ECO12: Principles of Economics II
This course is taught through ten lectures and discussion sessions, lasting 1 hour each. This course is now available to all members of saifedean.com, along with Saifedean’s three online courses, and access to the drafts of The Fiat Standard and Principles of Economics. Click below to subscribe, or make a one-time purchase allowing you access for a year.
Access live seminars
You are also welcome to join two weekly discussion seminars to discuss the material of the course, as well as a wide variety of topics, along with occasional special guests.
Saifedean’s course synopsis:
ECO12 is the second of two courses on saifedean.com introducing the basic principles and main
concepts of economics in the tradition of the Austrian school. It is recommended that students study
ECO11 : Principles of Economics I before this course. The course draws on the work of several scholars in the Austrian school tradition, mainly Ludwig von Mises, Murray Rothbard, Friedrich Hayek, and Hans Hermann Hoppe.
Having explained the main types of actions that humans undertake to economize in ECO11, this course moves to discuss the features of an impersonal market economic order, beginning with one of the most critical concepts: economic calculation. Mises explained how a market order where economic production meets the demands of consumers is only possible with the system of free enterprise and private property, as that is the only system in which the owners of capital are able to calculate the costs and benefits of their actions rationally. This point is one of Mises’ most important contributions to economics, and forms the essence of his devastating critique of socialist economic planning, which has not been refuted a century late.
We then introduce the work of Friedrich Hayek on the concept of spontaneous order, and how it helps us understand economic phenomena as the emergent result of human action, and not human design. We also discuss the different conceptions of rationality in economics, and order can emerge rationally from individual action.
The bulk of the course then introduces the basics of the Austrian analysis of money, beginning from the concept of time preference, which I find to be the most important and useful concept to learn in economics. After explaining the importance and significance of time preference, we move on to analyzing how the Austrian school views time preference as the determinant of interest rates. We then introduce the concepts of credit and banking, and Mises’ typology of money, and the distinction between money and credit.
With that background, we then analyze the Austrian theory of the business cycle. As interest rates on the free market a reflection on time preference, an increase in the supply of credit that is treated as money leads to the distortion of interest rates, the price of money, causing economic miscalculation in the capital markets, leading to malinvestments. We study this highly important theory from the works of several economists to get a full picture over two lectures.
In lecture 8 we analyze the market for security and national defense, analyzing the fallacy that these goods can only be provided by a monopoly, illustrating how they can be, and in fact are, produced by the free market, and how problems of insecurity and conflict around the world can best be understood as a result of the absence of a free market for security.
In lecture 9, we move to analyzing the topic of intellectual property. We study the work of Stephan Kinsella who argues that ideas and non-scarce goods cannot be property, and the attempt to treat them as such makes no sense economically or legally. We also analyze the claim that intellectual property rights enhance innovation and economic well-being.
Finally, the last lecture of the course discusses the connection between Austrian economics and bitcoin. How does studying Austrian economics help us understand bitcoin, and what does bitcoin teach us about Austrian economics. We then discuss the stock-to-flow numerical model of bitcoin price, and how its accuracy poses a challenge to the Austrian method of economics.
If you purchased the course on the legacy (archive) website, you can still access the materials here.