I’ve finally committed to delivering a manuscript of my long-overdue book Economics in Two Lessons. As part of the process, I’m going to post the chapters, one at a time, and ask for comments, criticism, encouragement and so on. To begin at the beginning, here’s the Introduction.
18 thoughts on “Economics in Two Lessons”
Regretably for me the preface is disappointing as I categorically realize you mean well. It suggests you have focused on some trees in one forest (modern Anglo economics) and missed the great Amazonian scale ecosystem just beyond the lookout on your (green) left which has so much to teach.
But perhaps I am wrong. In which case feel free to debunk my gripes here:
1. History – Economics has been with us since hunter gatherer times in increasing complex and diverse forms. Even modern ‘European’ economic evolution harkens back to the 1200s with the Florentines and those fascinating subjects of soap operas the Templars https://en.wikipedia.org/wiki/History_of_banking#Emergence_of_merchant_banks . But the Preface suggests you are presenting the history of economics as starting in the 1800s (e.g. reference to “Darwin”) or maybe the 1700s.
One of the more delightful things I have seen elsewhere is how some historians are trying to learn from deep history e.g. Michael Hudson and his delving into Sumerian (or is it Hittite) debt accumulation and forgiveness – a problem of our times for which there seems no solution short of a total upending of what you seem to see as economics……or a gradual descent of our society into neoliberal debt slavery.
2. The interactions with/lessons from natural sciences e.g. as provided by biology and chemistry etc. seem at best selective and at worst used to justify evil personal prejudices (nasty ideas like social Darwinism > Eugenics) – For example you reproduce Samuelson quoting Darwin at the very beginning of the preface. Will you be answering why much economics loves this simplistic jungle survival of the fittest but then ignores the greater complexity which natural science shows – ideas that suit its ideology (Samuelson is almost certainly appealing to Social Darwinism) while ignoring its lessons (e.g. limits to growth).
This poor selective use of hard science seems to be a problem with economics more generally. Soviet economics for example claimed to be ‘scientific’ and at times were e.g. COSSINS, D. 2017. The Soviet genius who tried to beat capitalism at its own game. New Scientist 6/Dec. . But state socialism (which was afterall notionally all about a better economic system) also produced ‘creeping schizophrenia’ and the legendary Lysenko who expected socialist determinism to triumph over biological limits to growth https://en.wikipedia.org/wiki/Trofim_Lysenko#Consequences_of_Lysenkoism …rather like the modern Economist modelling denialists we see in government departments like the bunch in (I think NSW) who are predicting 2% growth in coal exports through 2050!? and their ilk at the Federal level.
I’m pleased to see you mentioned Stern and carbon but I dont sense you have explored the larger disagreement between environmental economics and ecological economics.
3. Finally the preface still suggests you see the economic world from an anthropocentric perspective (like the scholastic churchmen of old?). While you recognise climate change do you recognize the bigger picture yet? The preface tone suggests otherwise, in particular the use without inverted commas of the term ‘market failure’ rather than stating the situation for what it really is. This is that there is a real world out there and humanity’s place in it is subisidiary and ‘market failures’ reflect lousy economics modelling philosophy for the most part…that is mainstream economics models (which seem to underpin your book) are essentially perfect and just need a little tweaking rather than a junking as would happen if economics were a true hypothesis testing discipline and more willing to see the limits of the current paradigm or perspective.
Perhaps if you were inclined to confront this last issue which seems to lie at the crux of my reservations about mainstream economics (and I fear the focus of your book) a good starting point would be DALY, H. 2015. Essays against growthism. World Economic Association.
Please dont get me wrong. I have no doubt your book is well written and has many insights to offer. My concern though is have you fully included the bigger context at least in part?
These two sentences “sound” too similar to me – though they are saying something different.
“Hazlitt’s arguments remain relevant today, and have not been substantially improved on by today’s advocates of the free market.”
“Hazlitt presented One-Lesson Economics in simple terms that have not been improved upon by any subsequent writer.”
Maybe they could be combined or the second rewritten, eg, “Hazlitt *also* presented…”?
Agreed, I’ll fix this repetition.
Looking forward to the rest.
Pg2. Para 2 So, he may be read just *as* if he were writing today.
Pg4. Para 3. In the definition of macroeconomics, disturbances seems too narrow? Aggregate levels of welfare?
