannot spread from weak banks to sound ones.

In the Friedman–Schwartz account, runs raised the public's currency/deposit ratio and banks' reserve ratio, so the money multiplier collapsed while high-powered money barely moved. Supplying reserves would have offset it. The 2008 Fed response was explicitly shaped by this lesson.

Ancient liberty was sharing directly in collective sovereignty; modern liberty is enjoying a protected private life, with government by representatives.

Constant argued that the French revolutionaries had tried to impose ancient liberty on modern commercial people, with terrible results, and also warned moderns not to give up political participation entirely.

How far labor can be divided depends on how much the market can absorb: a village cannot support a full-time pin-maker.

It ties specialization to trade, transport and population, and explains why commerce first flourished along coasts and navigable rivers. Wider markets, whether from canals or free trade, make deeper specialization possible.

Large groups with a common interest tend not to act on it, because each member can free-ride on the efforts of others.

Olson overturned the assumption that shared interests produce political pressure. Small groups organise easily; large, latent groups like consumers or taxpayers rarely do.

Legislators trading votes: I support your project if you support mine.

It lets intense minorities be heard, but it also lets a coalition pass bundles of projects that each cost more than they are worth, with the costs pushed onto everyone else.

Monetary policy affects spending only after a delay that is long (roughly 6 to 18 months or more) and that varies unpredictably.

A policymaker reacting to current data is like a fool in the shower: by the time the hot water arrives he has turned the tap too far, and he scalds himself. Activist fine-tuning can amplify the cycle it is trying to smooth.

Investment in projects that only looked profitable because the interest rate was held below its natural level.

In the Austrian theory of the cycle the bust is the discovery that these projects can't be completed. It is contested: Keynesians and monetarists see recessions mainly as shortfalls of demand or money.

Investment in the wrong lines and the wrong lengths of production, made in response to a false interest-rate signal, which shows up all at once when credit stops.

Explains why many firms in capital-goods industries fail at the same time, rather than random individual failures. For Mises the bust is the painful correction, and further credit only postpones it.

A loop in which any rise in income above subsistence raises population until income is pushed back down.

Escaping it needs technology to grow faster than population can keep up with. Fertility that falls as income rises makes the escape far easier and lasting, and in practice the two came together.

The worst land worth farming at current prices, which pays no rent.

The cost of producing corn on the marginal plot sets the price for all corn. Marginal reasoning of this kind became the core method of economics after the 1870s.

The value of one unit of a stock equals the importance of the least urgent use that unit serves, since that is what you'd give up if you lost it.

Menger's farmer with sacks of grain: lose one sack and he drops the parrots, not his bread. Value is decided for units at the margin, never for whole classes of goods.

The actual price at any moment, set by the quantity brought to market relative to the demand of those willing to pay the natural price.

Smith's example: a public mourning raises the price of black cloth. The market price can be far from the natural price for a while, but competition pulls it back.

With voters on one dimension and single-peaked preferences, two-candidate majority competition converges to the median voter’s position.

It explains why platforms often look alike and why policy tracks the middle. It also shows the limits of democracy as a preference-aggregator: the median decides, and minorities on either side get nothing from the vote itself.

A state limited to protection against force, theft and fraud and the enforcement of contracts: the 'night-watchman'.

Nozick argued that it could arise from anarchy without violating anyone's rights, and that any more extensive state would violate them. He described it as a framework for utopias: people form whatever communities they like within it.

A price floor on labour.

A worker whose output is worth less than the legal minimum becomes unemployable, and those are mostly the young and inexperienced. Whether modest increases cost many jobs is contested (Card and Krueger 1994 found no job loss in New Jersey fast food).

Durable things like gold and silver, valued by agreement, let people store the surplus of their land without it spoiling.

Money removes the spoilage cap, which makes large and unequal holdings legitimate in Locke's view, because people consented to money. It also makes land worth improving far beyond subsistence.

With reserve ratio r, an initial deposit can grow into at most 1/r times as much deposit money.

A 10% reserve ratio turns $100 of gold or base money into up to $1,000 of deposits. This is how bank credit expands the money supply without new metal, and why it can contract just as fast.

Guilds, corporations and exclusive privileges keep the market understocked, so price stays above the natural price for as long as the privilege lasts.

Smith's distrust aimed at merchants seeking government favors as much as at governments: 'People of the same trade seldom meet together... but the conversation ends in a conspiracy against the public.'

The price that just pays the rent, wages and profit needed to bring a good to market, each at its ordinary rate.

