Daily Dose Sunday

Leaders in entrepreneurial theory and practice

“If [entrepreneurs] fail to produce in the cheapest and best possible way those commodities which the consumers are asking for most urgently, they suffer losses and are finally eliminated from their entrepreneurial position.”

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Ludwig Von Mises. Profit and Loss, 1951

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Profit and Loss In 1951, Mises gave an outstanding paper that made the summary case for the price system under capitalistic economic systems. In "Profit and Loss," he explains how cost accounting is the critical institution that ferrets out social waste, ensures that resources are directed to their most highly valued ends, and how entrepreneurs respond to price signals. His presentation is systematic, relentless, logical, and ultimately devastating to the opponents of profit and loss.He explains what it is that entrepreneurs confront in a market economy and how no bureaucratic institution can replicate the trial-and-error process that is at the heart of the market system. He weaves into his analysis the role of the consumer as the final arbiter of what is produced and distributed.Behind Mises's presentation was a burning desire to not only persuade the world but the attendees of the Mont Pelerin Society meeting in particular, whom Mises suspected were losing touch with core truths about the market order.The great merit of this essay is its brevity and passion. It explains the workings of what most people never think about or take for granted. Graduate students of economics have appreciated this essay for many years as the best summary of the technical side of the market. mises.org⁠

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Ludwig Von Mises was a prominent Austrian economist who made significant contributions to the field of economics. His books, "Human Action" and "Profit and Loss", are considered seminal works that continue to influence economic thought. In "Human Action", Mises presents a comprehensive treatment of economics, philosophy, and sociology, emphasizing the role of individual decision-making in shaping economic outcomes. He argues that human action is driven by subjective preferences and values, which in turn affect market behavior.

In "Profit and Loss", Mises examines the concept of profit and its function in the market economy. He argues that profit is a vital signal that indicates entrepreneurial success or failure, and serves as a guide for businesses to adapt and innovate in response to changing market conditions. Mises' work highlights the dynamic nature of market adjustment, where entrepreneurs continually respond to shifting consumer preferences and market signals. Through his writings, Mises provides a nuanced understanding of the market economy and the role of individual initiative in driving economic growth and prosperity.

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