My friend Tom Burger from way back in the early internet days has finally started a blog, and as an introduction, here’s his article from today. Enjoy! – Ilene
Is Economics Like Religion?
Courtesy of Tom Burger at Applying the Lessons of Free Market Economics
I take this comment seriously, because … well, frankly, this is an opinion I once held. After all, what is an intelligent layman supposed to think when he sees professional economists holding divergent and even totally contradictory views? If economics is a science, why doesn’t logic drive most economists toward the same position, or at least similar positions? Are economic opinions, like religious convictions, based on nothing but faith?
It took a little reading into economic theory (see Suddenly, Economics Mattered), but it didn’t take me long to convince myself that logic is just as applicable and important in economics as it is in the physical sciences. I found other explanations for the divergent and contradictory economic ideas out there.
Why Bad Economics is so Popular and Enduring
In the opening paragraphs of his Economics in One Lesson, Henry Hazlitt says "Economics is haunted by more fallacies than any other study known to man. This is no accident." Hazlitt explains:
"The inherent difficulties of the subject would be great enough in any case, but they are multiplied a thousandfold by a factor that is insignificant in, say, physics, mathematics or medicine — the special pleading of selfish interests. While every group has certain economic interests identical with those of all groups, every group has also … interests antagonistic to those of all the other groups."
— Henry Hazlitt, Economics in One Lesson, page 15
It is inevitable that some people will try to use government’s coercive power to live well at somebody else’s expense. For any group to achieve that goal in a democracy, however, it must develop crafty and convincing arguments — arguments which give the enabling politicians effective cover. It really wouldn’t do for such a group to use this little tongue-in-cheek speech from Frédéric Bastiat’s essay, Government:
"I am dissatisfied at the proportion between my labor and my enjoyments. I should like, for the sake of restoring the desired equilibrium, to take part of the possessions of others. But this would be dangerous. Could not you facilitate the thing for me? Could you not find me a good place? or check the industry of my competitors? or, perhaps, lend me gratuitously some capital, which you may take from its possessor? … By this means I shall gain my end with an easy conscience, for the law will have acted for me, and I shall have all the advantages of plunder, without its risk or its disgrace!"
— Frédéric Bastiat, The Bastiat Collection, Volume 1, page 99
No, indeed. We will never see the pleadings of labor, management, retirees, teachers, bankers, … or a thousand other groups laid out with such clarity. To get their way, these groups all need sophisticated arguments from labor economists, auto industry economists, and other specialists who use their Ph.D. credentials, their obscure and erroneous assumptions, and their pretentious mathematics to baffle both Congress and taxpayers.
I believe politicians and government workers constitute the most dangerous collection of such "pleaders." These people choose to live wholly as tax consumers. Even worse than that, however, they truly enjoy telling the rest of us what to do. Not only do many of them produce nothing of value, but they interfere with genuine producers.
To more effectively argue their case, politicians and government workers are naturally drawn toward the economic fallacies that have served to bolster governments’ power and scope so well over the centuries. A few examples should make this point clear:
Public works programs create jobs; low interest rates generate growth; wealth is distributed unfairly on the free market; minimum wage rules benefit all workers; government spending promotes economic growth; full employment requires inflation; deflation is a horror that must be avoided at all costs; tariffs protect Americans; exports are good for us and imports are bad; foreigners selling goods "below cost" hurt Americans; saving is bad for the economy; rising gasoline prices are due to greed and gouging; …
This list could be extended almost indefinitely. The items in vogue change from time to time, but favorite fallacies are endlessly recycled. The public finds many of these ideas to its liking, of course, fallacies or not. Nevertheless, politicians are always trying to find new and better ways to explain government programs: their benefits, their necessity. The result, of course, is a strong and growing demand for economists and economic analyses that support the intended government actions.
And now we come to an indisputable economic law: if a government wants analyses supporting a particular political goal or action, somebody will gladly meet that need. If the President wants to spend a few trillion dollars to expand government’s scope and power, he is sure to find highly credentialed professors who will "prove" the efficacy of his decision — and some who will even say something like: "Good idea, Mr. President, but you should increase your spending proposals dramatically to ensure the desired result."
In a world such as this, we have to engage in this battle of ideas.
Citizen Economists
An intelligent citizen cannot afford to throw up his hands in resignation and accept whatever ideas are presented as "economic policy." Here is what Ludwig von Mises thought about this subject:
"… economics cannot remain an esoteric branch of knowledge accessible only to small groups of scholars and specialists."
"There is no means by which anyone can evade his personal responsibility. Whoever neglects to examine to the best of his abilities all the problems involved voluntarily surrenders his birthright to a self-appointed elite of supermen. In such vital matters blind reliance upon ‘experts’ and uncritical acceptance of popular catchwords and prejudices is tantamount to the abandonment of self-determination and to yielding to other people’s domination. As conditions are today, nothing can be more important to every intelligent man than economics. His own fate and that of his progeny is at stake."
— Human Action, Scholars’ Edition, page 874
In 2009, as we watch our "self-appointed elite of supermen" squandering trillions of dollars, it seems to me Mises’ call to action has never been more important. To participate in the debate, or to even to have an opinion on these matters, absolutely requires some economic understanding.
Achieving such an understanding might at first seem unrealistic or even impossible, especially to anyone who has ever glimpsed the esoteric mathematics in a contemporary economics paper. From that viewpoint, Mises’ admonition might appear as practical as a suggestion that every thinking person must understand Einstein’s General Theory of Relativity.
This comparison, however, is an illusion created and jealously maintained by our mainstream economic establishment. Becoming one’s own "citizen economist" is not nearly as daunting as our "experts" would like us to believe. All one needs, in my opinion, is an appreciation for logic and clarity of thought — and enough confidence to realize that these self-important economists are worthless if they can’t clearly and convincingly explain themselves to laymen.
