CORE – The Economy

It’s hard to overestimate the importance of public understanding of the fundamental principles of economics and some of the many uncontested facts (facts that are generally accepted by acknowledged peers of experts) of economic history. The lack of public understanding — worse still a misunderstanding — invariably leads to awful misery that could have been avoided by teaching the public a few essential details of the nature of our social world and how it works.

We have to be taught and we have to learn how to think about our world, just like we have to be taught how to read, write, reason logically and do arithmetic. Unlike comprehending and speaking natural languages, we cannot instinctively read, write, reason or do arithmetic; we have to learn. Reading, writing and doing arithmetic is “unnatural.”

Let’s recognize that the basic principles of economics are unnatural and therefore run counter to our intuition. Our natural instincts lead us to think and believe in ways that are almost always at odds with the facts and the true nature of our economic (therefore social) world. Briefly stated, this is so because our instincts evolved over evolutionary time-scales of tens of millions of years when humans lived in small groups of a few dozen people, hunting, gathering and foraging to survive. Only in the very recent past of around 200 years — the blink of an eye compared to hundreds of thousands of years — the world changed so dramatically that nearly everything that made sense in the long past was rendered totally irrelevant and wrong.

We no longer live the way nearly all of our thousands of generations of forebears lived. We now live in a world where billions of people engage in trade over vast distances which has been made possible through technological advances in transportation, communications, and computation. Our instincts, like our ancestors, evolved on a different planet (so to speak) and therefore are not suited to our present planet. We are strangers in strange land — almost like our paleolithic ancestors would be if they were beamed into our world of jet planes, microwave TV-dinners, ICBMs, nuclear submarines, internet and smartphones. We are ancient people inhabiting a modern world.

That’s the bad news. The good news is that with a little bit of effort we can overcome our instinctive biases, and bring out intuition in line with the reality we inhabit. We can be taught and we can learn provided we wish to.

When I went to school, I learned lots of facts about the world related to the natural sciences like physics and chemistry. I can even today after 40 years recall the number and significance of the valency bonds of Sulphur and Carbon atoms. Nice to know but totally irrelevant in the context of the world I live in because I, like most of us, don’t work with atoms. I interact with and work in a world of people. I was not taught anything even remotely related to the world of people — how they behave and why they behave as they do. I had no clue about the world of exchange, production, consumption, prices, costs, profit and loss, incentives, division of labor and specialization, the nature and functioning of institutions like the market, the government, et cetera.

Relatively late in life I realized that while familiarity with the fundamental principles of the natural sciences (such as the conservation laws, laws of motion, biological evolution through natural selection, etc.) is important and even essential, knowing how the world of humans operates is even more essential and indispensable. We must understand the principles of the social sciences (economics is a social science) because we are social creatures who as individuals and collectives create the world we live in, and if we systematically misapprehend and misunderstand our world, we are not likely to prosper and most certainly make our world worse than it need be. We create needless misery for ourselves and others not so much because of malice but due to our ignorance.

Here I am not arguing that we should all become economists (even though I became a card-carrying economist). My case is that we should all have a passing familiarity with the basics of economics. It’s not hard to do. What’s needed is a bit of curiosity, a bit of time, and access to some good content. If you have the first two, the third bit is available for (near) zero marginal cost. Allow me to refer you to one such resource: CORE —  the Curriculum Open-Access Resources in Economics.

I have scanned some of the pages of the CORE website. I approve of the style and content. I think it would be appropriate for the average person of 16 years and above. It could be a curative for those who are unintentionally ignorant and a prophylaxis (a measure taken to maintain health and prevent the spread of disease) for the cautious.

“Wait a minute,” you may say. “Why do you claim that the general public’s ignorance of the basic principles of economics leads to bad outcomes?” If the vast majority misunderstand how the world works, then they will support wrong policies with disastrous outcomes. For example, if a sufficient number of citizens believe that socialism is a better economic system than capitalism, then the nation turns to the left, and the outcome will be Venezuela, not Sweden.

India is what it is (desperately poor) because the vast majority of Indians prefer socialism over capitalism. Indians are not systematically stupider or lazier than other more prosperous collectives; they are just systematically more ignorant. Poverty is not necessarily the result of moral failure; most often it is the outcome of a broad-based societal ignorance of basic truths and principles about human nature and society.

Good news is that there is a way out. Learn the basics.

Author: Atanu Dey

Economist. View all posts by Atanu Dey