How We Lost Economics
[From a talk delivered at the Boston Mises Circle, October 1, 2016.]
A journalist from the Chronicle of Higher Education contacted me recently asking about free-market think tanks affiliated with universities. Can the Mises Institute or other organizations produce the scientific foundation for what he sees as an increasing faith among politicians in the power of free markets to solve societal problems and create the best outcomes? What, he asked, is the state of scientific evidence for this? Where’s the proof? How do we really know all this free-market stuff works?
I was tempted to respond with something snarky like “the twentieth century.” But I know a hit piece when I see one, and did manage to have a very civil phone conversation with him, and gently explained that no, most politicians advocate a mixed economy, and so forth.
But what’s so striking is the degree to which this journalist, and so many people like him, are deeply suspicious of capitalism and its advocates, and are convinced that some sinister plot is afoot to impose “free-market fundamentalism” on the nation (he actually used that term). And of course he never sees state-funded universities, mainstream media, corporate America, or government officials as enormously well-funded advocates for his point of view.
On the contrary, he imagines himself an underdog!
Now I wish this were true — that the case for political liberalism and laissez-faire, made so plain both by theory and history, had finally overcome the majority of academics. I wish American universities were not “nurseries of socialism,” to use Ludwig von Mises’s phrase.
But, they remain just that, and actually much worse.
In fact, universities have deteriorated rapidly since Mises died in the 1970s. Gone is any pretext of academic freedom, what we used to call free inquiry. If we judge modern universities by one simple criterion — are they committed to seeking and teaching truth above all? — then we must conclude that they are failing in their mission. We must conclude that they are committed to a political, economic, social, and cultural agenda that has little to do with truth seeking.
In this sense, today’s campuses are a microcosm of what progressives have in store for society in general. And part of that vision requires a degree of collective ignorance and even amnesia about entire fields of knowledge. It relates directly to my message for you today — namely, that we, intelligent laypeople, allowed economics to be lost.
A few weeks ago at our event in Asheville, North Carolina, I spoke about how economics has become a broken profession.
My point was that we now have an entire generation of supposedly mainstream economists who fundamentally:
- Don’t understand economics as a social science rather than a physical science that requires testing of hypotheses;
- Don’t understand money as a market commodity;
- Don’t understand inflation as a monetary phenomenon;
- Don’t understand interest rates as prices rather than policy tools;
- Don’t understand inflation and interest rates and can’t explain booms and busts;
- And perhaps worst of all, they often know nothing about the history of economic thought. They’ve simply accepted, without context, a host of assumptions that make up modern mainstream economics.
Think about that! It’s as though bloodletting had become the consensus mainstream medical approach to treating disease — and eighty years later doctors simply focused on the rate of bloodletting, or the timing of bloodletting, or the least painful approach to bloodletting.
By "broken" I don’t mean that the profession of economics doesn’t provide benefits for those working within it. It provides these benefits in spades. I mean it is broken in the same way universities are broken — that it no longer serves truth or society or humanity, but instead serves an agenda.
It starts with the wrong premises, asks the wrong questions, applies the wrong methods, and not surprisingly arrives at the wrong conclusions.
And we let it happen. We allowed the “academicization” of a field that we once expected high school graduates to reasonably grasp. We can call it formalism, or scientism, or just the intrusion of mathematics — but it represents nearly a century of diversion from classical and Austrian economics.
At some point in the the twentieth century, we all became convinced that certain fields were too complicated and too technical to understand. We let a group of technocratic elites capture economics for their own purposes. We were encouraged to throw up our hands and say “I give up,” and leave everything to the experts. Economics is like advanced physics, not something us average people should worry about.
Economists went on to embrace “mathiness” in economics, and many economists believe that any economics question can be posed in mathematical language. And, once posed, it is believed economists can reach definitive conclusions based on these mathematical models.
Mises certainly did not see economics as a mathematical exercise. He understood economics as a subset of praxeology, of human action, and therefore proper for all intelligent people to study. It is the human elements of consciousness and volition that distinguish economics from physics and chemistry and math.
And yet, while we would be alarmed if our children graduated from high school unable to write in complete sentences, or unable to perform basic algebra, balance a checkbook, or unable to make change at a cash register, we don’t mind sending them out into the world without a single economics class — completely vulnerable to politicians and supposed experts.
And we see this in the political debates, where the same falsehoods are repeated year after year.
It helps us understand how we arrived at a time and place where Ben Bernanke, Paul Krugman, Thomas Piketty, and Christine Lagarde are viewed as modern mainstream thinkers rather than the radicals they are when compared to the whole history of economics.
Making Economics Matter
So what do we do to correct this? How do we make economics less dismal and more relevant, so that we’re not a nation of gullible voters who fall for political nonsense? How do we convince young people that economics matters? And most of all, how do we save economics from professional economists?
I think first and foremost we need to accept that academia is captured. The Mises Institute continues to produce Fellows who go on to careers at universities around the world, and establish Austrian-friendly economics departments. We may not like it, but reclaiming academia professor by professor is an enormous task. The return on investment is far greater when we focus on young people and intelligent laypersons.
Second, we need to understand that it’s up to us to create the economics education the world needs. Thanks to the digital revolution, new structures and new platforms can be built far faster and far cheaper than we ever imagined. We can invert the classroom, do away with make-work curricula, and align economics education with the marketplace by teaching people only what they want and need. We can reject the one-way lecture production model that universities still cling to two thousand years after Aristotle.
Mises Academy, for example, makes a core group of Austrian economics courses available to anyone, anywhere, free of charge.
Finally, we must return to Mises’s more visceral approach and make economics real again. Like progressives, we shouldn’t be afraid to appeal to the heart as well as the head.
When we view economics as the stuff of life, we energize and humanize the subject. When we approach economics more like philosophy, as the study of general and fundamental human problems involving knowledge and reason, we create a whole new perspective. When we introduce logic and metaphysics into the discussion of economics, we make it a more vital subject. Economics is not an equation to be balanced, or a model to be filled with statistics. By restoring its role as a theoretical social science, we can restore its popularity among bright young people who really do want to change the world.
In closing, let me say that we don’t have to abandon intellectual rigor to “sell” Austrian economics. But we do have to make it more relevant and vital to the average person, by reclaiming it from the academics and asking the visceral questions: “Why are we so rich?” and “What if it all went away?”
But we can’t begin to do that — we can’t begin to understand or address what I would say are very serious structural economic problems — when the very science that is tasked with studying them has lost its way. So let’s reclaim economics from academia, from mathematicians, from politicians, and especially from the state and its court of intellectuals.