I read Menger’s Principles of Economics a few months ago, and I’m currently re-reading Mises’s Human Action, and I’ve noticed both of them introduce the concept of the “order” of goods, that is, the number of production steps a good is from consumption.
For example, if the path to making bread is: seed -> wheat -> flour -> bread, then flour is a second-order good, wheat is a third-order good, etc.
Both Menger and Mises introduce this concept, but both dismiss it as effectively meaningless. Their reason, I suppose, is that in complicated production pathways, one good might be fourth-order in one pathway, and fifth-order in another.
But I think they might have missed something–something where understanding the order of goods allows us to make a clear example of the usefulness of a medium of exchange or money.
Consider this: the number of steps a person is willing to go through to get from production to consumption is determined by their time preference, and their capacity for understanding large, complicated abstract structures. The person with high time preference might see goods of fifth order as valueless, since they are too far from consumption for him to care.
In a society where most individuals have very high time preference, production processes with more than a few steps are neglected, and, in such a primitive society, if they are limited to barter, the probability of longer production processes happening is vanishingly small. Even the people who might want to organize people into doing this work would have a hard time.
But the addition of a medium of exchange or money converts all labor into a third-order good at highest. I.e., labor -> money -> consumable. Now even people with ridiculously high time preference can be convinced to labor on small parts of large projects.
This is a simple and clear way to show how the introduction of a medium of exchange or money immediately allows the economy to drastically lengthen and improve its structure of production. To put it in modern terms, the reason a huge, long-term project like a skyscraper is even possible is because high time-preference laborers can be convinced to fire rivets in exchange for a medium of exchange/money.
This is just one praxeological concept that can benefit from the concept of the order of goods. There may be others. This is why I think the concept should not be neglected or underestimated.