It is the 'central price, to which the prices of all commodities are continually gravitating.' Above it, extra profit draws in labor and capital; below it, they leave.

The interest rate that would balance real saving and investment, set by people's time preference.

Taken from Wicksell. When banks lend at a rate below it, investment exceeds the saving that could fund it, and the gap is bridged by new money rather than by real resources.

The unemployment rate the economy settles at when expectations are correct, set by real factors such as job search, skills mismatch and labor-market rules.

Monetary policy can push unemployment below it only by fooling people, and only temporarily. To lower the natural rate itself you need real reforms, not more money.

Rights each person has by nature; Locke calls the three together 'property' in a broad sense.

The whole purpose of political society is to preserve them. The phrase echoes in the US Declaration of Independence (with 'pursuit of happiness' in place of property).

Replace the patchwork of welfare programs with a single cash payment that tapers off gradually as earnings rise.

It guarantees a floor, treats recipients as adults who can spend cash, cuts bureaucracy, and, unlike benefits withdrawn dollar for dollar, always leaves people better off for working more. The US EITC is a partial descendant. The catch: any two of a generous floor, a low taper and a low cost; not all three.

Freedom from interference: the area within which a person can act unobstructed by others.

Berlin defended it as the safer ideal: it doesn't require anyone to know what you really want, only that they leave you alone within a protected area.

Government may not take any part of a person's property, including by taxes, without his consent or that of his representatives.

Otherwise property would not really be property. The principle became the slogan of the American Revolution.

Nomos: the general law of just conduct that evolves (like common law). Thesis: specific commands of legislation that organise government.

Hayek feared that modern legislatures, with unlimited power to issue thesis, would crowd out nomos and turn law into a tool for special interests.

No one may initiate, or threaten to initiate, physical force or fraud against another person or their property.

Rothbard made it the single axiom of libertarian ethics. Force is allowed only in defense or restitution. Applied with no exception for governments, it classifies taxation as theft and conscription as slavery.

A change in the money supply doesn't raise all prices together; it changes relative prices and redistributes wealth along the way.

Mises rejected the idea of money as a neutral veil. Even if the price level eventually rises in proportion, the path matters: who got the money first is richer and who got it last is poorer.

Open access means no one can be excluded; common property means a defined group owns a resource jointly and can exclude outsiders.

Hardin's tragedy is really a tragedy of open access. A community that owns and governs a commons can manage it well, as many have for centuries.

A society in which institutions and beliefs are open to criticism and leaders can be removed without bloodshed.

Popper's version of democracy is not 'who should rule?' but 'how can we get rid of bad rulers without violence?'. It is falsifiability applied to politics: policies are conjectures to be tested.

The real cost of anything is the next-best thing given up to get it.

An hour of a lawyer's typing costs her an hour of fees, however fast she types. Seeing costs as forgone alternatives is what makes comparative advantage click, and it applies to people and firms as much as to nations.

The real cost of any use of resources is the best alternative given up.

Bastiat's unseen is opportunity cost before the term existed: the francs spent on a window are francs not spent on shoes.

The discount of future goods against present goods that follows from time preference; it exists even without money or loans.

For Mises interest is not the price of money or the reward for productivity but the expression of time preference. Market loan rates are this originary rate plus risk and expected inflation.

Eight features shared by long-lasting, self-governed commons: clear boundaries, rules fit to local conditions, users make the rules, monitoring, graduated sanctions, cheap conflict resolution, recognition by outside authorities, and nested layers.

They came from comparing real cases that lasted for centuries with ones that failed. They are not a blueprint but a checklist of what working arrangements tend to have.

Unlimited tolerance can lead to the disappearance of tolerance, if the intolerant are allowed to destroy it.

Popper did not mean suppressing intolerant opinions as such: as long as they can be countered by argument, suppression would be unwise. The right to suppress applies when they refuse argument and answer with fists or pistols.

Water is vital and cheap; diamonds are frivolous and dear. The marginal view resolves it: we never choose between all water and all diamonds, only between one more unit of each.

Where water is plentiful one more liter matters little; stranded in a desert, a liter outranks any diamond. Prices follow the marginal unit.

If the expected private benefit of voting is near zero, why does anyone vote?

Turnout is explained by civic duty, expressive motives and social pressure rather than instrumental calculation. Brennan, Lomasky and Caplan add that cheap, expressive votes let people indulge biases they would not act on with their own money.

People base their spending on their long-run expected income, not on this year's income, so they save windfalls and borrow through bad years.

