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Economics Essay

The “Order” of Goods: Not Useless?

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.