QUESTION: CURT: WHAT IS YOUR DEFINITION OF ‘ECONOMICS’?”
—“Hi Curt…I can relate to your comments. Perhaps you mentioned it and I missed it, but what in your definition of “Economics”. Is it sociological? A physical science? Something else?”—Lee Roesner
Great question. Thanks.
I think, that the scope of the term Economics is an interesting question, because we can discuss the etymological, normative, technical, and ‘necessary’ properties of the discipline. And by ‘necessary’, those properties that distinguish the discipline from other fields of inquiry.
If we look at the etymology, the term evolved from running the household, then the nation, then an abstract discipline that studies the behavior mankind’s production, distribution and trade, chiefly by studying demonstrated preferences recorded as monetary transactions.
If we look at how it is practiced, I think that today it is practiced as a social science, and that accusations of ‘economic imperialism’ in social science are probably justified: that economics has evolved into the dominant social science, and that experimental psychology and cognitive science, together have evolved as the dominant individual science. This appears to be the current state of affairs, where experimental psychology and cognitive science focus on our biases and limits, while economics focuses on the effect of those behaviors in the aggregate. And I think that the people in both disciplines expect to meet in the middle with a theory of mankind. (The problem is, that this merely justifies intervention – how to fool people.)
Now, I tend to look at disciplines by necessary properties, and I view economics as the study of institutional (both formal and informal) means by which we facilitate human cooperation in pursuit of prosperity. This is traditionally called political economy.
So the problem is that if we study it as how we can manipulate man’s biases, I think that is immoral on objective grounds, because it violates the principle of voluntary exchange (imposition of costs). Whereas if we study it as political economy, then we retain the moral constraint that all exchanges must be voluntary. We don’t try to fool people, we try to create transparency – to reduce friction, not to fool them that risk is lower than it appears.
This is why I try to stay on message with the statement “Every forced involuntary transfer is a lost opportunity for mutually beneficial exchange.” Because I prefer that economics be constructed and performed as an analysis of moral and voluntary cooperation in the western tradition, rather than an immoral and involuntary analysis in the eastern tradition. And also, because I agree with the Austrian theory of the business cycle: that all attempts to cushion the rate of reorganization of the economy, merely exacerbate the problem by funding the existing (exhausted) order.
So, I define economics as the study of morality: the study of the means of human cooperation in pursuit of the production of informal and formal institutions that assist us in cooperating. And as such I see law – the capture of normative constraints on involuntary transfer – as a subset of economics. And in practice I see the purpose of economics as little more than the justification of common, polycentric, organically evolved, law.
And I see economics as dependent upon experimental psychology, and cognitive science for the study of man’s actions. This is because these disciplines have proven extremely fruitful in exposing the numerous and extensive limitations to human reason.
I think this framing of the disciplines and the scope of the terms, is difficult to argue with – honestly that is.
Thanks for the great question.
The Propertarian Institute