Consumption is smoother than income, and temporary tax rebates stimulate much less than a simple Keynesian consumption function predicts. Measured responses to windfalls are often larger than the pure theory says, largely because many households cannot borrow.

Reform by small, reversible steps aimed at removing concrete evils, with results checked and mistakes corrected.

Popper contrasted it with utopian engineering, which aims at an ideal society through total reconstruction. Since we can't foresee consequences, a plan too big to evaluate or undo can't learn from its errors, and tends to suppress the criticism it would need.

A tax on each unit of a harmful activity equal to the damage it does to others.

It needs no negotiation, which makes it attractive when the people harmed are many. Coase's objections: the regulator must know the damage, and a tax that ignores cheaper avoidance by the victims can reduce total value.

Analysing government with the same assumption of self-interested, incentive-driven people used for markets.

Comparing a real market with an imagined, perfectly benevolent state is a rigged contest. Public choice compares real markets with real governments, staffed by ordinary people facing their own incentives and limited information.

Many overlapping centres of decision (local, regional, national) instead of one top-down authority.

Local users know the resource and can adapt the rules; higher levels handle what crosses boundaries. Ostrom shared the 2009 Nobel Prize for showing this works better than either pure market or pure state solutions in many settings.

Law produced and enforced by competing private courts, arbitrators and defense agencies rather than one territorial monopoly.

Rothbard argued agencies would settle inter-client disputes by pre-agreed arbitration, because war is costly and customers can leave. Critics (Nozick, Cowen) reply that the strongest agency would tend to become a de facto state, or that agencies would collude.

Spending targeted at particular districts, often agreed in a norm where every legislator gets a share.

When everyone trades, every bill passes and every district can end up worse off than if none had, yet no single legislator gains by refusing their share.

Freedom as self-mastery: being your own master, governing yourself and acting on your rational will.

A noble idea that Berlin thought could be turned upside down: if your 'true self' is identified with the state, the nation or history, coercing you can be called liberating you.

When benefits are withdrawn as earnings rise, the effective tax on extra earnings can reach 100% or more.

If earning $5,000 more leaves you no better off, staying on welfare is rational. Friedman argued such schemes punish exactly the work that leads out of poverty.

Mises's name for the general theory of human action, deduced from the axiom that humans act: they use means to pursue chosen ends.

Mises held that the core laws of economics (e.g. that people prefer more of a good to less, that all action takes time) are known a priori rather than tested statistically. This method is the most disputed part of his work; most economists treat economic laws as empirical hypotheses.

A legal maximum price set below the market-clearing level.

At the lower price more is wanted and less is offered, so a shortage appears. Price stops rationing the scarce good, and something else (queues, connections, bribes) takes its place.

Freezing prices while money keeps growing suppresses the symptom, producing shortages, and inflation returns when the freeze ends.

Friedman opposed Nixon's 1971 wage and price controls for exactly this reason. Brazil's repeated freezes in 1986–91 fit the pattern; the 1994 Plano Real worked once fiscal and monetary restraint backed it.

A legal minimum price set above the market-clearing level.

More is offered than is bought: surpluses of farm goods, or of labour in the form of unemployment.

Mises's example: a cap on milk prices leads farmers to make butter and cheese, so those are capped; then herds shrink, so feed is capped, and so on up the chain.

Shows how a single well-meant control pushes the shortage upstream into the inputs, ending with less milk than before the first control.

A price change condenses everything relevant about a resource's scarcity into one number each user can act on.

Users of tin need not know whether a mine closed or a new use appeared; they only see it got dearer and economise. Hayek: “The marvel is that in a case like that of a scarcity of one raw material … tens of thousands of people … are made to use the material or its products more sparingly.”

The money prices of factories, machines and raw materials, which exist only where they can be privately owned and traded.

Mises stressed that even a socialist economy with prices for consumer goods would lack these. Profit and loss from buying and selling inputs is what moves resources to their most valued uses.

Malthus's claim that population tends to grow faster than the food supply, so it is held back by misery or 'moral restraint'.

It describes most of human history fairly well: gains in productivity became more people rather than higher living standards. It failed as a forecast after about 1800, when technology outran population and fertility fell as people grew richer.

Whether fairness and justice are judged by the rules people followed or by the outcomes that came out.

The two visions differ most clearly here, which is why they disagree on equality, justice and poverty even when they agree on the facts.

The menu of output combinations a country can reach with its labour and technology.

Without trade, a country can only consume on or inside its own frontier. Specialisation plus trade lets both countries consume outside their frontiers, and that is the gain from trade drawn as a picture.

