To Understand Public Policy, First Understand Markets
In the final section of Human Action, Ludwig von Mises stressed the importance of all citizens to acquaint themselves with the findings of economic science. Unlike physics or engineering — where the scientists could safely continue with their advancements, whether or not the average person understood how they worked — economic policies as enacted by governments will ultimately rest with public opinion. No matter how decisively the great classical economists destroyed the case for mercantilism centuries ago, we still suffer from tariffs because most people want to “save jobs” by keeping out “cheap foreign imports.”
Indeed, just about all of the “public issues” of today are crucially dependent on an understanding of sound economics, including ObamaCare, Bitcoin, quantitative easing, the trillion-dollar platinum coin, so-called “green” energy initiatives, and the “sequester.” To understand whether government intervention in a particular sector will bring desirable effects, the first task is to learn how the market economy works.
In this respect, I am pleased to announce that on January 9, we will begin a six-week Mises Academy course that offers an introduction to the Austrian understanding of the free market, unhampered by government regulations and taxes. This course, titled “Introduction to the Free Market,” is the second installment of a three-part series that uses my Lessons for the Young Economist as the main textbook. (In December we wrapped up the first installment, “Action and Exchange,” which gave an introduction to economic science and studied isolated individuals as well as a simple barter economy. This earlier course is not necessary in order to take the current offering, but it’s available for independent study if a student wishes.) Specifically, in “Introduction to the Free Market” we will cover chapters 7 through 14 of Lessons for the Young Economist, finishing its treatment of the pure market economy.
The Scope of the Course
The weekly lectures will run from January 9 through February 27. At the conclusion of “Action and Exchange,” we had just finished studying the formation of barter prices in a simple economy with just a few individuals. Therefore, we start this second course by looking at indirect exchange and the emergence of money. Although we will rely primarily on my Lessons as the text, the lectures will also bring in discussion from more advanced Austrian readings. For example, we will discuss the specific contributions that Ludwig von Mises made to the theory of money; this is material that was just a bit too technical to be included in the textbook.
In the middle weeks, we will cover important features of the market economy such as the division of labor and comparative advantage (why would a specialized doctor hire a nurse who was inferior at performing medical tasks?), entrepreneurship and competition (what “directs” activities in a market without a central planner?), and the importance of saving and investment. Although these are standard topics, we will give a specifically Austrian flavor to them, as the Austrian School has many important nuances to add that the mainstream approach neglects, particularly when it comes to entrepreneurship and capital accumulation.
As another “standard” topic, we will also thoroughly cover supply and demand, to be sure that students understand the difference between a shift in supply versus a movement along the supply curve. Although pedantic, such emphasis ensures that no student will ever say something silly such as, “The Arab nations cut back oil production, causing prices to rise. But this made demand fall, causing prices to fall.” Such circular arguments are typical even in reporter’s articles on energy issues; this course will teach the student to be more precise and avoid this type of sloppiness.
Finally, we will cover the advanced topics of “Profit & Loss Accounting” and “The Stock Market.” As mainstream economics texts often utterly neglect profits and losses altogether, this will be a very “Austrian” treatment, in line with the importance Mises placed on economic calculation in his own writing. Finally, we will introduce students to the stock market, not (of course) with the aim of giving investment advice, but just to explain what the stock market is and the process by which stock prices move.
Structure of the Course
In a typical week of the course, I will give a live video broadcast on Thursday from 5:30–7:00pm Eastern time. I will spend the first 75 minutes lecturing on that week’s material, and then I will field questions from students for the remaining 15 minutes. In addition, on Saturday I will have “office hours” at a varying time of day (in order to cater to different students each week), meaning that I will be available on a live video broadcast to answer questions from any students who tune in.
Note that the Saturday sessions are purely for the students’ convenience, and are not mandatory. Also, all broadcasts will be recorded and available to enrolled students, so that people who have a scheduling conflict can still take the class if they wish.
If a student wishes, he or she can simply “audit” the class. This has been a popular option for many adults who take Mises Academy classes to watch the lectures but, because of their work schedules, can’t keep up with the reading.
However, students may also take the class for a grade. These students will take a multiple-choice quiz each week, in addition to a midterm and final exam. Although the Mises Institute is not accredited, we will present certificates of completion and a formal grade at the end of the class to those students who desire it.
The Mises Academy’s three-part series on “Basics of Economics” is appropriate for both working adults and homeschooling children. This second section, titled “Introduction to the Free Market,” provides an understanding of the operation of a pure free market economy. In this day and age, virtually every major “public” or “social” issue involves proposals for government interference with the market. That’s why it’s crucial for lovers of liberty to understand how a voluntary economic marketplace works, in order to explode the myths and lies of its enemies.