Compos Mentis

Dismal. Dismal, indeed.

I've just returned from my economics class with a new realization about what I'm actually learning there. I had previously labored under the impression that economics can predict and describe human behavior in terms of decisions regarding utility. By utility I mean that what people want to do; with some goods, their utility is in aiding our survival, but in other goods their utility is in abetting our pleasure. The first rule of economics has always been: people want to do things. They want to survive, certainly, but they also want to be happy, they want to have possesions, they want to help other people. Economics is purportedly able to predict and describe these behaviors, albeit it is only a statistical description. This means that they can only say what the tendency of people, corporations, and nations is in a given situation, usually using graphs. If I've learned anything in that class, it's that economists love to make graphs.
All of this is fine. I won't go into the problems involved in using statistics to predict behavior. Economists are aware of this weakness in their discipline, and the weakness of trying to find the 'right' economic decision. The most important thing I have gotten out of that class so far is that nothing is free. There are consequences for everything, and every action you take requires a trade-off. Economists say, "If the trade-off is beneficial to a person's overall utility, then people will do it." But sometimes there are consequences that we cannot predict, and that we did not intend. This is what happens when nations become single minded in scope; their efforts against a given enemy, without regard to everyone else involved, will likely spawn negative (for that nation) unintended consequences.
But I have regressed from the weakness of economics as a predictive science. The problem is that people's values change, and that change is complex and unpredictable. Also, the change is often upon mainstream society before anyone realized it. Let me give you an economics example. There is a school of thought that says that finding out any new information regarding the stock market is useless, because once the news hits, the market has already adjusted for that new information.
So, when economists put forth a new theory that is supposed to describe an aspect of human behavior, that behavior has already been part of society, and may already be passing out into obscurity.
The practical upshot of all this is that, if you're a policymaker, you will not be able to find an economic system that is perfect for everything. Remember the rule: there are consequences for anything and everything. However, there may be some policies which have been tried in the past to aid something. If that something needs fixing, then fix it. But don't be so in love with a system because it matches, say, your personal beliefs that it starts to grow stagnant. Look at the overuse of Keynesian economics that led to recessions in the late 70's; look at the overuse of Laissez Faire capitalism that Marx so harshly (and accurately!) analyzed a century and a half or so ago. This is why I'm an economic pragmatist: do whatever works in order to fix whatever is wrong today.
I guess I see the discipline of economics as a useful tautology. It is certainly not a science, but it can be used to see what economic activity people are doing right now. It's a figure which represents the real world, but only approximately.
But now I have to go buy some dinner. I feel like Chinese food.
"Economics is extremely useful as a form of employment for economists."
John Kenneth Galbraith

posted by Emmett @ 15:58