Mises Made Easier
Percy L. Greaves Jr.
Id. In psychoanalysis, the term applied to that part of the structure of the human mind from which subconscious urges and desires arise and out of which the Ego (qv.) and the Super Ego (Conscience and social norm controls) are said to spring.
Ideal type. A rough generalization of a specific but loose concept helpful for the description and interpretation of history. An ideal type is a typification of a conceptual representation of complex reality by a grouping, each member of which has all or many of a number of specified distinctive qualities or characteristics. Because of its inexactness, an ideal type cannot be defined, but must be described by an enumeration of its basic features, all of which need not be present in any individual case. An ideal type may pertain to men, events, ideologies or human institutions. Examples are leader, bandit, king, dictator, town, state, nation, war, revolution, economy. Although the same terms may also be used in a precise legal or praxeological sense, their common or more general use lacks the precision and uniformity of praxeological terms and thus ideal types cannot form the basis for valid scientific laws or principles. They are, however, an indispensable tool for recording and understanding history.
EP. 75-79, 108-09; HA. 59,251-52.
Ideology. (1) Any philosophical doctrine dealing principally with problems of society's political and economic organization. (2) In the Marxian usage of the term, a false doctrine that precisely on account of its falsity serves the interests of the class that developed it. Only in a classless society will men be able to develop truth free from ideological distortions. But the doctrines of Marx, Engels and other "proletarian" authors already anticipate, in the age of disintegrating "mature" capitalism, the perfect truth character of the science of the future. (3) The name of a French school of philosophy whose most eminent representatives were Pierre Jean George Cabanis (1757-1808) and Destutt de Tracy (1754-1836).
HA. 648; OG. 101-02, 119-120, 144-145; UF. 81-82, 130; also PLG. 68.
Ignoramus, (Latin). In law, we do not know. In a different American usage, an ignorant person.
Impalpable. Intangible; incapable of being felt; not readily obvious or intellectually perceptible.
Imperator, (Latin). Emperor. Originally, under the Republic of Rome (before 49 B.C.), it was the title given to an army commander after winning a great victory and was held only so long as he remained in command of troops. Later, the Roman Senate allowed such commanders to retain the title upon retirement. The first to use the title continuously was Julius Caesar (100-44 B.C.) who attained the rank with his first great victories in 58. B.C. When the Roman Empire was established in 27 B.C., the first ruler, Augustus (63 B.C.-14 A.D.) assumed the title Imperator and gave the word its present meaning, the supreme ruler of a state controlling a large territory, usually including a number of sub-states which had been conquered by the dominant state.
Imprescriptible. Eternally inalienable; permanently unalterable by law or authority; incapable of ever being disposed of or surrendered even if one wishes; absolute.
In abstracto, (Latin). In the abstract.
Increasing returns, law of. See "Returns, law of," of which it is a part.
Index numbers. Statistical averages of items selected as representative of all items of a class of economic data. Index numbers are usually designed to equal 100 for the base period and changes in their components are computed at regular intervals in an attempt to indicate general changes in a specific class of economic data.
The choice of the individual items and their weighting are of necessity arbitrary and unscientific. Index number comparisons must of necessity ignore all changes in the quality and relative importance of the individual items, including the introduction of new ones and the dropping of obsolete ones. Since most market participants are interested in specific items and not in averages, the significance of index numbers is greatly overrated. In times of inflation, index numbers for prices are at best crude and inaccurate indicators of changes in the exchange value or purchasing power of the monetary unit. See "Mathematical economics."
HA. 220-23,351,398-400,442-43; M. 189-94, 201-03, 401-10.
Indirect exchange. A two step exchange in which the first step is to exchange one's goods or services for a medium of exchange (q.v.), usually money (q.v.), and the second step is to exchange the medium of exchange so obtained for the goods or services desired. Indirect exchange contrasts with direct exchange (q.v.), i.e., barter or trucking, in which one trades his goods or services directly for the desired goods or services of another without the intermediary use of a medium of exchange, usually money. The need for indirect exchange increases as the division of labor increases and more goods and services become available for exchange.
HA. 202-04,398-478; M. 29-34.
Induction, n. inductive, adj. In logic, assuming the truth of a general (or universal) premise from the knowledge that individual or particular instances of the generality conform to the premise. Example: Assuming that all men speak English because all the men you know speak English.
Perfect induction is when the premise is based on the knowledge of all instances. In such cases, the induction is merely the statement of a known totality or generality.
Imperfect induction is when the premise is based on the knowledge of less than all the individual instances, i.e., on a sample. In the sciences of human action, imperfect induction can never provide scientific certainty. At best, it provides only a probability. However, imperfect induction is an epistemological basis of the natural sciences.
TH. 303; UF. 21-27, 44-45.
