The Politically Incorrect Guide to Economics
Genres: Economics
Book Preface
In the academic world, university economics departments are usually where you will find the most conservatives and the least politically correct foolishness. Understanding even the most elementary economic principles inoculates one against the utopian fantasies of liberals and socialists—such as curing poverty with minimum wage laws (why not make it $1,000 per hour and end poverty once and for all?); controlling inflation with price-control laws (yeah, like Nixon did); enriching the working class by taking more money out of their pockets in taxes; cutting the cost of medical care by giving government bureaucrats a monopoly in its provision; putting the nation’s entire money supply under the control of political appointees in a secret organization (the Fed) that has never been audited; giving politicians legal rights to counterfeit money (“monetary policy”); and so forth. This is why economists are often treated like the skunks at the picnic by liberal and socialist utopians in academe and elsewhere. They point out the obvious.
This general truth is far from universal, however; there are plenty of economics departments at American universities where just about everyone is to the left of a Hillary Clinton or a Barack Obama. Then there are the celebrity economists chosen by the government elites and crony capitalist corporate bureaucrats who are featured on the network television stations and in the New York Times and the Washington Post. Some of them, like Clinton administration labor secretary Robert Reich, are not even economists but lawyers and political hacks.
Most people largely ignore economics because, let’s face it, “the dismal science” (Thomas Carlyle’s name for it) is not quite as simple and easy as watching a TV sitcom or an episode of Wheel of Fortune. Most of what average citizens think they know about the subject comes from brief snippets they see on TV or read in the Times or the Post by celebrity economists such as Paul Krugman, former officials like Robert Reich, or government bond salesmen from some Wall Street bank or hedge fund.
Much of what such people say about economics is politically correct propaganda and pure hokum. Their job is to create what free-market economist Ludwig von Mises called official myths about economics and government. The job of real economists, said Mises, is to unmask some of these myths. That is exactly what this book proposes to do.
Internationally known investor and author Doug Casey forcefully explained how this all works in an essay with the catchy title of “How Economic Witch Doctors Convince Everyone They’re Neurosurgeons.” Most economists, writes Casey, “are political apologists masquerading as economists.” They “prescribe the way they would like the world to work and tailor theories to help politicians demonstrate the virtue and necessity of their quest for more power.”
The field of economics “has been turned into the handmaiden of government in order to give a scientistic justification for things the government… wants to do.” The antidote to this, says Casey, is not to spend hundreds of thousands of dollars on a college degree in economics but to educate yourself. “[E]very person should be his own economist” after undergoing such self-education, he says, repeating the advice of twentieth-century free-market economist Ludwig von Mises.
Given this state of affairs, the main purpose of this book is twofold: first, to explain and criticize many of the false theories that have evolved primarily to prop up government power and enrich the ruling class, not to improve the economy; and second, to help you, the reader, to become your own economist—and hence a better citizen.
The Remnant
There has always been a remnant of economic educators who understood and taught their students about the value of private property, free markets, free trade, and economic freedom—along with the perils and inevitable failures of government interventionism. This “remnant” consists of three basic schools of economic thought whose ideas will be discussed throughout this book: 1) the Austrian School of economics, so named because its founders were from Austria, the best known of whom is the Nobel laureate F. A. Hayek; 2) the Chicago School of free-market economics most associated with another Nobel laureate, Milton Friedman; 3) and the Public Choice School, associated with your author’s graduate school professor and onetime colleague, Nobel laureate James M. Buchanan. This last school of thought, which uses economic theory and methodology to analyze government behavior, is known for its theory of “government failure.”
In today’s crazed world of academic “wokeness,” the new word for political correctness, it is not uncommon for professors who espouse such views to be libeled, slandered, and even chased off campus. Exhibit A is the experience of the college campus speakers’ series administered by the conservative organization Young America’s Foundation, whose speakers have been shouted down, canceled, harassed, disinvited, and threatened. Some universities have even demanded that they spend tens of thousands of dollars for extra “security” should they sponsor a campus lecture by a—horrors!—conservative speaker.
Anything that challenges the politically correct orthodoxy—in economics, and virtually all other fields—is likely attacked by the campus Left, sometimes violently. When yours truly was invited to give a lecture in defense of capitalism and economic freedom at a North Carolina college, I discovered that extra campus police and security guards had been called in, apparently just in case anything was said that the campus Marxists found to be insensitive!
The Socialist Founders of the American Economic Association
Economics as a profession was founded in 1885 by late nineteenth-century versions of today’s politically correct professors. The leaders of the movement were men like Richard T. Ely. Ely was an American who had gone to Germany to pursue graduate studies at a time when German academe had decided to abandon virtually all of the economic theory that had been developed up to that time, from Adam Smith, author of the most famous treatise in economics, The Wealth of Nations, to their own time. In its place they had put a method of studying and researching “economics” that involved using statistics and historical facts in an ad hoc way to essentially crusade for a welfare state, government regulation of business, and socialism. It was called the German Historical School.
So members of the new American Economic Association decided to disavow the traditional methods and theories of economics in order to create a false façade of “science” for their socialistic political preferences. They were well aware that economic logic and common sense invalidated many of their utopian government interventions, so they opted to ignore economic logic and common sense.
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