There’s a funny story in Robert Heilbroner’s 1953 book The Worldly Philosophers (which has been republished dozens of times):
One evening Keynes was having dinner with Max Planck, the physicist who was responsible for the development of quantum mechanics. Planck turned to Keynes and told him that he had once considered going into economics himself. But he decided against it – it was too hard. Keynes repeated this story with relish to a friend back at Cambridge. “Why, that’s odd,” said the friend. “Bertrand Russell was telling me just the other day that he’d also thought about going into economics. But he decided it was too easy.”
So is economics hard or is it easy? It depends on the person, I suppose. To someone who has a very superficial understanding (or even a misunderstanding) of economics, it could appear easy. It’s a hard subject to master because it is deceptively simple. I think Russell’s understanding of economics was superficial. He was, after all, a first rate mathematician and philosopher, and I believe that had he studied the subject, he’d have appreciated it.
The fundamental principles are actually quite easy to understand, provided one is patient and willing to learn. The problem arises when people are incapable of reasoning logically or are uninterested in understanding the matter. James Buchanan said that “it takes varied reiteration to force alien
concepts upon reluctant minds.”
Repetition is key in learning the fundamental principles. They are actually quite counter-intuitive at first but when you get it, it becomes second nature.
I like to repeat the story of the mathematician Stanislaw Ulam and Paul Samuelson. Ulam once asked Samuelson if there was anything in economics that was both non-obvious and true. Samuelson took several years to arrive at the answer that it was the theory of “comparative advantage.” He said, “That it is logically true need not be argued before a mathematician; that is not trivial is attested by the thousands of important and intelligent men who have never been able to grasp the doctrine for themselves or to believe it after it was explained to them.”
What are the core concepts? They are (in no particular order)
- voluntary exchange is beneficial
- opportunity costs are relevant
- incentives matter
- free markets work
- decisions are taken at the margin
- people behave strategically
- demand schedules slope downward
- supply schedules slope upward
- there are no free lunches
There is another important truth about the world which is very clearly understood by students of economics. It is that actions have consequences, and furthermore that the consequences can be intended and unintended, and beneficial and harmful, and seen and hidden, and immediate and in the future. Note the and’s in there; they are not or’s. You will have intended and unintended consequences, you will have benefits and costs, etc. One cannot be a fully civilized human without internalizing that idea.
Anyway, what’s on your mind? Ask me anything.