Economics For Dummies

Lee Friday

We want more jobs. We want a healthy economy. We want economic growth. When it comes to the economy, everyone seems to be in agreement. Curiously though, everyone also seems content to delegate decision-making power for these matters to the government. Surely, the government has our best interests at heart. And we know the government can draw on the expertise of numerous trained economists. After all, the subject matter of economics is much too complicated for us mere mortals to comprehend.

With a bit of effort you can, and should, acquire some knowledge of basic economic principles. This will enable you to perceive the economic fallacies used to justify most government legislation and policy-making. If you commit a few hours each week to reading the right books, that will be enough (my suggested reading list to follow). “But wouldn’t I need a university degree to know all this stuff”? You only need a university degree to know all the stuff most economists think they know. You do not need a degree to know the right stuff.

The typical university – largely State influenced – inculcates in its economics students a doctrine completely indecipherable to others. Degrees are awarded after students have successfully completed a course of study which includes various convoluted theories, infinite amounts of arcane jargon, and numerous graphs and equations, all of which allow them to accurately predict nothing. Many of these graduates accept jobs with governments, central banks, commercial banks, universities, and mainstream media outlets. These positions provide them with a platform which they use to support government policy, and make policy recommendations. So long as they continue to espouse what they ‘learned’ in school, their careers will be lucrative. But most of them lack an understanding of basic economic theories, and their minds have been so warped by the intellectual garbage they were fed that it would be near impossible for them to attain such knowledge. As author Nathan Lewis wrote:

A rocket scientist with an interest in economics once mentioned that monetary theory is more difficult than rocket science. . . . Actually, monetary theory could be grasped by a dedicated student in less than a year, which is about nine years less than the time required for rocket science – unless, of course, that student already has an advanced degree in economics, in which case it may take a lifetime, if he or she is lucky. [1]

I like to refer to economists as either good economists or bad economists. Most fall into the latter category – Paul Krugman, a columnist with the New York Times, is a good example. All the complicated, indecipherable stuff they absorbed in school continues to seep out of their mouths non-stop throughout their entire careers. The intended effect is achieved – the general citizenry bows to their perceived expertise. Thus, complexity is used to convince the masses of the ongoing need for the State’s paternal guidance, and the bad economists serve as the State’s intellectuals, the so-called experts.

A good economist explains how the world works. A bad economist tells you how they want it to work. A good economist knows every action is followed by a reaction, and is often able to trace, explain, and  predict, the consequences of a given action. Conversely, a bad economist stresses the merits of a particular action but fails to acknowledge the consequences.

Henry Hazlitt was one of the good economists. In his popular book Economics in One Lesson, he wrote that “the whole of economics can be reduced to a single lesson, and that lesson can be reduced to a single sentence:

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group, but for all groups.”

That is a good summation by Hazlitt, but maybe we can simplify it further. When considering any action, or policy, or proposal, just ask yourself “Who wins, and who loses?” If you read the right books, you will  figure out the answers, and you will discover that common sense explains just about everything.

My suggested reading list is largely based on the teachings of the Austrian school of economics. Austrian economics is growing in popularity, despite being ignored by governments and disparaged by the bad economists. By and large the Austrian economists warned of the U.S. housing bubble which precipitated the economic crisis in 2008. How many of the 15,000 so-called professional (bad) economists saw the crisis coming? Maybe a dozen.

Austrian economists today follow in the footsteps of Ludwig von Mises, one of the top two economists of the twentieth century. In his magnum opus, Mises wrote:

Economics . . . is the philosophy of human life and action . . . It is the pith of civilization and of man’s human existence.

Whether we like it or not, it is a fact that economics cannot remain an esoteric branch of knowledge accessible only to small groups of scholars and specialists. Economics deals with society’s fundamental problems; it concerns everyone and belongs to all. It is the main and proper study of every citizen.

There is no means by which anyone can evade his personal responsibility. Whoever neglects to examine to the best of his abilities all the problems involved voluntarily surrenders his birthright to a self-appointed elite of supermen. In such vital matters, blind reliance upon “experts” and uncritical acceptance of popular catchwords and prejudices is tantamount to the abandonment of self-determination and to yielding to other people’s domination.[2]

If more citizens heed the prescient words of Mises, we may be able to implement permanent, peaceful solutions to the current and ongoing global economic turmoil.

If you read several books from the following list, you will no longer be an economics dummy (unlike all of those bad economists who will still be ‘economics dummies’). None of these books are textbooks, and all of them are suitable for a beginner or intermediate student (there are some excellent advanced textbooks which I could recommend, but you do not need these to develop a sound understanding of important economic principles). All books are available through Amazon, and some of them through the Mises Institute’s bookstore. Free PDFs are available for the four books marked with an asterisk.

  1. I, Pencil, Leonard E. Read (essay) *

2) The Concise Guide to Economics, Jim Cox *

3) How an Economy Grows and why it Crashes, Peter Schiff and Andrew Schiff

4) Economics in One Lesson, Henry Hazlitt *

5) How Capitalism Saved America, Thomas J. DiLorenzo

6) Economics for Real People, Gene Callahan *

7) Meltdown, Thomas E. Woods Jr.

8) Free Market Revolution, Yaron Brook and Don Watkins

9) Books for Children: 5 yrs. old – Teenagers

Additionally, I invite you to read the series of essays on this site (see top navigation menu), covering the five topics listed below. There is a logical sequencing of this material, in terms of concepts established, then referenced in subsequent essays. Therefore, I recommend reading the essays in the following order:

  • Division of Labour
  • Money
  • Capitalism
  • Recessions
  • Police, Courts, and Prisons

[1] Nathan Lewis GOLD The Once and Future Money (John Wiley & Sons, Inc., 2007) p xvi

[2] Ludwig von Mises Human Action, A Treatise on Economics (Ludwig von Mises Institute, 1998) pp 874 – 75

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