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Reflecting on Russ’s most-recent post, along with yesterday’s Quotation of the Day (by Hayek on the proper aims of economics), leads me to this conclusion: economics’s chief role is to bust myths.  Economists are at their best when they are myth busters.  No other function that economists can possibly serve, as economists, comes close to myth busting in importance – importance both for promoting better public understanding of the way economies work and for improving public policies.  (The latter happy outcome is achieved overwhelmingly through whatever bad public policies economic understanding might help to quash or, at least, modify.)

Economics does not allow for specific predictions; the social world is far too complicated for that.  In real-world economies ceteris is too seldom paribus (and even when it is, this situation is often impossible to detect).  The closest that sound economics allows us to get to justifiable predictive statements is that it improves our ability to make sensible “if-then” statements – statements that, using sound judgment, improve our ability to understand the complex world we inhabit.

But as a myth-busting tool, economics is unsurpassed.  Perhaps no other science or system of thought has ever busted as many myths as has economics.  Yet also: perhaps no other myth-busting enterprise fails as consistently as does economics at convincing large number of people that the myths it busts are in fact busted myths.  Acceptance of these myths is constantly reinforced by a combination of (1) innocent economic ignorance (fed, in part, by the above-mentioned great complexity of modern society), (2) not-so-innocent powerful political forces, and (3) a regrettable failure among economists, especially over the past half-century, to engage the public using plain language.

Here’s a list of just some general, widely believed myths that sound economics has busted:

– the myth that the amount of wealth in the world is fixed (and, hence, that Jones’s gains from trade must have come at the expense of Smith or some Smiths);

– the myth that a higher population of human beings means lower average living standards for human beings;

– the myth that poverty (rather than wealth) has causes;

– the myth that Jones’s successful pursuit of self-interest necessarily harms – or, at the very least, does nothing to help – Smith or some Smiths;

– the myth that mutually consensual trade that occurs across political borders differs in some essential way from mutually consensual trade that occurs within political borders;

– the myth that international trade is a “competition” among nations;

– the myth that prices are arbitrary obstacles established by sellers, and which can be forcibly lowered in order to benefit buyers at the expense only of sellers; (put differently, the myth that a government policy of forcing the prices of goods and services down makes goods and services more accessible and less costly for buyers);

– the myth that wages are arbitrary stipends granted by employers to workers, and which can be forcibly raised in order to benefit sellers of labor (workers) either at no one’s expense or at the expense only of those who purchase labor either directly or indirectly;

– the myth that profits are an unjust and socially pointless (or even harmful) theft of property or value by entrepreneurs and business owners from workers, other suppliers, and consumers;

– the myth that the only, or even the main, costs that people endure in a modern economy are costs expressed in money prices;

– the myth that sustained inflations are caused by rising prices or by higher costs;

– the myth that money is wealth and that wealth is money;

– the myth that there are only a fixed number of jobs for humans to profitably perform;

– the myth that government officials generally have, relative to actors in private-property markets, superior incentives and knowledge to act to promote widespread economic prosperity;

– the myth that raising tax rates necessarily increases government revenues (and, likewise, that lowering tax rates necessarily decreases government revenues);

– the myth that violations of the rights of private-property owners harm only, or even just mostly, those people whose private-property rights are violated;

– the myth that workable, productive, and sustainable complex social orders must be the result of human design (or that human design can improve the workability, productivity, and sustainability of complex social orders).

The above list is only partial.  Each mentions a proposition that is widely believed by non-economists but that most (or, in some cases, at least many) economists correctly understand to be false.


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