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).
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