Why Are Stock Prices so Volatile?

  • by:
  • 08/21/2022

???Since David Ricardo???s Principles there has been no book??? which has exercised such great influence on the development of economics as Carl Menger???s Grundsätze [Principles].???

-Knut Wicksell

At the invitation of Jan Fijor, a publisher of free-market books in Warsaw, Poland, I just completed writing an introduction to the Polish edition of Carl Menger's ???Grundsätze,??? translated ???Principles of Economics??? in English. I follow in the footsteps of introductions in previous editions by the iconoclastic Chicago economist, Frank Knight, and the Austrian economist Friedrich Hayek.

Carl Menger (1840-1921) was the founder of the Austrian school of economics when he published his ???Grundsätze der Volkswirtschaftslehre??? in 1871 and ushered in the "marginalist" revolution in economics. This is the idea that prices are determined by a marginal number of buyers and sellers, not the cost of production or labor inputs.

There's no better example of this marginalist principle than in the stock market. In fact, not surprisingly, Menger discovered this concept when he was a reporter on the Vienna stock exchange. He observed that security prices were determined by a marginal (small) number of buyers and sellers, and therefore had nothing to do with their cost of production, or even book value, as the classical economists had claimed.

To read the rest of this article, click here.

Image:
ADVERTISEMENT

Opinion

View All

JACK POSOBIEC: The government goes after MAGA and Trump while pedophilia in Hollywood is 'perfectly fine'

"Why would Nickelodeon employ people who had been already convicted of child sex abuse?"...

UK medical body claims preventing teachers from 'affirming' child sex change will 'cause distress' to students

The medical body told the UK Department of Education it does not think parents should always know if ...

Evan Gershkovich's detention in Russia extended over espionage allegations

The US ambassador to Russia, Lynne Tracy, maintained that "the accusations against Evan are categoric...

Women workers at greater risk of being replaced by AI: study

7.9 million jobs would be lost in the "worst-case scenario."...