Tuesday, February 24, 2009

Economic Character of Higher Order Goods and the Deductive Method of Menger

This post is part of a series exploring Principles of Economics by Carl Menger.  The following explores content from chapter 2.

Previously in this series: Menger on Natural Communism

the existence of requirements for goods of higher order is dependent upon the corresponding goods of lower order having economic character.

If goods of lower order do not have economic character, then there would be no need to produce more of them (there are already plenty), and therefore, there is no requirement for the higher order goods used to produce them. And a good with no requirements necessarily can have no economic character, since quantities necessarily exceed requirements. Therefore...

the economic character of goods of higher order depends upon the economic character of the goods of lower order for whose production they serve. In other words, no good of higher order can attain economic character or maintain it unless it is suitable for the production of some economic good of lower order.

This is a nice, simple example of Menger's use of formal logic, and how Menger's method (like all good economics) is deductive. Let the following letters represent the following corresponding terms:

A: Higher order goods with non-economic corresponding lower order goods
B: Goods with no requirements
C: Goods with more available quantities than requirements
D. Non-economic goods

What Menger is saying is basically the following syllogism:
All A's are B's. All B's are C's. All C's are D's. Therefore, all A's are D's.

Next in this series: Menger and the Teleological Nature of Economics

No comments: