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The Ludwig von Mises Institute

Advancing Austrian Economics, Liberty, and Peace

Advancing the scholarship of liberty in the tradition of the Austrian School

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Mises Made Easier
Percy L. Greaves Jr.


Caesarism. Political dictatorship; absolute government under one-man rule; one-man imperialism. The term comes from Gaius Julius Caesar (100 B.C.-44 B.C.), a general who expanded the Roman Empire and became its dictator, even though refusing a crown.

Capital. The fundamental concept of economic calculation which expresses in monetary terms the net wealth (assets minus liabilities) of the complex of all kinds of capital goods and marketable assets (savings) belonging to a definite person or other unit participating in a market economy. It is only by use of such an accounting concept that (1) profits (increases in capital account) and losses (decreases in capital account) of contemplated market actions can be estimated or prognosticated, and (2) profits and losses of completed actions can be calculated. Thus the mental tool of capital is essential both as a compass for guiding future market actions and as a means for evaluating the success or nonsuccess of completed market actions.

HA. 260-64, 491; PF. 110-25.

Capital accumulation. The act, process or result of creating or increasing the supply of capital goods (q.v.). Capital can only be accumulated by producing more wealth than is consumed, i.e., saving.

AC. 38-43,82-89; HA. 490-93, 774-75; OG. 101-02; PF. 181.

Capital consumption (or decumulation). The act or process of consuming or reducing the supply of capital goods (q.v.).

HA. 490-93; PF. 181.

Capital flight. The popular idea that invested wealth leaves one country for another. While gold and other commodities always move to those markets placing the highest value on them, neither invested wealth (capital goods) nor a nation's irredeemable paper money leaves a country. Only their values "flee," usually because investors (capitalists), as a result of new information or fears, have readjusted downward their appraisal of the future values of such investments (securities or monetary units). Investors profit from such a situation only when they correctly anticipate changes in the future market values before they actually occur. Capital flight is actually a loss in confidence that results in a drop in values.

HA. 517-20.

Capital goods. Produced factors of production, such as tools, buildings, transportation facilities, partially finished goods, and both cash and consumers goods which make it possible for the owner to engage in more time-consuming and more productive processes of wealth production than would be possible if he did not possess such forms of saving. In short, stored up labor, natural resources and time in the form of economic goods whose possession reduces the time necessary to attain some goal of human endeavor.

AC. 84-89; HA. 259-61, 490-93490-93; PF. 111, 120.

Capitalism. An economic concept of civilization that is based on the private ownership (and control) of the means of production. Such an institutional situation permits and inevitably encourages the division of labor, economic calculation, capital accumulation, technological improvement and the voluntary social cooperation of a market economy in which mass production is designed for the consumption of the sovereign masses. Capitalism is the antithesis of statism, socialism and communism which are based on government ownership (or control) of the means of production.

AC. 1-33, 48-112; B. 10, 18, 20-39, 67, 93, 105, 118-19; OG. 49-50, 284.

Capital levy. A tax or assessment imposed on privately held property, usually nonrecurring.

Carmen. A grand opera composed by Georges Bizet (1838-1875), with libretto by Meilhac (1831-1897) and Ludovic Hal?vy (1834-1908), and based on a romantic novel of the same name by Prosper Merim?e (1803-1870).

Cartel. An association of business firms in any one industry, which is formed for the purpose of limiting competition in order to substitute monopoly prices (q.v.) for competitive prices. Without government assistance, cartels could exist only in those few cases where nature has limited the sources of a raw commodity to easily controlled narrow geographic areas, but such instances are rare (possibly diamonds and mercury) and thus could play only a minor role in world trade and production. Cartels were used primarily in pre-World War II Germany to protect domestic industries, heavily burdened with welfare state taxes (social security, etc.) from competition with foreign firms not so burdened. The cartel device permits industries to sell abroad at competitive prices while charging monopoly prices in the domestic market that are sufficiently high to cover the welfare state expenses on total sales and production, thus placing the entire burden on domestic consumers. The agricultural programs of the American government are a substitute for a cartel.

HA. 365-68; OG. 70-77.