Industrial Revolution. The rapid changes in the transition from medieval methods of production to those of the free enterprise system which took place from about 1760 to 1830, primarily in England. A term of Marxian origin loaded with emotional connotations in order to fit economic history into the theories of Fabianism (q.v.), Marxism (q.v.), Historicism (q.v.) and Institutionalism (q.v.).
B. 18; HA. 8,617-23; 0G. 101-02; PF. 136, 168.
Ineffable. Incapable of being stated or described because of some elusive transcendental quality such as ideality, ethereality or spirituality.
Ineluctable. Impossible to surmount or overcome; irresistible; inevitable.
Infant industries argument. The argument that the domestic economy needs and can support certain new industries but that they cannot be started without the temporary assistance of a protective tariff until they grow large enough and efficient enough to compete with the already established industries of foreign nations. It is generally implied that the protective tariff will no longer be necessary after the industries have "matured" and that the nation will benefit in the long run from the early establishment of such industries.
HA. 509-10; also p.247 in Mises' article, "The Disintegration of the International Division of Labour," in The World Crisis, an anthology by the Professors of the Graduate Institute of International Studies at Geneva, Switzerland (London: Longmans, Green and Co., 1938).
Inflation. In popular nonscientific usage, a large increase in the quantity of money in the broader sense (q.v.) which results in a drop in the purchasing power of the monetary unit, falsifies economic calculation and impairs the value of accounting as a means of appraising profits and losses. Inflation affects the various prices, wage rates and interest rates at different times and to different degrees. It thus disarranges consumption, investment, the course of production and the structure of business and industry while increasing the wealth and income of some and decreasing that of others. Inflation does not increase the available consumable wealth. It merely rearranges purchasing power by granting some to those who first receive some of the new quantities of money.
This popular definition, a large increase in the quantity of money, is satisfactory for history and politics but it lacks the precision of a scientific term since the distinction between a small increase and a large increase in quantity of money is indefinite and the differences in their effects are merely a matter of degree.
A more precise concept for use in theoretical analysis is any increase in the quantity of money in the broader sense which is not offset by a corresponding increase in the need for money in the broader sense, so that a fall in the objective exchange-value (purchasing power) of money must ensue.
NOTE: The currently popular fashion of defining inflation by one of its effects, higher prices, tends to conceal from the public the other effects of an increase in the quantity of money whenever the resulting rise in prices is offset by a corresponding drop in prices due to an increase in production. The use of this definition thus weakens the opposition to further increases in the quantity of money by political flat or manipulation and permits a still greater distortion of the economic structure before the inevitable readjustment period, popularly known as a recession or depression (q.v.).
B. 84; HA. 414,422-24,427-28,431-32,548-71; M. 219-31, 239-41; OG. 215, 218-19, 251-54; PF. 50-51, 72-82, 88, 102, 127-28, 150-61; also PLG. 135-137, 146-47, 164-66, 176-295.
Inscrutable. Incapable of being analyzed and understood because the essential facts or factors are concealed.
Institutional. Relating to an institution in the sense of a humanly created and generally accepted social custom, usage, law, rule, principle or pattern of procedure or organization, etc., which pertains to, guides or regulates social conduct. Examples: Government, language, family, individual laws, private property, market society, money, etc. See also "Institutional economics" and "Institutionalism."
Institutional economics. An holistic school of thought (see "Holism"), of American origin, that maintains that the patterns of group behavior, rather than individual human actions, should occupy the central stage of "social studies." This school believes that man's activities are primarily fashioned by irresistible social pressures called institutions. Such institutions include custom, habit, tradition, environment and man-made law. Attributing the ills of mankind primarily to the institutions of "laissez-faire capitalism," they seek to change existing institutions by the pressures of public (i.e., politically controlled) education, political intervention and social controls (central planning) which they believe will eliminate the maladjustments and clashes of interest they consider inherent in a market economy based on private property and the self-interest of individuals. Institutional economics has been largely influenced by the writings of Thorstein Veblen (1857-1929), John R. Commons (1862-1945), Wesley C. Mitchell (1874-1948), the sociologist Charles H. Cooley (1864-1929) and the philosopher John Dewey (1859-1952). It is the American variety of the British and German Historical Schools of Economics. (See "Historical School." )
EP. xvii, 8; OG. 59; S. 531.
Institutionalism. An American outgrowth of Historicism (q.v.) which emphasizes control of human actions by patterns of group behavior and advocates political intervention as the best means of changing man's habits and improving mankind. The "institutional approach" is a collectivist approach opposed to the approach of individualism and the idea that economics is a science. Institutionalism is a broader and more general term than Institutional economics (q.v.).
EP.8; HA. 647.
Institutional unemployment. See "Unemployment, institutional."
