My colleague Pete Boettke discusses the meaning and importance of sound economic reasoning. Here’s Pete’s conclusion:
Sound economic reasoning teaches many things, but perhaps the most important lesson is about the importance of the instituitonal framework for marshalling the self-interest of individuals into publicly desirable outcomes by enabling the judicous negotiation of trade-offs so that the gains from trade and the gains from innovation are realized. Some instituitonal environments promote productive specialization and peaceful social cooperation among individuals, others don’t. Economic reasoning is essentially discursive reasoning in comparative institutional analysis. As you prepare yourself for the fall term of teaching in a contemporary context full of examples of popular fallacies perpetuated by politicians and pundits, and methodological blind-spots causing professional apathy on the one hand, and professional malpractice on the other, think of Hayek’s examples of “clear-sighted economists” such as Cannan and Mises (and Hayek and Friedman; and Buchanan and Coase; and Rothbard and Stringham/Leeson/Skarbek; and Higgs and Coyne/Powell, etc.). Economists can, and must, do a lot of common good by teaching to their students and the public the results that the science has to offer that emanate from sound economic reasoning about scarcity, self-interest, and spontaneous order. Ruthless consistency in the economic way of thinking is not a vice, it is a virtue.