Saturday, January 31, 2009

Menger on Orders of Goods

This post is part of a series exploring Principles of Economics by Carl Menger.  The following explores content from chapter 1.

Previously in this series: Menger on Goods

Menger's calls goods which satisfy needs directly "goods of the first order" (also known in modern terminology as "consumer's goods"); examples would include bread ready for the eating, a house ready to be lived in, a back rub ready to be enjoyed, or a romance ready to be cherished.1. He calls goods which satisfy needs only indirectly, through producing a good of the first order, a... (you guessed it) "good of the second order"; i.e., the flour to make the bread, the wooden beams to build the house, the training of the masseuse, or the wooing of the girl. Third order goods are those which produce second order goods (grain mills, trees to be chopped... you get the picture), and so on. Goods of second order or higher are now called "producer's goods" or "capital goods".

1 Menger includes non-physical goods like services and relations in his definition of a good.

Next in this series: Menger on Complementary Goods

No comments: