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Groupthink in Economics Is Why We’re In Such Bad Shape
In Principles of Economics, Carl Menger corrected the theoretical mistakes made by the old classical school. At the time, the founder of the Austrian school of economics seemed to want to make economics accessible to everyday people, which may explain why he exemplified the nature of economic value in his book, making sure readers understood that economics revolves around the actions of individuals.
Described by many as “the best introduction to economic logic ever written,” Menger’s Principles inspired young economists like Ludwig von Mises to explore the populist nature of economics in an attempt to make the case that economics was for everyone, and that practical knowledge of economics can help even the most uneducated among us to prosper.
Despite the honorable efforts and the exponential growth of influence the Austrian school of economics has exerted over the years, the reality is that, for most individuals around the globe, economics is hard.
Murray Rothbard, the late Austrian economist and scholar, famously wrote in 1970 that it is no “crime to be ignorant of economics,” after all, he added, most people see economics as a “dismal science.” Nevertheless, he concluded, “it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”
While economics retains its “most-discussed” status as a field, it remains underappreciated. In many cases, economics is even ridiculed and treated as a lesser social science. Nevertheless, it’s the only subject that individuals deal with on a regular basis. And it’s the only field on which individuals rely on without even realizing.
Like many other social sciences, economics deals with people and their actions — two very unpredictable factors, no matter how sweet the idea of central planning may sound. But with the growth of what many may call elitist intellectualism, the negation of the importance of keeping social sciences free from the abuses of reason became the norm.
In The Counter-Revolution of Science, first published in 1952, economist and Nobel Prize Laureate F. A. Hayek dissected both positivism and historicism, carefully crafting a treatise on social scientists and their infatuation with the application of “physical science methods” to nearly every discipline under the sun, especially economics. With this book, Hayek not only analyzed the modern social scientific method and scientists’ lack of vision, but also explained why the popular approach to economics is inappropriate.
Because individuals are ignored by modern economists and other social scientists, collectivism has become the basis for the interpretation of economics as a field of study. Decisions are made without any consideration for context, and politicians end up mirroring mainstream social scientists, using the field of study as a means to plan society from the top down.
Not aware of this disparity, the individual builds his own opinions about economics and economic policies by basing their knowledge solely on what politicians and popular talking heads spew. Oftentimes, assistant professor of enterprise at the University of Manchester Matt McCaffrey wrote in 2015, people are so used to ignoring the low standards when it comes to economic thinking that they “build their opinions … on a knowledge base so small it would seem bizarre in any other discipline.” As expected, only ostracized, or “marginalized” voices like those who are familiar with Menger’s teachings are now speaking against the absurdity. And while they often receive little to no attention, the cultural revolution sparked by the introduction of politicians like former Congressman Ron Paul in the US presidential races helped to put more free market thinkers under the spotlight.
While “the economic way of thinking requires effort,” as author Sheldon Richman noted recently, it does so not because economics is hard, but because economics as a social science has been hijacked by thinkers who, for generations, continue to treat men as automatons.
As Bettina Bien Greaves so eloquently put in 1981, while all science “starts with classification, … social sciences deal with the actions of men. … Men think. They have different values, varied goals and many purposes. Men choose among alternatives. They act purposively. Their actions cannot be classified without reference to their subjective (personal) ideas, values and goals. The results of their actions cannot be quantified, measured or predicted in advance.”
In other words, “economics is hard” because we continue to look at the mob for policy ideas, unfortunately, mobs don’t know what economics is.
21 min agoAlice Salles
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