… is from pages 70-71 of Frank Knight’s 1944 paper “Economics, Political Science, and Education“:
A rational, common-sense approach to the subject matter of political economy begins with the fact that the economic problem for any individual or group is to make the best of what it has, through comparison, selection, and combination of competing alternative ends and procedures in the use of means. All practical problems arise out of conflicts of interest and differences of opinion. Economic problems arise out of conflicts due to limitation of resources in relation to total needs or wants, and these are social problems when the ends are those of diferent people. But human nature is clearly averse to such rational comparison. Men seize on particular aims or courses of action and treat them as absolute. Our whole moral tradition, sanctioned by our religious tradition, stresses disdain for the counting of costs. It is anti-intellectual; it teaches that if the heart is right, in relation to emotional or transcendental values, all concrete problems will be solved automatically. In this connection, it is the failure of men’s professions to carry over into practical thinking and action which saves them from disaster instead of causing it. Even “scientific” economics has slowly and as yet imperfectly come around to the comparative point of view, to recognition that the only cost which makes sense is a sacrificed alternative.
DBx: Yes.
It is commonplace, to the point of being tiresome, for people who don’t understand economics to pompously criticize economists for being narrowly obsessed with “efficiency.” These people mistake what economists mean by “efficiency.”
By “efficiency” we don’t mean that all that matters for human beings – or all that should matter for human beings – is money or that which is or can be exchanged for money. Nor do we mean that human beings do or should care only about material or sensual gratifications. Instead, we mean the achievement of one’s ends, whatever these ends might be, in that way that enables as many as possible other human ends also to be achieved.
The saintly caregiver who uses more resources (including time) than is necessary to provide some level of comfort to Mr. Jones is thereby rendered unable to supply that same level of comfort to Ms. Smith and Mr. Williams. In this case the saintly caregiver acts no less inefficiently than she would act were she instead a sybarite who carelessly overpays for a bottle of champagne.
Sound economic analysis is an analytical acid that, when properly applied, dissolves the dreams and hopes of those who refuse to acknowledge that resources are scarce and that different adults have different, often conflicting ends (as well as different assessments about the best ways to achieve any set of given ends). And so the many social reformers – left, center, and right – who offer up their utopian schemes are unhappy when economists expose their schemes as unworkable. But rather than rationally reassess the practicality of their schemes, these social reformers typically resort to issuing ignorant criticisms of economics and of economists – such as ‘economists are obsessed with efficiency, unaware that real human beings care about more than efficiency. Pay no attention to economists.’
Such statements about economics and economists are uninformed. Yet they are widely believed.