A pure profit opportunity exists because someone made a mistake: something is underpriced or overpriced.

Acting on it corrects the error and moves prices toward coordination. Unlike Schumpeter's disruptor, Kirzner's entrepreneur pulls the market toward equilibrium.

A disposition in human nature to trade one thing for another, which gives rise to the division of labor.

Smith grounds the market in ordinary human behavior, not in any plan. 'Nobody ever saw a dog make a fair and deliberate exchange of one bone for another with another dog.'

Subsidies, licences and barriers that shield established firms and industries from new competitors.

It preserves visible jobs today at the cost of unseen innovations that never arrive. Schumpeter also feared big bureaucratic firms and hostile intellectuals would slowly smother capitalism.

Tariffs and quotas to shield domestic producers from cheaper foreign goods.

The protected industry's gain is visible; the higher prices paid by all buyers, and the industries those buyers would have supported, are not. The net is a deadweight loss.

Defending state spending by the jobs it visibly creates, ignoring the jobs lost where the taxes came from.

Taxes paid for the project are spending taxpayers no longer do, so the job count is roughly a wash. A project must be justified by its usefulness, not its employment.

Money times its velocity equals the price level times real output, so in growth rates inflation ≈ money growth + velocity growth − output growth.

Friedman restated the old identity as a theory of the demand for money: because people's desired money holdings are fairly stable, sustained changes in the money stock show up in nominal income, and in the long run in prices.

Voters choosing not to learn about policy because the chance their vote decides anything is tiny.

Becoming informed costs hours; the expected payoff is the stake times a one-in-millions chance of being decisive. Ignorance is then the rational choice, which leaves the field to those with concentrated stakes.

Refuting a sophism by applying its own principle consistently until the absurdity shows.

Bastiat's satires (the candlemakers, the negative railroad, the right hand vs. the left) work because the arguments they mock were really made in the Chamber.

Today's demand for money depends on yesterday's purchasing power, which depends on the day before's, back to the last day the good was valued only for non-monetary uses.

Mises's answer to the circularity of explaining money's value by its value. It implies every money must have started as a commodity with its own use value (a claim debated now that fiat currencies and Bitcoin exist).

A regulatory agency coming to serve the industry it regulates instead of the public.

Stigler argued regulation is often acquired by the industry and designed for its benefit: entry barriers, price floors, restrictions on substitutes. Industry has steady, concentrated interest; public attention is sporadic.

A ceiling on rents, usually with limited annual increases.

Short-run benefits go to sitting tenants. Over years, less building, conversions, deferred maintenance and frozen mobility shrink and degrade the rental stock that newcomers can get.

When many contenders compete for a prize by spending, total spending approaches the value of the prize.

With n equal contenders in a lottery-style contest, together they spend (n−1)/n of the rent. Whether bids are burned on lobbying or paid to the treasury as an auction makes the difference between waste and a transfer.

Spending resources to obtain a transfer or privilege from government rather than to create new wealth.

Tullock saw that the cost of a monopoly, tariff or theft is not only the deadweight triangle: the resources spent competing for the privilege (and defending against it) are also lost. That made the true cost of such policies much larger than earlier estimates.

Adam Ferguson's phrase, adopted by Hayek, for institutions that nobody invented on purpose.

It rejects the false choice between ‘natural’ and ‘artificial’: many of our most useful institutions are neither instincts nor deliberate inventions, but evolved practices.

The movement of staff between regulatory agencies and the firms they oversee.

Expertise often exists only inside the industry, so agencies hire from it, and officials who hope for industry jobs later have a reason to be accommodating. Cooling-off rules slow but do not remove this.

If households fully anticipate the future taxes needed to repay government debt, borrowing and taxing have the same effect on spending.

It challenges the idea that deficits stimulate demand. Ricardo set out the logic in his Essay on the Funding System (1820) but doubted that people actually behave this way. Robert Barro revived it in 1974. Most evidence finds partial, not full, equivalence.

When the government acts against the trust, power reverts to the people, who may set up a new legislative; with no judge on earth, they 'appeal to heaven'.

It answered the charge that resistance means anarchy: dissolving a government is not dissolving society. It was used to justify 1688 and, explicitly, 1776.

Producing tools and intermediate goods first, and consumer goods later, yields more output per hour but takes longer.

Böhm-Bawerk's idea, taken up by Mises: lengthening the structure of production needs savings to live on while waiting. Lower time preference makes longer detours worthwhile.

How easily a good can be sold at a fair price at any time: helped by durability, divisibility, portability and wide demand.

Barter needs a double coincidence of wants. Holding a more saleable good is a way around that, which is the first step toward money.

Government funds education, but gives the money to families as a voucher they can spend at any approved school.

Financing schooling does not require running the schools. When money follows the student, schools compete for pupils and poor families get the choice richer ones already have by moving house. Evidence from Chile, Sweden and US programs is mixed and hotly debated.

Private benefits (insurance, journals, discounts, or penalties) offered only to members, so large groups can still organise.

They explain why big lobbies such as farm bureaus, unions or retiree associations exist despite the free-rider problem: the lobbying is a by-product of something members buy for themselves.

Every person has an absolute property right in their own body.

Rothbard argues the only alternatives are that some people own others, or everyone owns a share of everyone, and both are indefensible. From self-ownership he derives ownership of what a person produces.

Conduct that concerns only yourself (or consenting others) versus conduct that affects others' interests.

Over the first, 'the individual is sovereign'. Society may still advise, persuade or avoid you, but not punish. Critics note that almost any act affects someone; Mill's answer was to look for definite damage to definite interests.

Legislative, executive and judicial power held by different people so that none can make, carry out and judge its own laws.

Montesquieu, drawing on England's constitution, held that liberty is lost when these powers are united in one person or body. It became a blueprint for the US Constitution.

Scarcity is permanent (there is never enough for everyone to have all they want); a shortage is people unable to buy at the current price.

Price controls don't increase how much exists. They turn scarcity, which prices ration, into a shortage, which queues ration.

A system in which private ownership remains in name but the state dictates prices, wages, output and who works where.

Mises's term (from Zwangswirtschaft, 'compulsory economy') for where the interventionist spiral ends: the endpoint looks like the market economy on paper, but decisions are made by command.

A mild, tutelary central power that provides for everyone's needs and in doing so takes away the habit and capacity of governing themselves.

It doesn't tyrannize; it 'hinders, compresses, enervates'. Tocqueville feared it more than violent despotism for democracies because people would welcome it.

No one may take more than he can use before it spoils; letting acorns rot or plums decay offends the law of nature.

In a world of perishable goods this caps every holding at what one family can use, so there is little inequality and plenty left for others.

An order that arises from many people following rules and responding to local circumstances, without anyone designing the overall pattern.

Language, common law, money and markets are all orderly but unplanned. They can be more complex than any designed order because they use more knowledge than any designer has.

Money arises without a decree: traders accept the most saleable good in indirect exchange, which makes it more saleable still, until it becomes the general medium of exchange.

Menger's account shows how a key social institution can emerge from individual choices that no one designed. The state can later adopt or monopolize money, but it didn't invent it.

Judging a policy by its immediate, intended effect without asking what happens next.

People adjust, and the later stages often reverse the first. Sowell's test is to keep asking 'and then what?'

High inflation and high unemployment at the same time.

The original Phillips curve said this could not happen. With expectations built in it is natural: once inflation is expected, it persists even at the natural rate, and supply shocks or disinflation add unemployment on top. Ending it took the painful Volcker disinflation of 1979–82.

The legislative must govern by promulgated, established laws applied equally, not by extemporary decrees.

Known rules let people plan and protect them from the ruler's whim. Freedom, for Locke, is living under a standing rule, not the absence of rules.

The condition of people with no common superior on earth to judge between them: free and equal, but without a settled judge.

Unlike Hobbes's war of all against all, Locke's state of nature has a moral law and can be peaceful. Its defect is practical: every dispute must be settled by the parties themselves, so it tends to slide into conflict.

The end point where profits fall so low that accumulation, and therefore growth, stops.

With diminishing returns on land and wages at subsistence, Ricardo expected profits to trend down. Free trade in corn and better farming could postpone it. Sustained technological progress turned out to prevent it altogether.

A good's value is not a property of the good or of the labor in it, but the importance a person attaches to it for satisfying a want.

Menger's break with the classical labor theory of value. Exchange happens because two people value the same goods in opposite order; costs matter only because the inputs have other valued uses.

Our capacity to imagine ourselves in another's situation and feel something of what they feel.

In the Moral Sentiments, sympathy, not self-interest, is the foundation of moral judgment. The same Smith who wrote about the butcher began with fellow-feeling.

Once preferences and restraints are removed, 'the obvious and simple system of natural liberty establishes itself of its own accord.' The sovereign keeps three duties: defense, justice, and certain public works and institutions.

It is a limited, not an absent, state. Smith supported public roads, canals, basic schooling and some regulation, so he is cited by many traditions, not only libertarians.

The rate at which one country's exports exchange for its imports.

Both countries gain only if the price lies between their two domestic opportunity costs. Where in that band it settles decides how the gain is split, but not whether there is one.

The shift, first in Holland and then in Britain, from despising trade to admiring it, together with new liberty for ordinary people.

It is her answer to ‘why then, why there?’: a new combination of liberty and dignity for commoners. Critics say she underweights coal, institutions and empire.

"It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."

In voluntary exchange each side must offer something the other values more than what he gives up, so both gain. This does not deny benevolence; it notes that in a large society we depend on the cooperation of strangers we could never befriend.

Choosing voting rules by weighing the cost of being outvoted against the cost of reaching agreement.

Unanimity protects everyone from having costs imposed on them, but agreeing is slow and expensive; simple majority is cheap to reach but lets 51% tax the other 49%. Buchanan and Tullock argued the rules themselves (the constitution) should be chosen as if by unanimity, behind a veil of uncertainty about one’s future position.

A satirical petition asking parliament to block out the sun to protect makers of candles from unfair foreign competition.

It takes protectionist logic to its conclusion: if cheap imports are harmful because they are cheap, free sunlight is the worst competitor of all. Jobs rise; wealth falls.

Rothbard's argument that the Federal Reserve was created by and for large banks as a cartel device to inflate together without fear of runs.

A central bank lets all banks expand credit in step, so no single bank loses reserves to its rivals, and stands ready to bail them out. Rothbard proposed abolishing it and returning to 100% gold.

Judge economic policy by its effect on people as consumers, since everyone consumes and production exists to serve consumption.

Producers lobby for scarcity of what they sell; consumers want abundance. Since the consumer interest is everyone's interest, it is the general interest.

In a competitive market, an employer who passes over better workers for group reasons pays for it in lost output and profit.

Competition penalises discrimination; price controls, surplus applicants, regulated monopolies and government employment remove the penalty, which is where discrimination has historically persisted.

Traders who stand between producers and consumers cut the costs of finding, storing, and distributing goods.

Middlemen are often resented as people who 'add nothing', and middleman minorities have been persecuted for it, but removing them usually raises costs, because someone still has to do the work.

The worldwide network of cooperation among strangers made possible by rules of property, contract, honesty and trade.

It lets billions of people serve each other's needs without knowing each other, and it supports far more people than small-band morality could.

The belief that we can deliberately design a better society from scratch because we designed the institutions we have.

Hayek: “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

From 1929 to 1933 the US money stock fell by about a third as waves of bank runs shrank deposits, and nominal income collapsed with it.

Friedman and Schwartz argued the Depression was not proof that markets are unstable, but of a monetary failure: the Fed had the tools to stop the decline and did not use them. Ben Bernanke, as Fed governor in 2002, told Friedman: "You're right, we did it. We're very sorry."

McCloskey's name for the rise in real income per person since 1800: roughly 3,000% in places like Britain, more once you count better goods.

She argues it is too big to be explained by trade, exploitation, capital accumulation or institutions alone; it needs an explosion of innovation.

The 1930s argument over whether slumps come from prior credit-fuelled malinvestment (Hayek) or from deficient aggregate demand (Keynes).

Keynes's view dominated policy until the 1970s, when stagflation and Hayek's 1974 Nobel revived attention to the risks of inflation and discretionary policy.

A picture of the economy's structure of production: stages from raw materials to consumer goods, with the value of goods-in-process rising at each stage.

It shows capital as a time structure, not a homogeneous lump. Lower interest rates make longer, more roundabout structures profitable.

For most of history average income stayed around $2–3 a day; since about 1800 it has risen thirty-fold or more in the richest countries and about fifteen-fold worldwide.

This is the central fact of economic history. Anything that claims to explain prosperity has to explain why it began so recently and spread where it did.

The imagined fair, well-informed observer, the 'man within the breast', by whose eyes we judge our own conduct.

It explains how people come to act decently when nobody is watching: we want to be not just praised, but praiseworthy. Social life builds this conscience; it then works even in anonymity.

Individuals pursuing their own gain are 'led by an invisible hand to promote an end which was no part of their intention.'

Smith uses the phrase only three times. It names the idea that good social outcomes (prices that clear markets, capital flowing where it is most valued) can come from decentralized choices. Later economists made it precise, and also specified when it fails: monopoly, externalities, missing information.

The information needed to run an economy never exists in one place; it is dispersed, partial and often contradictory.

