Some Musings on Economics

As a graduating senior from high school, I was so excited to attend college as an economics major. The issues I was passionate about seemed like they could be fully explained through robust economic theory, accurate data, and by experts who had studied the burgeoning field for nearly a century. As thrilled as I was, I had a few sharp doubts about the world I was entering. I had seen a documentary (it might have been excerpts from ‘Inside Job’) which exposed the gargantuan power of corporations and showed how many monopolistic firms had implanted free-market enthusiasts into academic positions at universities across the nation. These so-called ‘academics’ put free markets above all else; they produced works that delegitimized the role of government regulation in a capitalist society, writing off any level of intervention as an unequivocal determinant of market inefficiencies. As corrupt as these actions seemed, intuitively, these academics’ ideas made logical sense to me. I’d only been exposed to simple supply and demand graphs at the time which clearly showed how features like minimum wage and rent control were bad because they distorted market fundamentals. As an aspiring youth hoping to have a positive impact on society, and having been truly inspired by reading about economic issues that had been tearing at the fabric of American society for decades like inequality and poverty, I was confused as to how we could make life better for those individuals if all the government could do was create inefficiencies in the market. How else should we help those who need it the most? As interesting as economics seemed to me at the time, I had an underlying fear that learning about economics in college would leave me disheartened, unsatisfied, and cynical towards measures that sounded good at a societal level, but were somehow disproven by economics.

As a junior in college who is nearing his final year, I can confidently say that those fears have been allayed. Over the past three years I’ve interacted with professors and professional economists (like Greg Mankiw!) and read studies that show why the economics most people are familiar with at a surface level are in most cases not generalizable, and not explanatory. I’ve taken away a few ideas that have been crucial to my understanding of how economics can help people, and the common misconceptions that shroud the field.

1. Governments can and should play a role in the economy. Every economics education starts off with microeconomics in which you learn a barebones version of how individuals and firms interact in the market. According to introductory micro, government intervention in the economy is bad because it necessarily reduces efficiency: sometimes on the producer side, and sometimes on the consumer side. It’s easy to take this and run with it, but dangerous if not analyzed further. Though I didn’t learn about it in my introductory series, intermediate microeconomics ended with the course titled ‘Market Imperfections’. Finally, we began to poke holes in the overly simplistic supply-demand models that characterize economics. I learned how human behavior is not as predictable as economists would like (big surprise!),how monopolists restrain economies by making decisions that are self-serving and harmful to consumers, and how negative externalities cannot be remedied by free markets. I learned about the importance of public goods like education and medical research that would cease to exist if not somehow supported at least in part through government financing. Through independent reading, I began to understand that it was paradoxical to believe that governments have no role in the economy. Though influenced but not convinced by tenets of modern monetary theory I understood what should be obvious: that the government has a monopoly on money. As such, it has the herculean task of determining important variables like money supply and interest rates, variables that inevitably affect the lives of everyone. There is no economy without the government, and if the welfare of people is a society’s main concern (which it should be), then those aims cannot be attained without some form of government intervention. Though free markets are incredible, productive, and unimaginably miraculous, they must work within a system that allows and promotes equal opportunity and the improvement of its peoples’ welfare.
2. Economists are some of the kindest people I’ve met. Alfred Marshall put it best in his seminal text on the subject, Principles of Economics. This passage is a bit long, but extremely insightful to an outsider of the subject. He wrote:

“The fact is that nearly all the founders of modern economics were men of gentle and sympathetic temper, touched with the enthusiasm of humanity. They cared little for wealth for themselves; they cared much for its wide diffusion among the masses of the people. They opposed antisocial monopolies however powerful. In their several generations they supported the movement against the class legislation which denied to trade unions privileges that were open to associations of employers… They were without exception devoted to the doctrine that the wellbeing of the whole people should be the ultimate goal of all private effort and all public policy. But they were strong in courage and caution; they appeared cold, because they would not assume the responsibility of advocating rapid advances on untried paths, for the safety of which the only guarantees offered were the confident hopes of men whose imaginations were eager, but not steadied by knowledge nor disciplined by hard thought.”

This passage is such a beautiful and humanistic description of what most economists are like. They aren’t cold, calculating, profit-maximizing machines. They couldn’t care less about money themselves, as ironic as that may seem. In most cases, they care about how money can be used as an instrument to make peoples’ lives better. This has been the goal of modern economics for more than a century now. To realize that most economists truly fit this description instilled in me a deep optimism in the field I’d chosen to study.

3. The advent of econometric techniques that allow us to test theory has been game-changing for the field. We aren’t limited anymore by pen and paper; now we can go out into the world, collect data on large scales and use new and developing methods to test our hypotheses. Our guesses about how the world actually works can more effectively be used to create policies that make societies more equitable, knowledgable, and capable.

These are just three out of many observations I’ve noticed over the past few years. They were what first came to mind, and all points that made me confident that economics was the field I’d hoped it to be.

I’m not too sure what people who aren’t economics majors or economists think about the field. Although I suspect many people believe economics to be some funnel through which individuals enter finance and make big bucks working in Wall Street. While this certainly can be the case for many economics majors, the study of economics itself has more to do with understanding how humans interact and make decisions, and at a larger scale, what those decisions mean for societies at large. While the number of sub-fields within economics is vast, I think it’s fair to say that most economists are not cronies that fetishize free markets and desire copious amounts of wealth for themselves at the expense of others. Most economists are sincere, gentle individuals who crave intellectual challenges and believe that economics can truly be a force for societal good. I’m glad I chose to study economics, and I’m grateful for all that I’ve learned during the past few years. I genuinely believe that economics can help explain many of the structural and societal problems we read about online and perhaps even experience in our very own lives. But if that is to remain the case, it’s important for economists and non-economists alike to internalize that people and societies are the primary unit of study from which everything else comes from; not corporations, banks, profits, or abstract numbers that have no discernible connection to either primary unit.

Economics has the potential to do an enormous amount of good for humanity, and it’s exactly what I hope to be a part of someday.