ok, I accept that humans act and i have great respect for the Austrian School. Can someone please explain why this axiom is so important and how this precipitates the Austrian method?
If you read the first couple of chapters of MES, you’ll find that Rothbard derives the basic principles of economics from the action axiom, including the Subjective theory of value, marginal utility, etc.
Assume the action axiom and all else follows.
It’s not really important in the sense of being a ground-shaking secret of the universe, but only in the sense that people, economists in particular, frequently act and deliberate as though it were not true.
Couple of examples: people show incredulity toward the concept of private defense and private law because they cannot imagine the possibility of indivuals acting to organize such things; virtually all market regulations are passed in denial of consumers and suppliers acting in some way or another (their purchases and production thought to signify mere mechanism rather than preference or prediction). The examples are endless.
Any way. Ron Paul plugged human action on Cavuto
Action = goal-oriented behaviour. Denying this will cause one to lapse into self-contradiction (as denial is an action.) Humans are constrained by scarcity (including time being scarce, see below), hence they must economize as far as means are concerned when it comes to achieving their goals, but also they must rank their goals in accordance to how much they value them. An agent will prefer the available means most capable of rendering him the service of attaining (even if partially) his goal. This alone gives you utility and the theory of goods, supply and demand. Time is scarce. Agents prefer homogeneous goods now over homogenous goods later. That is time preference and gives you interest. In any given exchange that is voluntary an agent will only exchange a good with another good if they value the other good more highly than their good and vice-versa for the other agent. Hence exchange. And so on. By adding a couple of subsidiary postulates (like the disutility of labour, diversity of resources, production of goods for sale &c.) the entire theoretical apparatus of economics comes into being.
-Jon
Can production of goods for sale not be deduced from diversity of natural resources/ human skills and the action axiom?
Yeah. Rothbard considered profit-maximization to be the “weakest” postulate held by Austrians IIRC, in that it only characterizes some action, not all, i.e. action specifically oriented at production. Exchange logically presupposes a diversity of goods (otherwise there’d be no point in it.) Another postulate is the scarcity of labour and capital relative to land.
-Jon