The economic problem is not how to allocate given resources with known data, but how to use knowledge that no single mind possesses. That makes central planning impossible in principle, not just hard.

Law is the organized extension of each person's right to defend their life, liberty and property.

Since an individual may use force only to defend these, the law may legitimately do no more. A law that goes further perverts its own purpose.

Appropriation is legitimate only where 'enough, and as good' is left in common for others.

It limits the labor theory. Critics argue it eventually fails once land is all owned; Locke and later Nozick replied that owners make the land so much more productive that latecomers are still better off than in the commons.

Before 1800, gains in productivity mostly turned into more people rather than higher incomes, so living standards stayed near subsistence.

It explains the long flat handle of the hockey stick, and why escaping it required ideas to grow faster than population.

The planner who imagines he can arrange the members of society as easily as a hand arranges pieces on a chess-board.

In society every piece 'has a principle of motion of its own.' Where it agrees with the legislator's plan, things go smoothly; where it is opposed, 'the society must be at all times in the highest degree of disorder.'

Firms exist because directing work by command is sometimes cheaper than buying each piece on the market; a firm grows until organizing one more activity inside costs as much as buying it.

It explains why the economy is islands of planning in a sea of markets, and why firm boundaries move when communication and management technology change.

A satire on demands to break a rail line at Bordeaux so local porters and innkeepers profit from transshipment.

If one break enriches one town, a break at every town should enrich them all, which would turn a railway into a string of obstacles. Local seen gains add up to a general loss.

A conflict of uses has two sides: stopping the factory harms the factory just as smoke harms the laundry.

The question is not 'who is to blame?' but 'which arrangement produces the most value?'. Sometimes the cheapest fix is on the victim's side (indoor dryers, moving away), and a rule that only restrains the 'polluter' can destroy value.

The argument that comprehensive economic planning tends to require ever more coercive power, ending in the loss of political freedom.

Not a prediction that any welfare measure leads to tyranny, but that a society committed to one central plan must, step by step, override the people whose choices make the plan fail.

Government coercion limited to enforcing general, abstract rules, known in advance and equally binding on everyone, including the government.

When people can foresee how the state will act, they can plan their own lives. Discretionary commands, even well meant, make long-range planning by individuals impossible.

The innovator who carries out “new combinations”: a new good, method, market, source of supply or organisation.

For Schumpeter the entrepreneur disrupts equilibrium; profit is the temporary reward until imitators compete it away.

In 1980 Julian Simon bet Paul Ehrlich that five metals Ehrlich chose would be cheaper, after inflation, in 1990. All five were.

It became the symbol of the debate over whether population growth exhausts resources. Over some other decades Ehrlich would have won, so the long-run trend matters more than one bet.

Managers are agents of shareholders; spending the firm's money on causes of their own choosing is taxing owners, customers or workers without their consent.

Within the rules of the game (open competition, no fraud), profit-seeking serves society. Social goals should be chosen by individuals with their own money or by democratic process, not by executives. The essay is the classic statement of shareholder primacy, now argued against by stakeholder and ESG views.

The state is the institution that claims a compulsory monopoly on ultimate decision-making and funds itself by taxation rather than voluntary payment.

Rothbard holds that no other organization may get its income by force; legitimacy is manufactured by court intellectuals who persuade the public that the state's extraction is in their interest.

"The State is the great fiction through which everyone endeavors to live at the expense of everyone else."

When every group expects the state to give, everyone lobbies, everyone pays, and the overhead makes the total negative: a prisoner's dilemma among interest groups.

Simon's claim that human ingenuity, not raw material, is the resource that matters, so more people means more problem-solvers.

Scarcity raises prices, which rewards finding substitutes and better methods. The claim depends on free prices and institutions; critics note it fits less well for unpriced goods like clean air or fisheries.

Sowell's term for the outlook of an intellectual elite that sees itself as morally and intellectually superior and its policies as self-evidently right.

Because the vision is held for self-flattering reasons, its policies are insulated from feedback: failures are blamed on others or on not going far enough.

Everything has a cost; if you do not pay for something directly, someone pays for it, through taxes, inflation or forgone alternatives.

Programs that look free hide their costs in the fourth box of spending. Friedman used the old saloon phrase as the title of a 1975 book of essays.

Specialization raises output through greater dexterity from repetition, time saved in switching between tasks, and machines invented by people focused on one task.

It explains why the gain is so much larger than the sum of the workers. Smith also warned that a life spent on a few simple operations could dull the mind, and wanted public schooling to counter it.