Interest, gross (market) rate of. The market interest rate which is the composite figure for originary interest (q.v.), plus or minus the entrepreneurial component (see "Interest rate, entrepreneurial component"), and plus or minus the price premium (q.v.). For Mises' detailed critical analysis of Böhm-Bawerk's interest theories referred to in Human Action, p.488n., see "Mises' Critique".
Interest, neutral rate of. A uniform, originary rate of interest (see "Originary interest") in certain inconceivable imaginary constructions which assume neutral money (q.v.). With a neutral rate of interest, the interest rate on loans would always coincide with the ratio between the prices of present goods and the prices of future goods, under the assumption that all prices change uniformly.
Interest rate, entrepreneurial component. The component of the gross or market interest rate which reflects the uncertainty element due to the entrepreneurial speculation present in every loan. The entrepreneurial component varies in each instance in accordance with the peculiar circumstances pertaining to the specific deal.
International Monetary Fund. An international monetary organization related to the United Nations (q.v.). The IMF was officially proposed during World War II at the 1944 Bretton Woods Conference (q.v.) and organized in 1946 with 38 member countries. As of June 1965, there were 102 member countries.
Each member country subscribes for a set quota, payable partly in gold (25% or less) and partly in their own currency. The United States quota is $4.1 billions, of which 25% was paid in gold and the balance in dollars. As of May 1965, paid up subscriptions, at official parity rates, totaled just over $15 billions. The Fund's resources are available, within limits, for member countries to borrow or purchase with their own currencies, at the legal parity, whenever any member country feels the need of additional assets to bolster public confidence in the gold parity of its currency, threatened by domestic policies of unbalanced budgets financed by inflation and/or credit expansion. (See "Bretton Woods Conference." )
PLG. 281, 285-86.
Interventionism. The doctrine or practice of the legally hampered market economy. (See "Market economy, the hampered." ) The policy of resorting to governmental decrees and coercion to direct market activities in a manner different from the primary desires of consumers as expressed by the practices, prices, wage rates and interest rates of an unhampered market economy. (See "Market economy, the free or unhampered." ) Interventionism is always an attempt to help some at the expense of others, as contrasted with the unhampered market economy in which participants improve their situations by improving the situations of others. Many interventionists, failing to understand economics, advocate specific interventions as a means of saving free enterprise from what they consider its excesses or weaknesses. [Interventionism was the policy advocated by Karl Marx (1818-1883) and Friedrich Engels (1820-1895) in the Communist Manifesto (1848) "as a means of entirely revolutionizing the mode of production." Later, both Marx and Engels repudiated interventionism as a petit bourgeois policy.]
For a complete analysis of all phases of interventionism, see Human Action, Part Six, pp.716-861.
AC. 58-62; B. 118-19; EP. 162-64, 218-22; OG. 58-66, 182-86, 192, 247-55, 267-71, 284-86; PF. 1-35; S. 531; also PLG. 52-54.
Introversive labor. Exertions which are ends in themselves in that they provide immediate inner satisfaction; as opposed to extroversive labor, exertions undertaken as a means to attain a desired end. Examples of introversive labor include religious activities, pleasurable, mental or physical exercises and exertions undertaken to divert one's mind from problems of the moment.
Ipso facto, (Latin). By the act or fact itself; by that very fact.
Iron Law of Wages. The doctrine according to which "the price of ... labor is equal to its cost of production," that is "the means of subsistence that he [the worker] requires for his maintenance, and for the propagation of his race." [Quotations from the Communist Manifesto, Part I]
The Iron Law of Wages is an extension to the field of labor of the idea that the value of anything is found in its cost of production or reproduction. This alleged law holds that under capitalism, there is a natural law of wages toward which wage rates must constantly tend to return. This "natural" rate is that which provides a "subsistence level" for workers, wives and the raising to maturity of sufficient children to maintain the number of workers needed for the state of production. It is held that higher wages will result in raising more children to maturity, and lower wages in fewer, so that eventually the competition of more, or fewer, workers must drive wages back in line with the natural rate needed to sustain a sufficient number of workers. Founded on the writings of David Ricardo (1772-1823), the Iron Law of Wages was adopted by the German socialist, Ferdinand Lassalle (1825-1864), as well as his rival, Karl Marx (1818-1883). They used it as an argument to prove there was no hope for the workers under capitalism.
AC. 85; HA. 603-04.
Irrational. That which lies beyond the bounds of what can be comprehended, explained, justified or rejected by human reasoning and science. Antonym: rational (q.v.). NOTE: Irrational does not mean incorrect or impractical reasoning, but the total absence of any reasoning.
EP. 31-35, 135, 148; HA. 19-23, 89,102-04,173,184-87,884884; OG. 112-13.
Irrationalism. The theory that human reason is unfit to interpret or elucidate the material forces that determine human behavior. Irrationalism attacks the very basis of praxeology and economics.