I’ll start: All costs are opportunity costs.
PS: Feel free to disagree with stated insights if you disagree with them being Austrian or core Austrian. Would be nice if this thread ends in a lively debate.
Well, if we can attribute the discovery of marginal valuation to Menger, then this is probably the greatest insight to date.
Marginal value would be my close second; I would however still place all costs being opportunity costs above it, since this concept in my opinion signifies the relation between costs, prices and value, completely exploding the fallacy of the labour theory of value (of course the marginal value theory does its fair share here too).
Mises’ theory of economic calculation. Many people don’t realize that it was what Hulsmann calls a “Keplerian shift” in the fundamentals of economics, and not just a handy argument against socialism.
I do not have a favorite Austrian insight, but I found one that I find interesting.
I read John Stossel’s column today. He cited the Peltzman Effect “(named after retired University of Chicago economist Sam Peltzman): People tend to behave more recklessly when their sense of safety is increased. By removing signs, lights and barriers, drivers feel less safe, so they drive more carefully. They pay more attention.”
The Peltzman effect is seemingly derivable from time preference. People prefer to be satisfied sooner rather than later. Applied to road usage, people want to reach their destination faster rather than slower and will do so if the risk of injury is reduced.
The Peltzman effect, which I absolutely adore, is really just cost-benefit analysis: the government, in that case, has reduced the costs of risk, so we perform riskier behavior.
What is Austrian about the Peltzman effect? Its psychological mambo jambo.
It’s incentive based though, and it’s logically necessary for behavior not to go the opposite of whatever is incentivized in a cost-free way to the individual. I’d argue that’s pretty Austrian.
The cause/effect relationship between policy and incentives is psychological. I mean you could imagine that people might say “Oh the rule is for our own good better be careful” or “those douchebag statists don’t know anything I’m going to act the same”. Without testing, you don’t know. The fact that the Peltzman effect is verified in real life does not make it a priori.
Well, it’s not Austrian. Peltzman is a Chicago school economist. But Austrians shouldn’t disagree with it.
And, the Peltzman effect is one of the best arguments against government regulation.
I strongly recommend everyone read his article, “Regulation and the Wealth of Nations”: http://pcpe.libinst.cz/nppe/3_2/nppe3_2_3.pdf. You’ll be a smarter anti-Statist if you do.
First, the Peltzman effect has been redeemed by the data, so that’s good. But only empiricists like me care, right?
But, I think your point is wrong, Sieben. This is a simple supply and demand situation. If you believe the minimum wage will increase unemployment (as Rothbard and others allege), then you should believe more safety regulations will increase risky driving. If you reduce the costs of risky driving, quantity demanded will rise.
Sieben you are right, but we Austrians could point out that either the policy fails to deliver the incentives or if it does, behavior changes in an unintended way (Peltzman) which is obvious if you think about it praxeologically. So in either case the policy fails.
I care too because I live on earth. But its not praxeologic so its not Austrian.
I would disagree with Rothbard on boring technical grounds. Costs are subjective and are not embodied entirely within nominal monetary prices, as is usually assumed. So raising the minimum wage raises a parameter that MAY be relevant to the subjective costs of employers. Another factor might be the number 7. Hey lucky sevens! Seven is my favorite number! Why don’t I employ 7 more employees at 7 dollars an hour! 7!
Again, I think there is a great empirical reason to believe that increasing monetary costs increase subjective costs… but its not apodictically true.
What would be a priori is if you somehow increased the subjective costs of hiring new workers, as opposed to nominal monetary costs. Even then the increase in unemployment is not certain because all you’re saying is that it is now more difficult to hire workers.
So what I’m saying might sound like a cop out, but it tells us what we can test for. Namely the relationship between the nominal monetary price of labor and unemployment. Empirically, we get a great correlation.
(If you want my personal opinion on Rothbard, I think he is an excellent advocate of the Austrian school and anarcho capitalism, but I think he could be about 30-40% more academic in his writings…)
Sieben, your point is technically true, but it’s market competition that allows Austrians to assume that increasing monetary costs increases subjective costs. The market disciplines crazy behavior.
I know I’m technically right. Thats why I said my disagreement with rothbard was a boring technical point 
I would argue that the Peltzman effect is praxeological: There are many possible risks one can take that. If several are taken at the same time, acting man’s logic (at least my logic) tells him he needs to multiply the risk-increases with each other for a correct risk-accessment. For example: If you don’t wear a seatbelt, the chance that you get hurt badly in an accident if one occurs is increased. If you drive recklessly, the chance that you get into an accident is increased. However, if you do both at the time, to correctly analyze the risk you will not only add them together, but you will have to multiply: When you, in addition to driving recklessly, also don’t wear a seatbelt, not only do you risk getting hurt badly to the same chance as when you would only drive recklessly but still wear a seatbelt, there is also additional risk in the form of getting hurt badly in the additional chance for accidents that results from driving recklessly. (I hope my usage of language doesn’t make this too complicated)
So, while to a person that doesn’t wear seatbelts voluntarily the additional risk of driving recklessly might not be worth it; when you force him to wear a seatbelt, he might start driving more recklessly, because due to the lower chance of getting hurt badly in an accident, driving recklessly becomes relatively more attractive to him (assuming he has at least a certain amount of interest in his safety).
Psychology might of course, as you described, also play a role, but if we disregard that role and only focus on the praxeological effect on the rational reasoning of the acting man, it becomes clear that by being forced to decrease the risk to himself in a certain area he would tend to engage in more risky behavior in another area if he had previously not engaged in said more risky behavior because it would have had to be multiplied with the risk-taking that is now forbidden to him.
PS: @Neoclassical: Examples like the above one are part of the reason why I belief in methodological dualism; to human action it is entirely relevant what the actual studies show or what the statistics are : What matters for economics and praxeology in general is the reasoning behind the chosing of means by the acting man. Because the objective is not to find out whether more or less accidents will happen introducing legislation like forcing people to wear seatbelts - those prove nothing as an increased or decreased rate of accidents could very well be determined by other factors so that for example the rate of accidents might decrease DESPITE the legislation simply because as an example cars in general are safer to drive due to some upgrade in technology - but to discover the influence that the legislation has on the chosing of means by acting man. Lastly, even IF human logic is wrong and it the logical reasoning of the acting man would not correspond to the laws of nature simply due to a failure of human logic, I would still endorse methodological dualism, simply because the objective of the praxeologist is figuring out the process of rational decision making of the acting man, even if it has flaws and is faulty. Therefore the way to prove my assertion above wrong is not to give me statistics or anything like that, but to point of my logical inconsistency in my above reasoning (which may very well exist, I wrote it rather hastily) within the bounds of the human mind.
This Peltzman topic deserves it’s own thread. It’s highjacking this one, which would be more useful as a concise survey of members’ favorite Austrian insights.
Calculation
Capital theory.
Hm, Grayson, I actually intended for this to be a discussion about which principles are to be considered Austrian (or core Austrian) as I stated in my OP, so I’m glad the Peltzman example was brought up because there is clearly room for discussion whether you can classify it as “Austrian” or not.