Car tel est notre bon plaisir, (French). For such is our good pleasure. A phrase frequently used by monarchs when signing a law.

Catallactic competition. The peaceful competition of the market economy wherein each participant seeks his own satisfaction in striving to excel in some contribution that will best satisfy the needs or desires of his fellow participants in a market society. Catallactic competition tends to produce the greatest possible satisfaction of consumers by assigning each individual in a voluntary society that function in which be can render to all his fellow men the most valuable of the services he is able to perform.

HA. 117,274-79; UF. 88.

Catallactics, n. catallactic, adj. The theory of the market economy, i.e., of exchange ratios and prices. It analyzes all actions based on monetary calculation and traces the formation of prices back to the point where acting man makes his choices. It explains market prices as they are and not as they should be. The laws of catallactics are not value judgments, but are exact, objective and of universal validity.

EP. 88-89, 149, 208; HA. 234,327-28,646,650,652.

Catallactic unemployment. See "Unemployment, catallactic."

Caucasian. A large and rather indefinite division of mankind which in the eighteenth century was comprised of the chief races Of Europe, North Africa and Southwest Asia. All mankind was divided into five species by Johann F. Blumenbach (1752-1840) in 1781. The other four were Mongolian, Ethiopian, American and Malay.

Central bank. An ideal type (q.v.) rather than a scientific term since no two central banks are precisely alike.

Almost all modern countries have a central bank which is a large bank operating either as a direct governmental institution or as a private institution whose management is strictly controlled by the government. Most central banks were established by law as the result of a national financial emergency, such as the collapse of a prior credit expansion (U.S. Federal Reserve Banks), or the desire of the government for more funds than it cares or dares to raise through taxes or private loans (Bank of England). Central banks usually attempt to control interest rates, reserve requirements and note issues of the nation's banks and act as the bank of last resort when other banks are pressed for funds while holding investments which the central bank will discount on demand. By such technical procedures, the central bank attempts to control the quantity of "money in the broader sense" (q.v.) and thus indirectly influence prices, production and employment. Central bank policies are usually determined by a desire to (1) prevent financial panics, recessions or depressions, usually by the expansion of circulation credit (q.v.), and (2) provide the government with funds to cover any deficits not fully covered by funds from private sources.

M. 422.

"Ce que j'appelle mon present, c'est mon attitude vis-a-vis de l'avenir immediat c'est mon action imminente," (French). "What I call my present is my mental attitude towards the immediate future, my imminent action."

Ceteris paribus, (Latin). Other things (factors or elements) being equal or remaining unchanged. Ceteris paribus is an element of every scientific doctrine and no economic law can dispense with it.

M. 129.

Charisma, (Greek). A special divine gift which endows the recipient with a supernatural ability to know and proclaim the will of God. In short, a pipeline from God which mere mortals may not challenge.

Chauvinism. Absurdly exaggerated patriotism or militarism; originally a term of ridicule applied to idolatry of Napoleon I (1769-1821), it came from the name of Nicolas Chauvin, a much wounded and decorated veteran who worshipped with blind enthusiasm the military glories and expansionist policies of his defeated hero.

Chauvinism applies to talk and disposition. It thus differs from nationalism which applies to a policy of action. For distinction, see Omnipotent Government, pp. 122-125.

OG. 1, 122-25.

Checkbook money. See "Deposit currency."

Chiliastic. Pertaining to the doctrine that when men are perfected the Messiah will appear on the Earth to rule over a happy and glorious kingdom for 1,000 years (the Millennium).

S. 281-88.

Chimera. Originally a fabled and frightening monster whose features resembled the corresponding parts of many different animals. Hence, an absurd or fantastic creature of the imagination; a frightful fancy; a visionary or impracticable idea.

Chimerical. Wildly or fantastically unreal or visionary.

Chrematistic. Related to wealth as far as it can be calculated in terms of money.

Christian socialism. A brand of socialism that seeks to base the socialist system upon loyalty to the Christian church as opposed to antireligious, anti-Christian, atheistic brands of socialism. It emerged in the nineteenth century and is based primarily on disapproval of the desire for profits or personal gain. Its advocates generally ignore the problem of production, oppose bigness and radical innovations in business and seek what they consider a "more just" allocation of existing wealth. They yearn for "just" prices and wages, usually those of some point in the past for which the only hope of maintenance lies in a completely controlled economy.

S. 252-58, 423-29.

Circulation credit. Credit extended by banks in the form of banknotes or demand deposits especially created for this purpose; as opposed to credit granted by the loan of a bank's own funds, or funds deposited with it by its customers. The extension of circulation credit makes available to borrowers newly created funds which do not decrease or restrict the funds available to anyone else as in the case of commodity credit (q.v.). See also "Credit expansion" and "Monetary theory of the trade cycle."

HA. 433-434,571-575; M. 264-275.

Circumlocution. The use of indirect or roundabout language. The use of more words than necessary as a means of avoiding a simple direct expression.

Circumscribe. Restrain by drawing a line around; limit or restrict actions to a small area within narrow boundaries.

Civil War, American (1861-1865). The war between the Northern States, known as the Union or the Federals, and the Southern States, known as the Confederate States or the Rebels. The basic issues were Negro slavery, State sovereignty or "States' Rights" and protectionism for industry. The two sides had about equal populations. Economic factors gave victory to the Union. The North developed great diversified industrial strength, fed itself and blockaded Southern ports. The South, long dependent on cotton and tobacco, lacked food, industry and transportation facilities for keeping her armed forces supplied. The blockade made cotton almost worthless within the Confederacy, while world prices, in terms of gold, shot up to more than ten times prewar prices, causing great distress among English textile workers.[Further Reading see Charles Adams When In The Course of Human Events ( Rowman & Littlefield Publishers, Inc. 2000)]

Classical economics. The first comprehensive system of economic theory, first expounded by Adam Smith (1723-1790) in his Wealth of Nations (1776). It also included the writings of Jeremy Bentham (1748-1832), David Ricardo (1772-1823), Jean Baptiste Say (1767-1832), Thos. R. Malthus (1766-1834), James Mill (1773-1836), John Stuart Mill (1806-1873) and many others of that era. While not advocates of complete laissez fare, this school of economics generally supported the principle that both individuals and society prosper most with a minimum of political intervention. They defended private property, voluntary social cooperation, economic freedom and popular government and provided some of the first basic principles upon which modern economics has been built. Their great weakness was their failure to solve the paradox of value and thus much of their reasoning was based on the labor (objective) theory of value.

HA. 162-64,175175, 231,653, et al.; also PLG. 29-31, 35, 76.

Classical liberalism. The doctrines and policies of the traditional "liberal" (q.v.).

Classical theory of value. The value theory of Adam Smith (1723-1790), David Ricardo (1772-1823) and their followers, also accepted by Karl Marx (1818-1883). This theory holds that market values are determined by the quantity of labor required to produce what is offered for sale. As later developed, the quality of the labor needed was also taken into consideration.

Coadjuvancy. Mutually helpful assistance.

Cockaigne, Land of, (French). Literally, land of cakes. An imaginary country of idleness and luxury. In Cockaigne the rivers were of wine, houses were built of cakes, the streets were paved with pastry and the stores were filled with free goods. Roasted fowl flew about ready for the eating.

EP. 79; PF. 116,177.

Coefficient of correlation. A mathematical figure for showing the degree of agreement or uniformity of relationship between two things, groups, sets of facts or series of data or certain qualities thereof. A perfect agreement or uniformity of relationship is unity, or one. Consequently, the nearer the coefficient of correlation is to one, the closer is the agreement or uniformity of relationship for the two matters under consideration.

Cognition. The mental act, process or product of such act or process of knowing, learning, perceiving or of becoming aware.

HA. 647.

Collateral. In business, property, or legal title thereto, which is deposited as security to guarantee the performance of a contract, usually the repayment of a loan.

Coloni, (Latin). Tenant farmers, later serfs who farmed.

Commodity credit. The exchange of a lender's present goods or money for the borrower's promise of payment in future goods or money in which the immediate sacrifice of the lender corresponds exactly to the goods or sum of money received by the borrower. In the case of banks, commodity credit represents loans of banknotes or the extension of demand deposit credit for which the bank holds 100% monetary reserves. In short, the lender forfeits for a time the use or consumption of real wealth which has been transferred to the borrower. Commodity credit contrasts with circulation credit (q.v.).

HA. 433-34; M. 264-65.

Commodity money. A physical commodity originally valued for its commercial uses which has come to be used as money. As long as it remains a commercial commodity, its value as a commodity and as money is interchangeable and dependent on market conditions, i.e., the money relation (q.v.), the demand for it as a commodity and the cost of production (or mining). Modern example: gold.

HA. 428-29; M. 59-67, 482-83.

Communism. See "Socialism" with which communism is synonymous in terms of their common final goal, the public ownership (control) of the means of production and the public management of all production and allocation of finished goods and services. Following the Bolshevist Revolution (1917), the Bolshevist leader, Lenin (1870-1924), chose the name Communist Party for all those dedicated to the use of violence, revolution and civil war to attain their final goal, to distinguish his followers from the socialists, or social democrats who sought the same final goal by democratic processes. In 1928, when it became evident that the Communist Revolution had not eliminated the poverty of the Russian masses, the Communist International proclaimed a material distinction between communism and socialism. It reserved the term "communism" for what Karl Marx (1818-1883), in his Critique of the Gotha Program (1875), called the "higher phase of communist society." It would follow socialism when the increase in wealth from socialism would permit an allocation of goods and services on the basis of "From each according to his abilities, to each according to his needs!"

AC. 63-66, 111-12; PF. 140-43; S. 543-53.

Communist International. The international organization whose members are the Communist Parties of all nations having one. It first met at Moscow in 1919 and is also known as the Comintern or the "Third International." Its headquarters are in Moscow and it is the main organization through which the leaders of the Soviet Union seek to convert the rest of the world to the ideology of "Socialism of the Russian pattern" (q.v.). For its historical antecedents, see "Second International."

S. 550, 552.

Communist Manifesto. In November 1847, the Communist League, a newly formed international group, commissioned Karl Marx (1818-1883) and Friedrich Engels (1820-1895) to draw up a party platform or program for the League. Originally written in German, it appeared on the eve of the 1848 European revolutions which the authors apparently looked upon as the dawn of a communist era. As the best known piece of socialist literature, it has formed the basis of many anticapitalistic movements and should be read for an understanding of the increasing acceptance of the principles of interventionism and socialism during the last century.

AC. 41-42, 63-66, 72, 111; B. 98; OG, 51, 151, 178; PF. 95-101, 103, 141, 175, 184; S. 543.

Comparative cost, law or theory of. The theory of David Ricardo (1772-1823), also known as the Ricardian Law of Association, which holds that when one person, group or nation is superior to another in the production of all goods, it is advantageous for all parties if the more efficient or better endowed producer concentrates on the production of those goods he can produce with the greatest relative superiority and the less effective producer concentrates on those goods he can produce with the least relative deficiency.

HA. 159-64.

Concatenation. State or condition of the correlated action of mutually interdependent processes. Situation where a number of distinct processes mesh or link together with a resulting cumulative effect in a well coordinated movement. A good example of concatenation is the market process wherein the independent value judgments of all potential participants are simultaneously correlated or meshed together to produce market prices which allocate available supplies of economic goods and services. See Human Action;, paragraph starting on the last line of page 652.

Conceptual realism. The theory that abstract universals, unobservable general classes or ideal types (q.v.) have a reality that is independent, equal and sometimes superior to the reality of their individual parts or specific examples. For instance, conceptual realists consider the abstract term "capital" as something real concrete and permanent with different uses and characteristics from those of the "capital goods" of which it consists. Another example would be "national income." The philosopher A. N. Whitehead (1861-1947) called this the "fallacy of misplaced concreteness.

HA. 45,145,515. See also F. A. Hayek's The Counter-Revolution of Science (Glencoe, Ill.: Free Press, 1952), p. 54.

Confederates. Name given to the soldiers and citizens of the Confederate States of America, the Southern States of the United States during the Civil War (q.v.).

Congener. A person or thing of the same origin, nature or innate character.

Congeneric. Allied in origin and nature.