I enjoyed the preface, but I think that a brief discussion of “opportunity costs” might assist the average (neoliberal) reader, if that is your target audience. Haven’t heard anyone reference Paul Samuelson since 1968!
I’ve run down a passage of d’Argenson’s expounding laissez-faire: here, last paragraph.
I’m not happy with your translation : “let [business] do it.” There is no limitation in d’Argenson to capitalists, he thinks his principle applies to economic actors in general. Nor does the French imply an undefined “it”. Suggestion: “Let people act.”
I am qualified at a high level in French. I worked for 32 years for a bilingual international organisation. I self-translated many letters and drafts to and from French, and checked the work of our professional translators before documents were sent for printing.
So far so good. I like the introduction. Its exciting. I can only tell you what I would do if I was writing something similar. I wouldn’t take Hazlitt, Mises, Reisman or even Hutt head on. Because their logic is so very sound. I would concentrate the implicit abuse on any happy-talk followers who are suggesting that a do-nothing approach is implied by their logic, under the current set of circumstances. As if we were now living in a well-ordered and well-balanced Misean paradise. So I wouldn’t be focusing at where these guys are wrong in logic. Because they aren’t wrong in logic.
The current setup is just a nightmare of dysfunction. As your last book showed. I think you were too polite and understating things actually. And the intellectual poverty of the neoclassicals (local versions: Berg, Davidson, Kirchner, Humphreys) is offensive.
I am really digging listening to Michael Hudson lately. He sounds like a former marxist but he understands the 19th century British Classical school so much better than these neoclassical clowns that dog our every step. I will get his book. I hope you get competitive with him.
One time an elder relative of Richard Burton, an old Welsh guy, took Richard aside and said something like ….. “You know that Marlon Brando ……… Can you beat him?” Ha ha hilarious. But thats what I would like you to do. Because the project is a good one. And so far Hudson seems to be setting the standard. Gridiron Coach Al Davis was known for telling his team “Just Win Baby.”
There was so much good in the original economy-in-government ideology but this perverted neoclassical hatefulness is killing us. We have a country to save. So your project could not be more important. I want you to be thinking all the time “Can I beat Michael.” and my pep talk to you is “Just win baby.” All that was good and worth preserving about this nation depends on projects such as this.
I know I have a one post a day limit. So this is a straight message to you. Although I suppose I could rewrite it tomorrow.
There is a really great Hutt book where he is advocating downward flexibility in wages. Which I would not now advocate, given the current extreme dysfunction. Anyway after making all these apparently flawless arguments and references to 19th Century geniuses of impeccable pedigree …. he finally gets down to what I think is now the problem. I cannot remember it properly. But he makes the argument that:
if his argument is in fact wrong, all that could mean was there was a lot of fat and uselessness (not his description) in business ….. AND SO THAT IS WHERE THE REFORM EFFORT SHOULD LIE. Trying to remember this from 20 years ago.
But clearly there is so much dysfunction in business that you could explore. And the one of several take-home-stories is that they are no longer even profit maximisers. Not even profit satisFICERS … well yes profit satisficers but that alone doesn’t capture it.
In reality they are now “fractional reserve subsidy rent-seekers.” In fact almost everyone we know in our generation that has started off middle class and become a real estate millionaire (for example) was never a profit maximiser. The easy money for the last few decades has been in fractional reserve subsidy rent-seeking.
That changes everything. It completely throws out the logic that the best economists have so carefully crafted. But there are other reasons that the excellent models and the hateful realty diverge so much. I will keep giving you my thoughts on these reasons as time goes by. For patriotic motives. There are so many game-changers. But one game-changer is that these bigshots are not even acting like profit maximisers any more. They are rent-seekers on the other side of the balance sheet of the bankers money-creation racket.
The one lesson economic rule reminds me of one rule libertarian free speech theory. That rule being that there should be no rules or limits and that the free market of ideas will sort everything out. Understandably people very very strongly prefer rules that are simpler or explain more. Our problem is that these simple outlooks are so beautiful and attractive but the real world is more messy. In both cases the powerful are using these one rules to preserve and enhance their wealth and power.
