Introduction to The Common Sense behind Basic Economics

As promised, I’m posting the introduction to my book The Common Sense behind Basic Economics: A guide for budding economists, students, and voters below in order to get a conversation going, help those […]

As promised, I’m posting the introduction to my book The Common Sense behind Basic Economics: A guide for budding economists, students, and voters below in order to get a conversation going, help those who don’t have a copy, and entice some of you into either sending me a compelling reason to get a free copy or purchase one yourself.

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INTRODUCTION

1In the beginning God created the heavens and the earth,” 2[and man created economics to mess it all up.] –Genesis 1:1-2 (Confused Students’ Revised Version)

 

As a first year economics student, or anyone else trying to wrap your head around what has been called “the dismal science,” you might be wondering if masochism became trendy right around the time economics was invented.

Although it may sometimes seem like studying trigonometry in Latin, economics really is no more difficult than any other discipline.  At first glance, it seems like complete nonsense, but then you learn a little bit (which means, quite sadly, that you now know more than 90 percent of your peers) and begin to think that you’re smart.  But, if you are one of the even smaller percentage of humans that decides to delve a little deeper into the field, you’re probably going to find what I did:  The more I know the more I realize I don’t know and the more I know that the people I thought knew don’t know either.

Even after spending years as a student of economics, as well as some time teaching it, I really don’t see myself as an “expert” in the traditional sense of the word, often defined as one who is widely published and reviewed by his peers in academia and requested to present papers to audiences filled with other academic superstars, who stroke each other for their respective levels of genius.  There are plenty of men smarter than me out there who have done this for a living over a career spanning decades.  (Now I’m starting to question if I should be doing this.)

I may not be qualified to garner the attention of the Nobel committee (yet), but I am a student of the discipline, who happens to be one of those (partially insane) individuals who enjoys reading, studying, teaching, and writing about the economy.  Like the quote suggests, the more I do learn about economics, the more I realize I need to learn.

 

WHO DOES KNOW?

 

It does make me feel a little better, however, knowing that nearly everyone else has something to learn as well.  After all, economics is a relatively new academic discipline, whose beginnings surround the late 19th century.  Before this time, philosophers, professors, and researchers from other fields spent time in what we now consider the distinct and separate field of economics.

Yet, there have been thousands upon thousands of books published on the topic in the relatively short period of time since.  Even a quick book search for the subject “economics” at Amazon yields 2,106,823 results.  If each book has 300 pages, which I assure you many have more, and I read 200 pages per day without a day off, it will take me 8,658 years to read them all!  (Excluding the several dozen or so that I’ve read, it should only take about 8,657 years.)  Even if 99 percent of those books are just recitations of the knowledge presented in the other one percent, that leaves me about 87 years to read all of the books presenting original research and thought on economics.  This doesn’t include research papers, journal articles, Ph.D. dissertations, Wall Street Journal editorials . . . I’ve got a lot to learn.

The pursuit of knowledge can be overwhelming.  But, as you can see, so can the presentation of that knowledge.  Once someone knows, or thinks they know something (e.g. this guy), they now have to find a proper and acceptable way of presenting it.  Unfortunately, the presentation can often skew the message.  Want to be acknowledged and respected as a highly-reputable academic?  Better learn the pedantic and complex economics-speak of the research world.  Scholarly journals aren’t so keen on contractions, slang, relatable humor, or, well, any type of writing that isn’t drier than the Atacama Desert (by the way, that’s the driest place on Earth).

Once you learn their language, you begin to realize that they don’t know as much as you thought they knew.  Many so-called scholars are merely repeating in their own words what they’ve read someone else write in theirs, in a sense reporting on someone else’s findings, the history of economics, or attempting to explain current economies.  There is so much room for disagreement in any of these categories that entire research papers are devoted to just explaining interpretations.

If not busy explaining others’ explanations, then scholars attempt to come up with a theory.  You know what a theory is?  A theory is basically an educated guess.  Put all of this together and you begin to realize that there are a lot of people arguing about what someone else said and a lot of guessing going on.  That’s right, many of the smartest people in the world don’t know either.

 

THE BASIC FACTS

 

There are, however, some basic economic ideas that have been so long-held that they have become what average people will call “facts,” which in the language of the academic is known as “theory” or “principle.”  Even these basics, although rarely disputed, have been misrepresented, presented poorly, or denounced by other, even less knowledgeable individuals looking to make a name for themselves by making a big stink.