Congress of Paris(1856). Representatives of England, France, Austria, Sardinia, Turkey and Russia met for more than a month to draw up and sign the Treaty of Paris (1856), a peace treaty ending the Crimean War. The provisions affecting naval warfare included: (1) Abolition of wartime privateers; (2) Guarantee of safe passage for all enemy property, except war contraband, carried on neutral ships; (3) Guarantee of safety to all shipping on the Danube River; (4) Provision that all blockades must be effective in order to be binding on neutral shipping; (5) Black Sea opened up for the first time to commercial shipping of all nations; (6) Ban placed on all naval ships in the Black Sea and on any arsenals or fortifications on Black Sea coastal areas.

Congruity. State or quality of being appropriately adapted, suitably consistent or harmoniously related.

Conquistadors, (from the Spanish). Name given to the sixteenth century Spanish conquerors of Mexico and Peru. The two best known Conquistadors were Hern?n Cort?s (1485-1547) who conquered Mexico and Francisco Pizarro (1470?-1541) who operated in Peru and founded Lima.

Continental currency. The paper notes issued by the Continental Congress to help finance the American Revolution. They entitled the bearer to receive "Spanish milled dollars, or the value thereof in gold or silver" but were never so redeemed. The original issue of $2,000,000 was authorized on June 22, 1775. By the end of 1779, the total issued reached $241,522,280. Two years later they were worthless. In 1790, after they had been out of circulation for almost ten years, the new government agreed to redeem them at one new dollar for every 40 continental dollars, but only six or seven million were ever presented for redemption.

Contracyclical policies. Interventionist policies which the sponsors hope will counteract the undesired but inevitable effects of credit expansion (q.v.). At best, such policies merely postpone the day of reckoning. See "Trade cycle" and "Monetary theory of the trade cycle."

HA. 798-800.

Contradictio in adjecto, (Latin). A logical inconsistency between a noun and its modifying adjective. Examples are "square circle," "inert activity" and "controlled or non-market prices."

Coolies. The lowest paid unskilled laborers of, or from, China, India or other highly populated Asiatic areas.

Corn-hog cycle. A large corn crop results in lower corn prices, causing farmers to increase. their breeding and feeding of pigs which, when they mature and are sold as hogs, depress hog prices. Farmers then reduce their production of hogs which in turn reduces the demand for corn and thus the price of corn, and the cycle is then ready to repeat itself.

Corn Laws. British laws for the regulation of the grain trade from 1436 to 1846. In the later years, from about 1790, it became increasingly evident that these laws were primarily protecting the British land owners from foreign competition and thus raising the prices of bread and cereals, the basic diet of industrial workers. In 1838, the Anti-Corn Law League was founded in Manchester, England. The League, led by Richard Cobden (1804-1865), "The Apostle of Free Trade," and John Bright (1811-1889), was largely responsible for the repeal of the Corn Law in 1846 and the growing acceptance of the laissez faire principles of the Manchester School (q.v.). NOTE: Corn is the name generally given to the leading cereal grass consumed as food by a country's inhabitants. In England, corn is what Americans know as wheat.

In Scotland and Ireland, corn is oats, while on the European continent, corn is usually what Americans know as rye.

Corporativism. The economic program of the Italian Fascist Party, largely copying the program of British "guild socialism" (q.v.). All organized economic activities were divided into 22 sectors, each of which was represented by a corporation. The council of each corporation was presided over by a Fascist Party member and was comprised of government appointed "experts" and representatives of employees, employers and the Fascist Party. Each council was responsible to the Minister of Corporations for the management of its corporation, and its members were also members of the Chamber of Fasces and Corporations, which was scheduled to become the lower house of the legislature. In practice, the Corporation council members merely ratified the decisions of the nation's Fascist dictator, Benito Mussolini (1883-1945).

S. 576-77.

Corporazione, (Italian). Corporation, guild, association.


Corv?e, (French). A feudal term for the forced unpaid labor a peasant performed for his lord or vassal. The term was later applied to such labor that inhabitants must perform under the direction of the public authorities, being a type of tax in the form of forced labor.

Cosmogony. A theory or account of the creation and development of the world or universe.