Other things equal, a person prefers a satisfaction sooner to the same satisfaction later.

Mises treats it as a universal feature of action. It is why saving and waiting must be rewarded, and how far it falls decides how long the production processes a society can sustain.

The hours of work needed to earn enough to buy something.

It measures scarcity from a human point of view and grows more meaningful as wages rise. By this measure most commodities have become much cheaper as population grew.

A contract is enforceable only as a transfer of title to property, not as a promise of future behavior.

This lets Rothbard reject voluntary slavery contracts (you cannot alienate your will) and specific performance, while still enforcing debts and fraud as theft of property.

The magistrate's power covers civil interests only; it cannot reach the care of souls, because belief cannot be compelled by outward force.

Persecution produces hypocrites, not believers, and fuels conflict. Locke's toleration had limits by modern standards: he excluded atheists and those he thought owed allegiance to a foreign prince.

The idea that commerce binds nations by mutual interest and makes war costlier.

Bastiat campaigned with Cobden for free trade as a force for peace. The popular line "when goods don't cross borders, soldiers will" is attributed to him but does not appear in his writings; the sentiment, though, is his.

Every choice gives up something; policy picks a point among imperfect outcomes rather than eliminating a problem.

Framing an issue as a problem with a solution hides what the solution costs. Asking 'at what cost?' turns slogans into choices that can be compared.

McCloskey's preferred name for ‘capitalism’: improvements that are tested by whether people voluntarily buy them.

It puts the focus on innovation tested by consent in the marketplace, rather than on capital, which every society has always accumulated.

When a resource is open to all, each user gets the full gain from taking more and bears only a fraction of the depletion, so the resource is over-used, sometimes to collapse.

Hardin's 1968 essay made it famous (the idea goes back to Aristotle and William Forster Lloyd). His remedies were private property or government control; Ostrom later showed a third way.

The costs of using markets: finding a trading partner, negotiating, writing a contract, checking it is kept and enforcing it.

They are the friction behind most of this chapter. They explain why firms exist, why some harms are never bargained away, and why institutions that make strangers trustworthy are worth so much.

Oppression of minorities by a democratic majority, through law or through the social pressure of opinion.

Tocqueville made the phrase famous; Mill adopted it and stressed social tyranny, which 'leaves fewer means of escape'. Madison's answer in Federalist 10 was a large republic with many shifting factions plus constitutional limits.

A view of human nature as improvable, with the knowledge to solve social problems available to the wise and well-intentioned.

It favours deliberate, articulated solutions, and treats bad outcomes as evidence of a problem someone should fix.

Some costs of a decision fall on identifiable people, others on people nobody can name.

Decision-makers are blamed for the first and not the second, so their incentives tilt toward avoiding visible errors even when that causes more harm overall.

When money wages are held above the market-clearing level while prices fall, real wages rise and employers hire fewer workers.

In Rothbard's view the labor market clears if wages are free to fall with prices. Holding them up by persuasion, unions or law produces persistent unemployment rather than preventing it.

Ricardo's theory of distribution: the national product splits into rent for landlords, wages for workers and profits for capitalists.

If wages must buy a subsistence basket of corn, dearer corn raises money wages and lowers profits. In Ricardo's account, landlords' interests ran against everyone else's: rising rents came out of profits and growth.

The real wealth of a nation is the annual produce of its land and labor, the necessaries and conveniences people consume.

It moved the scoreboard from the treasury to the household. GDP-style accounting descends from this idea.

Effort is a cost; what people want is the result. A policy that makes more work for the same result makes us poorer.

Bastiat called the worship of effort "Sisyphism". Measuring success by jobs rather than by goods produced inverts means and ends.

Every act or law has an immediate, visible effect and a train of later, dispersed effects that nobody sees.

The bad economist stops at the visible effect; the good one also counts what would have happened otherwise. Most economic sophisms come from forgetting the unseen alternative.

Positions of unlimited power in a planned society select for those most willing to use coercion.

Scrupulous people decline jobs that require ordering others about against their will; ruthlessness becomes a qualification. Mass support is easiest to build on the lowest common denominator and a common enemy.

Start from any distribution you think just; let a million fans freely pay 25¢ each to watch Wilt play; the new, unequal distribution arose by voluntary steps from a just one.

Nozick's conclusion: 'liberty upsets patterns'. Keeping a pattern requires continual interference with people's choices. Critics (Cohen, Rawlsians) reply that fans didn't consent to the effects on third parties, and that taxes known in advance are part of the background rules.