The reason for this error is because these analyses take place in a market economy in which money, a general medium of exchange, is in use. Money will be discussed in much greater detail later. But for now, the presence of money changes none of the above analysis except in the case where a counterfeiter (or other fraudulent money producer) enters the market. A counterfeiter is someone who can create money at an extremely low cost. In this case, he can demand goods and services which are not backed by a real supply. Through his artificial demand, he can increase consumption, but there is no corresponding production. In reality the counterfeiter exchanges nothing in return for goods or services that are needed by others. The counterfeiter’s injection of demand will boost the supply of whatever it is that he demands, but this never results in an increased saving. It is a pure consumption, so society as a whole will lose, because there is no possibility to save anything from what the counterfeiter demands. If the counterfeiter buys tools and other capital goods so that production can be stimulated to produce goods that will be in great demand, there is a slim possibility that this will result in a future saving, but that likelihood is very low. This particular issue will be dealt with later.
Money is in a state of barter with all other products. Instead of exchanging 1apples for 2 oranges, A man might exchange an apple for 10 units of currency and then use 5 units of the currency to purchase an orange. The price of apples in terms money or the price of money in terms of apples are the inverse of each other. These are barter prices. Just because money exists does not eliminate the fact that every product is bartered against another product, it’s just that today, almost every exchange involves barter with money.
The short digression into an introduction to money is important at this point because an economy is very complex and misunderstanding about what money is, leads to many erroneous conclusions. What is important is to remember the following.
Private ownership provides the incentive to preserve resources by making them valuable and trade-able. State regulation damages these incentives because the owner no longer completely controls his property. The regulated entity will try to take advantage of the regulator to gain advantage over his competitors. Regulation also usually provides a shield to protect the regulated from certain failures. In extreme cases, this can be a guarantee that the State will devote all its resources to assist the regulated. In this way, the normal relationship between buyer and seller is weakened.
Rothbard Making economic sense