Cosmology. A general science or theory which describes or explains the extent and orderly structure of the universe, with emphasis on the nature of its parts as well as the laws, processes and relationships by which the parts are coordinated in time and space. Also a specific theory, body of doctrine or school of thought which deals with or relates to the natural order of the universe.

Cost. (1) Whatever asset must be spent, foregone, given up or otherwise sacrificed; or (2) Whatever liability must be acquired or suffered in order to obtain or produce something or attain some end. A cost may be a matter of money, labor, lives, time, trouble, pain, debt or anything else that men value and take into consideration when deciding to seek a specific goal or good. The contemplation of a cost is always a judgment of value (q.v.). Any cost expressed in monetary terms is a price, i.e., a quantity of money.

Counterpoise. Offset; balance; counterbalance; act as an equal effect.

Crack-up boom. The final short-lived boom that occurs in the last stages of a seemingly endless inflation. The crack-up boom results from a "flight into goods or real values" (q.v.) and marks the end of an inflation by a complete breakdown of the monetary system.

HA. 427-28,436,469,555,562; M. 227-30.

Credit contraction. Reduction in outstanding circulation credit (q.v.); reversal of a prior credit expansion (q.v.). NOTE: Credit contraction has no reference to a reduction in commodity credit (q.v).

Credit expansion. An increase in the quantity of monetary units created by an increase in bank loans over and above the number of monetary units that savers have released to the banks for lending to third parties. In short, monetary loans in excess of monetary savings available for lending. Credit expansion is only possible with a fractional reserve banking system. Other things remaining the same, every credit expansion must create a boom or upswing in economic activity. This boom can only be sustained by a continued credit expansion at an ever accelerated rate sufficient to induce a repetition of the same activities at the increased prices resulting from the previous credit expansions. See "Circulation credit" and "Monetary theory of the trade cycle."

B. 84; HA. 434,440-44,554-57,570-71,793-98; OG. 251-54; PF. 58-61, 68-69, 102, 150-61; S. 531; also PLG. 179-81, 187-95.

Credit money. Non-commodity money which consists of non-interest bearing claims that are not redeemable on demand. Usually, credit money is money that was originally issued as a redeemable money-substitute but whose redemption was later suspended either indefinitely or until some future date. It retains value because it has general acceptance as a medium of exchange. Credit money is "Money in both the broader and narrower senses" (q.v.).

HA. 429; M. 61-62, 482-83.

Currency. Anything which passes from person to person and is commonly acceptable as a medium of exchange (q.v.).

Currency School. This British group originated from the writings of David Ricardo (1772-1823) in opposition to the Banking School (q.v.). The Currency School advocated the "currency doctrine" in the nineteenth century controversy over the laws which should govern the Bank of England and form the basis of the British monetary system. The "currency doctrine" maintains that all future changes in the nation's quantity of money should correspond precisely with changes in the nation's holdings of monetary metal (after 1853, gold only). In general, the Currency School opposed free banking principles and the legal sanction for any discretionary increases or decreases in the nation's quantity of money, which, in their opinion, included banknotes but not demand deposits subject to transfer or withdrawal by check. In short, the School opposed the practice of issuing fiduciary banknotes against commercial paper and government securities and sought a legal ban on the issue of any new banknotes except against 100% gold reserves.

The Currency School was successful in incorporating its ideas into the Bank (Peel's) Act of 1844 (q.v.). However, this Act, while prohibiting further fiduciary issues of banknotes, permitted a great expansion of circulation credit (q.v.) in the form of demand deposits. Consequently, the Act failed to limit the increase in fiduciary media as the Currency School had anticipated.

Because no short definition can be fully satisfactory, the reader is urged to read the references.

HA. 438-44,571-72; M. 343-45, 367-73; PF. 67. See also J. Laurence Laughlin's The Principles of Money (N.Y.: Chas. Scribner's Sons, 1903/1926), pp. 238-81; and Lloyd W. Mints' A History of Banking Theory, in Great Britain and the United States (Univ. of Chicago Press, 1945), pp. 74-124.

Customs duties, customs. Taxes levied or collected on imports or exports.

Cyclical movements of trade. See "Trade cycle."

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