By Dr. Bernard James Mauser, Ph.D.
Let us remove this primary barrier. There is a significant problem with thinking of economics in simply mathematical terms. The glaring deficiency is that mathematics can only reveal a small portion of reality. That is to say, not everything is mathematically analyzable. Take, for instance, my last statement about economics (namely, that not everything is mathematically analyzable). There is no mathematical analysis that can be done to discover its truth. In a recent article, Christopher Westley corroborates the testimony of many scholars that recognize that “Science is more than mathematics.”[i] The same type of thinking applies to economics. It doesn’t mean that mathematics cannot play any role in making predictions. But, what it does mean is that there are non-mathematical aspects of economics that can be understood. Some may even argue that it is really these non-mathematical concepts that are primarily important in economics. These may lead us in a ‘common sense’ approach to analyze what is occurring in our society. Indeed, the inability to mathematically determine free-will reveals a glaring deficiency in a purely mathematical approach. Where does this ‘common sense’ reasoning come in to play in the real world of economics?
We must all realize that we have a view of the economy- whether simple or complex. We have opinions about what to do with our money, whether to invest it, how to best invest it, and even an opinion on who would be best at investing it. Before the 1900s there were no ‘professional’ economists. This is a recent innovation. Perhaps it may encourage us to return to studying basic economics if we realize this.
It is pretty non-controversial to say that our knowledge of economics can impact our lives and the lives of those around us. As many of us have contrary ideas as to which policies are best we can be assured that not all of us are good economic theorists. Some ideas people believe are true and some are not. How can we discover the basics that will help us discover which approach to economics has 1) the greatest explanatory power, 2) is best for society, and 3) most accurate predictive ability?
For those that have allowed math to hinder them, let me assure you that the basics of economics (and the approach that satisfactorily meets the three criteria) can be easily understood and applied. The most general principle to learn about what a good economist should examine is best summarized by Henry Hazlitt in his work, Economics in One Lesson: “The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.”[ii] The majority of problems that occur from having a mistaken economic approach stem from two erroneous ways of thinking about the effects of certain policies. The first error is to only look at immediate consequences; the second is to only look at how a particular group is affected. The aspects ignored in these two errors are long-term consequences and how the entire society is affected by a certain policy.
Many professional economists- even those in key positions in our government- are guilty of ignoring long-term consequences. Why have those that are professionals developed this bad habit of ignoring the long-term consequences? The primary reason is that they follow the approach of John Maynard Keynes- the father of what is called the Keynesian school of economics. Keynes is famous for having written, “In the long run we are all dead.”[iii] He wrote this to encourage government intervention as a way to fix economic problems versus letting the free-market work itself out over time. It is no wonder those in this tradition are less concerned with the long run.
Be encouraged that the average person can understand the principles used to make current government policy. These are not mathematical principles, but are philosophical. Some may think this to be an equally horrifying prospect (as if I’ve encouraged them to jump out of the frying pan and into the fire). Keep in mind that referring to the principles as ‘philosophical’ need not mean complex or impossible to understand. The philosophical principles already mentioned- which identify the difference between a good and bad economist- illustrate that an idea does not have to be impossible to understand to be called philosophical.
Every individual should know basic economics for a very simple reason: economic policies are morally significant. A little-known fact is that economics until recently in world history was traditionally a discipline that fell into the subcategory of ethics. Adam Smith, who authored of The Wealth of the Nations and is the oft-cited ‘Father of Capitalism’, was a student of moral philosophy under ethicist Francis Hutcheson. His work and that of early economic theorists was seen as a category of moral philosophy. Recognize the significant implications of viewing economics this way. If economic policy is tied to morality, then an individual’s economic approach is morally good or bad. As people that should be concerned with promoting what is good and discouraging what is evil, we should be prepared to evaluate policies and its effects on all the people in a society.
One can, therefore, make a moral case for the superiority of one approach versus another. The ultimate foundation for economics ends up being something beyond economics. It is morality- not math- that determines whether a policy is good or not. For example, the policy that benefits the majority or a special group and punishes the rest is unjust. One can easily recognize that calling a policy unjust is a moral judgment. All people should care about the most important aspect of economics, namely, the long-term effects of policies upon everyone, as it has a moral component. An individual is essentially preparing to make a moral case for one approach versus another in undertaking a study of economics. If we don’t educate ourselves, who will be there to defend our uneducated brethren?
[i] Christopher Westley, “Science is More than Mathematics,” Mises Daily, September 16, 2013. http://mises.org/daily/6528/Science-is-More-than-Mathematics.
[ii] Henry Hazlitt, Economics in One Lesson, (New York: Harper & Brothers, 1946): 5.
[iii] John Maynard Keynes, "The Theory of Money and the Foreign Exchanges". A Tract on Monetary Reform. (1924).