ECON 338 and PHIL 361: Study Questions for the Final Exam
1. Briefly describe the method of economics according to Mises and Rothbard:
In what way is their method different from that of other schools of
economics? (slides; Rothbard, Man, Economy, and State [MES], pp. 72-76; also
Callahan, pp. 321-328)
2. A scale of values or preferences: how is that implied by any action we choose
to perform? (Rothbard, MES, 2-8)
3. Explain the origin of money according to Austrian economists. What
problems does the introduction of money solve? (Rothbard, What Has
Government Done to Our Money? [Money])
4. What are the checks on the inflationary effects of fractional reserve banking?
(Rothbard, Money)
5. What problems of the fractional reserve banking system were supposed to be
solved by the introduction of central banks? (Rothbard, Money)
6. What is the point of Hume’s thought experiment about a fairy doubling the
supply of our money overnight? (Rothbard, Money)
7. What is fiat money? What are the disadvantages that ensue from going off the
gold standard? (Rothbard, Money)
8. Briefly outline Mises’s argument against central planning. (Mises, Economic
Calculation in the Socialist Commonwealth [Calculation]; Callahan, pp. 157-
161)
9. Why would it be impossible for central planners in a society where the
means of productions are owned by the state to solve the problem of
allocation of scarce resources? (Mises, Calculation; Callahan, pp. 157-161)
10. Briefly outline Hayek’s argument against central planning. (Hayek, “The Use
of Knowledge in Society”; Read; Callahan, pp. 161-165)
11. What kind of knowledge is relevant to Hayek’s knowledge argument against
central planning? (Hayek, “The Use of Knowledge in Society”; Read; Callahan,
pp. 161-165)
12. In what way, if any, is Mises’s calculation argument against central planning
different from Hayek’s knowledge argument? (Callahan, pp. 165-167; Robert
P. Murphy, “Socialism: The Calculation Problem Is Not the Knowledge
Problem,” at https://mises.org/wire/socialism-calculation-problem-notknowledge-problem-0)
13. Describe the relation among time-preference, saving, investment, and
consumption in a one-person economy, i.e., in Crusoe’s economy (What I said
in class; Rothbard, MES, Ch. 1)
14. The early nineteenth-century economist Bastiat tried to explain how the
government’s increase of the money-supply affects the borrowing of scarce
resources, with the example of a plow. How is this example relevant to the
Austrian theory of the business cycle? (What I said in class)
15.How does Garrison use the production possibility frontier to explain
economic growth? What kind of trade-off does the production possibilities
frontier represent?
16.How can you represent a market for loanable funds, according to Garrison?
17. What is a “Hayekian triangle”? Explain how this diagram can be used to relate
investment, stages of production, and consumption. (Garrison)
18. What is the “derived demand effect”? What is the “time-discount effect” (or
“interest rate effect”)? (Garrison)
19. What is Keynes’s “paradox of thrift” (Garrison)
20. What are the effects on the labour market of the derived demand effect and
the time-discount effect? (Garrison)
21. Try to explain as clearly as possible the Austrian theory of the business cycle.
(Garrison and Callahan)
22. What starts the boom-and-bust cycle according to the Austrian theorists?
(Garrison and Callahan)
23.“A tug-of-war.” Why does Garrison use this expression in his explanation of
the Austrian business cycle theory?
24. Why do the dynamics of boom-and-bust entail both overinvestment and
malinvestment? (Garrison)
25.“Circular flow”: what does Keynes mean by that? (Garrison)
26.How are consumption and investment related to each other, according to
Keynes? (Garrison)
27. What is the cause of downturns in the economy, according to Keynes?
(Garrison)
28. What is “sticky” and why, according Keynes?
29.Hayek: “Blame the interest rates.” Keynes: “No, it’s the animal spirits.” What
are Hayek and Keynes referring to when they use these expressions in the
first rap battle video?
30.“Hair-of-the-dog.” Why does Hayek use this expression in the first rap battle
video to describe Keynes’s recipe for economic recovery?
31.“Don’t use the printing press.” Why does Hayek use this expression in the
first rap battle video?
32.“I want plans by the many, not by the few.” Why does Hayek use this
expression in the second rap battle video?
33. At the end of his chapter on the Austrian theory of the business cycle,
Callahan answers a few objections to the theory (pp. 223-235). Present one
and only one of these objections and Callahan’s answer.
Study Questions for the Bonus Question
1. Why is the notion of intellectual property objectionable, according to Jacob H.
Huebert?
2. A loaf of bread and a music electronic file: why is this comparison relevant to
the issue of intellectual property?
3. Present at least one of the arguments in defense of intellectual property.
What does Huebert say against this argument?
4. Mozart’s quote on “stealing” a piece of music from an opera by Gluck. What is
the point made by Mozart? (Class presentation)
5. According to Huebert, should we have prevented Shakespeare from
“stealing” the plots of his dramas from previous sources?
6. Give an example of a patent for technological innovation that has retarded
further technological innovations. (Huebert)
7. According to Huebert, are musicians and writers in danger of becoming poor
if we eliminate copyrights?
8. Patents for pharmaceutical drugs. How are they defended? What does
Huebert say against patents for pharmaceutical drugs?
9. According to Huebert, what is problematic about Rothbard’s argument in
defence of intellectual property?
10. In what way is economic freedom compatible with environmentalism,
according to Walter Block?
11. According to Block, why is the problem of air pollution not an example of
“market failure”?
12. Why is privatization of waste disposal the best way to protect the
environment from hazardous waste?
13. Outline the difference between mini-archism and anarcho-capitalism (also
known as market anarchy)
14. Present at least three arguments against anarcho-capitalism and Roderick
Long’s answers to these arguments.