The basics of economics are among the most misunderstood of any academic discipline.  That’s because most people learn about economics in one of three ways:  1) In the classroom from a college professor who adds a lot of the unnecessary academic fluff to the conversation; 2) From the editorial pages of newspapers (opinions from cable news or talk radio as well); or 3) From their weird Uncle Charles at holiday gatherings.  In the first, you will find a lot of confusing charts, graphs, and equations.  At least that’s what most people complain about.  Something like “…but point b1 is not a stable equilibrium” is not something you’ll hear in everyday language.  On the other hand, opinions from commentators, although sometimes well-explained, often lack a total understanding or miss some important point given the limited amount of time in a particular segment.  No matter how much you respect their vast knowledge, sometimes entertainment value trumps the necessity for a thorough and accurate explanation.  Your weird Uncle Charles, or whichever other interesting personality you come across, seems to think everyone wants to know his opinion on politics and economics in the most inappropriate of circumstances, regardless of whether he knows anything about anything.

With such misinformation being strewn about, it’s easy to see why everyone is confused.  The truth, however, is that basic economics is actually quite simple and even more commonsensical, and it should be explained that way.  But, it rarely is and that’s why I’ve written this book:  to explain the basics of the basics in simple and easy-to-understand language.

 

DOES IT REALLY MATTER?

 

Perhaps the biggest problem is that our elected and appointed leaders are people too.  Many of them, although well-educated and well-intentioned people, often lack the basic economic understanding necessary to run a mom-and-pop ice cream shop, no less your city, state, or (help me, Lord) country’s finances!  It’s not always their fault (though mostly it is); we expect them to know everything, and we’re disappointed when they don’t.  But, they should know the basics, at a minimum.

How will you know if they know if you yourself don’t know?  Well, it’s time you knew.  Otherwise the masters of the universe who keep temporary residences in D.C. will continue their antics with the realization that little of the following is understood by the average voter.  If you the voter don’t understand what our wonderful leaders are doing, you can easily be fooled into thinking that they are the authorities on subjects that they themselves don’t even understand, which leads to all kinds of Washingtonian tomfoolery.

Therefore, I hope to expose some of our mutual misunderstandings here, so that neither the politician, nor us mere mortals, can be pushed over or manipulated to pursue or promote policies that will have unexpected and undesirable economic ramifications.

 

COMMON SENSE, BY THE BOOK

 

We should follow our instincts more often.  Just knowing the very basics will show you how legislators ignore economic principle almost as emphatically as they try to convince you of what they do know.  They will more likely wear a suit that isn’t navy blue before admitting a mistake (or they will try to convince us that they are right and all economists are wrong).  If only the combined C.Y.A. efforts of Washington, D.C. could somehow be bottled and sold, we could solve the world’s energy problems tomorrow.

To ensure I don’t make any mistakes myself, I’ve tried to maintain my own opinions in their rightful place inside my head.  I’ve based this book on long-established economic principles, instead.  In fact, I’ve based much of it on several of my favorite classic books and textbooks on economics, which you can find in the “Guide to Further Reading” and “References” sections at the end of the book, yet I’ve also intentionally (perhaps sometimes unintentionally) left out a lot so as not to bore you to tears.

In addition, you won’t find any fancy charts, graphs, formulas, or overly wordy academics-speak.  Too many who use obscure language intend to distract and confuse the average person from realizing that they really don’t know what they’re talking about in the first place, or, even worse, try to hide the fact that they don’t want you to know enough to participate in the political process.  That’s why I’ve broken it down so that anyone can understand, in plain English, and so that no one can ever say to you, “It’s really complicated. Just trust me.”

Because we only really understand and remember what we use, I’ve tried to incorporate much of the basic economic concepts into further explanations of what they mean to you and me.  After some of the chapters, you’ll find a section called “Focus on Economic Policy,” which takes an example of a policy that D.C. legislators are kicking around and explains what it is, how it ties into that chapter’s discussion, and what it means to you.  (If you’re too excited to read the next chapter, feel free to skip these.)

The following are (for the most part) not contentions or guesses or what should-be’s.  These are the principles that any and every economy has adhered to since the beginning of time.  Yet for some reason it has become too difficult for many to understand.  It shouldn’t be.  It’s common sense and I’m going to show you why.

(Read more by, well, buying a copy, or staying tuned…)