If markets work perfectly, and there are no income distribution issues, things are simple. Otherwise, welcome to modern economics. Is the value-added that you are working from Hazlitt? If the insight is that there are correctible market failures and that laissez-faire does not necessarily yield socially just income distributions then the message seems well-known. Or are you targetting the Catallaxy crew whose limited view is that free markets always work?
I know you usually can give things an unexpected twist and looking forward to further installments.
I agree, ‘Economics in one Lesson’ is still current and, as evidenced on this blog-site on many occasions, among some segments of society the debate is stuck in the 1940s (‘free market’ vs ‘socialism’). To my surprise, it is current even in unexpected places such as in some pockets of academia where ‘basic’ economic subjects are taught within other applied courses. Hence the delusion of the simplistic ideas of Economics in One Lesson spread very far and wide. I have come across academics in an interdisciplinary school who consider Economics as being one isolated one-term or one-semester subject. I assume your book is aimed at raising some serious doubts about Economics in one Lesson in these presumably very large segments of the population.
You write, “And despite impressive advances in mathematical sophistication and the advent of powerful computer models, the basic questions in economics have not changed much since Hazlitt wrote, nor have the key debates been resolved.”
IMO this sentence is not helpful. I would contend that it is exactly the impressive advances in ‘mathematical sophisticated’ that the backwardness (anachronism) of the persistent debates can be identified as such. I don’t believe I need to list the major advances since the 1950s.
Ernestine I don’t think he ought to be raising any doubts about “Economics In One Lesson.” Its a masterpiece. To take it head on would be like trying to best Charles Laughtons performance in the Hunchback. Thats not the point. The point is there is a lot of deeply ignorant neoclassical types, of the kind I used to hang out with at Catallaxy, who have become like “The Nothing” in that wonderful kids movie “The Never Ending Story.”
They are destroying everything cool about this nation. It was the new world countries, yes yes at the terrible expense of incumbent populations, who came closest to learning how we ought to live together. I’m talking about places like Canada, Australia, New Zealand, and some parts of the US. Maybe the Dutch and the Singaporeans have come close even since then. But in any case these neoclassicals are going to wipe out any potential of us recapturing and improving upon our heritage.
Think of how things were in a place like Australia in the sixties. An unambitious yet sober young man could expect to keep a wife and an expanding family on an entry level job. Debt was too high even then but nothing like the problem it is today. Its nothing to economic science to create a surplus of high-rise living space, in medium sized towns everywhere, so there simply is no excuse to have that situation come to an end on this continent, no matter what your position on immigration is.
For me the access of evil comes from a printing press somewhere where they are turning out economists like Berg, Kirchner, Humphreys, Davidson and so forth. You simply could not get these guys to talk about social goals that would be benevolent to ordinary Australians. Suppose you asked Berg ….. “Mr Berg …can you give me a strategic plan for Australia to have first world wages and third world real estate costs…” Chris and the other neoclassicals would go into some sort of combat roll and when they came back at you from all angles, they would be disrupting any possibility of us finding out and communicating how to have the good life.
The current policy settings are robbing all of us and funnelling all the pieces of a smaller pie up to the already rich. Now this is happening for many reasons and a lot of them subtle. Its not Hazlitts doing and I’m sure that Hazlitt would be an ally of the Professor if he had lived long enough to see the current nightmare.
As a sidelight, I would be interested to know your answer to Karl Popper’s question (or was it Bertrand Russell’s question)?
“Why does mathematics work?” It is also sometimes couched as, “Why does maths work in our reality?” or as, “The Unreasonable Effectiveness of Mathematics in the Natural Sciences” a book by Eugene Wigner which I have not read.
Perhaps you could give your thoughts in the Sandpit. I am very interested.
Thanks for this. I was using a secondary source. I’ll change along the lines you suggest, but I feel as if ““Let people do” would be better than “Let people act.”
I take your point. There are plenty of valid points to be made about ecological vs environmental economics, but the book you want would need a different author.
Several readers have had this reaction. I will expand on this.
To other commenters: thanks very much. I appreciate all this feedback and it will be helpful to me.
People have been so blindsided by these neoclassicals for so long. I even thought I was one of them. The process of trying to real them in is only just starting to get going. So I think the idea is to get hold of all the prior efforts of those who have made a fist of this, and try to surpass their efforts. Here is a book that is likely to be worthwhile reading while you working on this.