Review: How to Think about the Economy

“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.” —Murray N. Rothbard.

Economics, like physics, is in essence a simple science. It has a subject matter that covers a very wide scope—in physics, the scope is the whole universe, and in economics, all human choices. And just as there are many natural laws that govern the physical universe, there are laws that govern human interactions. Often the physical laws can be stated in simple mathematical formulas, and likewise, economic laws can be stated in words that act as “formulae” or simply rules. Of course, the task of the physicist is to understand what the symbols of the formula mean, what is the domain of their applicability, and what is the range of things they can explain. In Per Bylund’s primer, we are offered that for the field of economics: An exposition of the science in a way that clarifies the social laws that govern our interactions.

Of course, the first task of any scientist is to define his field of inquiry. And though many scientists bicker about what their field actually studies, they have to agree upon certain ideas and themes that they are mostly concerned with. From the first page, we are introduced to economics as a discipline that studies “human actions and interactions” (p. 15) and stresses the Austrian inclination toward methodological individualism in treating individuals as the smallest acting units in an economy. This, as opposed to considering economics as a science of how to organize the production and distribution of goods, or the focus on the scarcity of resources as we see in Lionel Robbins’ approach. The author was very careful to define the terms to be used in the rest of the book in a clear manner that many modern economics or political philosophy best sellers can learn from (for recent books that leave some of the main economic ideas in their books vague, see for instance Ha-Joon Chang’s 23 Things They Don’t Tell You About Capitalism, John Perkins’ The New Confessions of an Economic Hit Man, Mark Fisher’s Capitalist Realism, and Christopher Ryan’s Civilized to Death).

The first three chapters cover the general subject to be inspected focusing on the individuals partaking in the production and consumption of the goods and services, how the scientific theory is organized in the Austrian tradition, and the main interactions people can engage in, given an economy. The second part of the book goes over the machinery of the market while considering the psychological and sociological drives that regulate people and their community as a whole, and the third and final part looks at where and when the system can fail following Hayek’s and Bastiat’s terminologies, but really in a way mostly reminiscent of Rothbard’s Man, Economy, and State.

The book is very simple and succinct. It is even easier to read than Henry Hazlitt’s Economics in One Lesson or Thomas Sowell’s Basic Economics, both of which are mainstream economics books that stress this commonsense introduction to the main topics, and present economics principles in a rational and rigorous manner. Professor Bylund’s book is not intended as a textbook, and it does not cover the theory as one might see in Thomas Taylor’s Introduction to Austrian Economics, but it does justice to its name in providing a good primer. What the book aims at is a basic understanding for the largest possible audience. (In a funny marketing ploy, signed copies of the book for Klaus Schwab, Robert Reich, and Alexandria Ocasio Cortez were posted on the Mises Institute Twitter account.1) Other than a bibliography to aid the new reader into Austrian economics, the book offers much even for those who have read the books by Taylor, Sowell, and Hazlitt mentioned above, since it is more dedicated to the entrepreneurial spirit and with a focus on production. These ideas are in constant need of being refreshed, since we have become politically polarized in a very critical way that it’s hard to look at the basic principles behind why we support what we do, and can only point out what problems await the plans of our opponents, and why they are economically infeasible. In such a charged atmosphere, we forget to consider Hayek’s reminder: “We must first explain how an economy can possibly work right before we can meaningfully ask what might go wrong.”

In a private communication with the author, I’ve asked him what might Austrian economics be called if it hadn’t acquired this name. And he responded with “causal-realist economics.” This gives us a great intuition about what such a book will provide, and it starts with:

The economics of old sought to uncover how the world works. It showed, or even proved, that there is a natural order to it. (p. 15)

It ends with:

Nothing about the market economy is magic…. [T]he market is quite real and mundane. It functions in a certain and knowable way; it has a specific behavior, which emerges from and arises out of people’s actions and interactions. (p. 131)

The most important takeaway from the book is to come to know what metaphysical rules regulate our behavior, and what language Austrian economists use to attribute causes and understand social phenomena. This is done to show that this “dismal science” is a legitimate effort to study the consequences of our choices.

Unlike the German historical school which does not recognize immutable laws governing societies and human action and interaction, or the Keynesian economics of today whose “propensity to imitate as closely as possible the procedures of the brilliantly successful physical sciences,” as Hayek put it, has shifted the focus on economics on experimentation instead of logical deduction, the book, following Hoppe and Rothbard, explains how we can revive this tradition in a noncompromising manner. For that, it has done its job spectacularly.

  • 1. I believe one was also written for Richard Wolff, but I could not locate it.