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Economics

Economics explained in everyday language

Much of my work at the Adam Smith Institute involves economic policy and analysis.  The ASI itself is active in the field of economic policy, and often publishes research that lends backing to free market initiatives favouring incentives, opportunity and enterprise.

I take the view that economics is not, and never can be, a science like physics or astronomy.  Economics deals with people, and people are self-motivated in ways that atoms and stars are not.  Furthermore, unlike atoms and stars, they can change their minds and start to behave differently.  Academic economists make assumptions and simplify in order to use mathematical equations, but in doing so they often lose touch with the real world.  In that real world there is no perfect competition, no perfect information, no equilibrium prices, and supply never meets demand.

The real world of economic activity is constantly in motion, with people doing the best they can to improve their lot, based on such information as they can access, and using judgement that is neither fully rational nor perfect.  Economics is essentially a process.  It is about the ways that people have developed for dealing with each other and for allocating resources.

The Austrian School of economics, to my mind, gives the best account of this process, and I favour the somewhat empirical approach of F A Hayek over the more deductive style of Ludwig von Mises, close though the two are.  This reflects my own rather empirical approach.  (I joke about M-Pirie-cism, but the word comes from Sextus Empiricus).  The point is that economics is a learning experience, like life itself, and any account of it should find space for that.

Some talk of ‘market failure’, assuming that this justifies government intervention.  At the ASI we look at Public Choice Theory and talk of government failure.  We do not assume that legislators know best, not that they are motivated only by a selfless desire to do good for others.  We take the view that they often do more harm than good, and that their intervention often inhibits economic activity.  Nor do we assume that legislators know more about people and care more about them than people themselves do.

I wrote “Economics Made Simple” to explain in ordinary language, free of jargon and equations, how economics works, how it derives from human behaviour, and how intuitive it is.  From time to time I post short YouTube videos on the ASI channel to put across some of the points about economics in an informal, lively, and (I hope!) user-friendly way.

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