Come on baby dry your eyes
Wipe your tears
Never like to see you cry
Central to the study of economics is the concept of human action (Rothbard, 2004). Human action is purposeful behavior. In the economic context, human action is distinguishable from purely reflexive, involuntary reactions to stimuli. Human action is intentional, governed by a purpose that the actor has in mind. The purpose of a person's action is the end, and the desire to achieve the end is the motive for action.
Human action can only be undertaken by individuals. "Societies," "groups," "governments," et al. do not act. These are only constructs or metaphors that have no independent existence aside from the actions of their individual members. Existence of institutions such as government are meaningful only through actions of individuals who are and who are not considered members.
Initiating action requires not only unachieved ends but also expectation that particular behavior will enable achievement of the ends. Such achievement is expected to result in a less imperfectly satisfied state.
Human action takes place in environments that an individual decides to change in some way to achieve his/her ends. Environments consist of general conditions that the individual believes that he/she cannot control, and means the he/she thinks can be altered to achieve the ends. To act, an individual must have some technological idea of how to use some elements of the environment as means to arrive at the ends.
Human action always takes place in time. Once an individual decides to act to achieve an end, the end can be obtained only at some point in the future.
Because time is scarce, individuals must choose among ends to be satisfied. Choosing among ends requires ranking or prioritizing them. It necessarily follows that means are also scarce. If they were not, then all ends could be satisfied at once and there would no need to prioritize. Choosing among means to satisfy ends is called economizing.
The means to satisfy ends take the form of goods. Because they are scarce, goods are the objects of economizing action. They can be classified into two categories. Consumption, or first order, goods are immediately and directly serviceable in the satisfaction of wants. A bowl of soup, for example, is a consumption good that can be used to satisfy hunger.
Producer, or higher order, goods are transformable into first order goods only at some point in the future. For example, a can of soup must be pulled from the pantry and opened. A pan is required to hold the soup while it is heated, and a source of heat such as a stove is necessary as well. Once heated, the soup is poured into a bowl, and a spoon might be employed to eat the soup bite by bite. The above factors are producer goods because they are used to produce the good to be consumed.
Many producer goods are unavailable in nature and must be produced themselves. Thus, in addition to naturally occuring factors in producing the consumer good such as labor (e.g., to open the can, select cooking temperature, stir, pour) and land (e.g., kitchen space) involved in cooking the soup, many other factors employed in the process (e.g., pan, bowl, stove, spoon) must be produced in previous time periods and positioned so that they can be used in the production of consumer goods. These are higher order producer goods.
Finally, it should be noted all human action takes place in conditions of uncertainty. Uncertainty stems both from unpredictability of human acts of choice (e.g., bounded rationality), and insufficient knowledge of the environment (both means and general conditions) that can influence outcomes.
Omnipresence of uncertainty introduces the ever-present possibility of error in human action. For example the actor might find, after completing an action, that the means were inappropriate in attaining the desired end.
Rothbard, M.N. 2004. Man, Economy, and State, 2nd ed. Auburn, AL: Ludwig von Mises Institute.