New at Monte Blog
A collection of stories and articles about us
1. Friedrich August von Hayek
Hayek is known for his criticisms of mainstream economic assumptions underlying the 20th century advances in the mathematic formalization of competition in markets.
2. Richard Cantillon
Cantillon is not well known, but he should be. A banker, Cantillon developed revolutionary theory on the flow of money and its effects on inflation. Aptly named the Cantillin effect, his theory challenges the idea that money is neutral, or is distributed like a helicopter, equally and evenly. Indeed, money does not flow this way. Instead, new money is injected into certain sectors of the economy first, and then spent in others.
This means that inflation does not affect all in the economy evenly. Rather, those who initially receive the new money are able to buy at the old prices, and then as that money passes through, increasing the money supply, prices rise, and those who receive the second inflow of money have to pay the higher prices.
3. Jean Baptiste Say
Say is one of the most misunderstood economists of all time. Say's law theorizes that there must be supply in order for demand to occur. Many understand this to be a claim that in order for me to demand an apple, I must have an apple to eat. However, this is a much too simplistic understanding of Say. His theory is much more powerful than that because it implies that in order to demand a product, one must have been productive at some point in the past.
For example, in order to demand, I must have the desire to demand and means to demand, money. No one gifts money for free (parents are a different story). Instead, we work for our money. When we work, we create productivity because we create value for someone else, otherwise they wouldn't pay us. Then, in turn, we spend this money, or demand other products. Hence, we are spending our productivity, and therefore in order to demand, one must supply.
4. Harvey Leibenstein
Leibenstein holds a special place in our hearts; he coined X-Inefficiency (XnF), our namesake in 1966. Xnf refers to the lost output that arises from inefficiencies in a firm's production. This is graphically represented by a higher than necessary average costs curve, and it results in higher prices and less output.
Everyone suffers from Xnf, and we exist to cut out the slack, and move production to more efficient processes.
5. Karl Menger
Menger really started the Austrian school of economics with his emphasize on individual subjectivity. Notably, Menger derived the demand curve using the concept of diminishing marginal utility (DMU), however he did it in an entirely novel way. Where other economists like Jevons also used DMU, Menger associated it with an ordinal set of "Ends" rather than physiological desire. Specifically, Menger discovered that we fulfill our needs in a hierarchical way, and we use the first quantity of a product to fulfill our highest valued ends first. The subsequent Q's fulfill lesser valued ends.