Saturday, 5 January 2013

Why you should not major in Economics

It is a matter of no small pride to my family that I graduated from one of the world's best universities with a degree in Mathematics and Economics and with good grades. Yet, I have apologised, at least twice, to my father for spending rather a lot of his money studying economics in university, and today I regard the entire field of economics as taught in universities as a colossal waste of time and money. This is why I advise any young person looking to study economics in university to do something else instead- preferably a hard science like Physics or an art like Pure Mathematics. (Yes, I do regard mathematics as an art.)

Let me be very clear here. It is critical that every intelligent young person, and in particular every intelligent independent-thinking young man, understand economics. As Ludwig von Mises pointed out, economics is not an isolated science. It is part of a much wider body of knowledge and inquiry known as praxeology- the study of human action. Economics is indeed the study of human action taken under the universal condition of scarcity. All of us have needs, wants, and desires that are numerous in nature, yet we are all constrained by the resources available to us in satisfying them.

When viewed in this light, the understanding of economics becomes the understanding of Man's relationships with his fellows. And in this regard, it is no different from Game. When one understands that Man acts, and that Man acts in order to better his current situation, economics suddenly becomes a very easy discipline to understand. The following axioms resolve themselves almost immediately, purely through logical deduction from first principles:
  1. Man's desires are not objective, they are subjective.
  2. Thus, attempting to measure or mathematically calculate the utility that Man derives from any good or service is immediately rendered futile.
  3. There can be no consumption without production.
  4. The ability to defer consumption is determined individually, based on individual circumstances.
  5. When Man satisfies his most immediate needs and is able to defer consumption to some present point, he is able to concern himself with increasing his production through better skills, better resources, and better technologies.
  6. Deferred consumption (or savings) thus creates a positive feedback effect, in which Man's time-preference rate falls over time. This rate is denoted most simply by "the rate of interest" in the economy.
  7. No man can do everything, but by concentrating on that which he does best and trading with others for that which he does poorly, Man reduces his time preference rate further.
  8. Through this process of Man's actions, he progresses from barbarity to civilisation by deferring present consumption to provide for future consumption and comfort.
Several other truths follow just as immediately. For one, any outside attempt to interfere with this process, whether through income taxation, meddling with interest rates, deliberate planned inflation, currency manipulation, or harmful regulation, will damage or even destroy this civilising process. For another, attempting to measure and manage an economy is simply futile. There is not even the least bit of use in trying, because each man's decisions are his own to make, and each man decides based on his own desires. There is no mathematical model capable to dealing with the thousands of individual decisions each of us make, from the mundane to the critical, every day; and if an individual's actions cannot be easily modelled, then it is the definition of futility to attempt to do so with an aggregation of individuals.

Given such basic and timeless truths, which free-thinking men should understand in their very bones, why then is economics such a useless discipline in universities?

Because nothing that I have written above will be taught to you in most university courses on Economics. I am not joking when I say that I had to learn all of this myself. I'm still learning it, and what strikes me with ever greater force as I grow older is how little I really knew in university, and how little I was really taught.

Here is what you will typically learn in the most demanding university courses in economics- and remember, I was taught by some of the "best" economists in the world:
  • Economics will be taught to you as though it is a "scientific discipline", relying on "evidence" to test "hypotheses". It is nothing of the sort. Economics in its essence relies on logical deduction from established axioms, against which the evidence must then be weighed.
  • You will surely be taught "general equilibrium theory". This is a theory developed by the French political economist Leon Walras which proves, through some really rather clever and elegant maths, that if the economy in general is in equilibrium, then any specific market must also be in equilibrium. The problem with this, of course, is that an economy in perfect equilibrium isn't really an economy at all- it's completely static, in utter defiance of what logic and real-world experience tell us. Yet, this will be taught to you as the Holy Grail of economics- to render all markets unto perfect competition and perfect equilibrium.
  • At some point you will be introduced to the division between microeconomics and macroeconomics, as if they are two different disciplines. Most economists agree on the basic principles of microeconomics (i.e. actions of individuals or firms or even entire markets), but there is sharp division over the principles of macroeconomics (i.e. national or global economics). The reality is that there is no division. The principles of economics are universal.
  • You will be taught about Aggregate Supply and Aggregate Demand, as if one can somehow magically take millions or billions of decisions and preferences and products and services and lump them together to represent the entire economy.
  • Macroeconomic management will be taught to you as though one can manage an entire country using complex mathematical formulae, such as the (in)famous Y = C + I + G + X - M formulation. You will be taught that government spending has some sort of magical "multiplier" effect, in which the multiplier is calculated as a function of people's "propensity to save". Never mind Henry Hazlitt's beautiful and brutal demolition of the entire concept of mathematics in economics, or Robert Barro's research showing that multiplier effects are rather less than 1.
  • You will be taught that unrestricted free trade is an absolute good, using the method first pioneered by David Ricardo of simplifying everything down to a two-party case and freezing everything but one variable. (This, incidentally, is one of the very few areas where I break with libertarian orthodoxy; you can have nation-states or you can have unrestricted free trade, but you cannot have both.) Vox Day's dissection of this argument makes for very compelling reading.
  • At the same time, you will be taught that government powers to tax and spend and print money are undoubtedly good things, even though they tend to harm the very free trade that was promoted as being an unlimited boon just a few lectures previously! Yes, college economics really is that self-contradictory.
Bottom line: your degree will be a gigantic waste of time and money, and you will spend the rest of your life paying for the mistakes of others if you don't sit up and do something about undoing that damage.

So, what is a free-thinking man to do? Well, for starters, don't apply for an undergraduate degree in economics. It's just that simple. Then, if you really wish to learn about economics, if you wish to develop and codify your ability to think rationally about the great and small economic problems that face you, the very first place you should start is the Mises Institute. There is no shortage of outstanding economic analysis and commentary to be found from real free-market thinkers throughout the Manosphere and teh interwebz. My reading list includes:
  • Vox Day
  • Steve Keen's Debtwatch
  • Karl Denninger's Market Ticker
  • Captain Capitalism
  • Mish's Global Economics
  • ZeroHedge
... and many more. Knowledge and the resulting power that comes from it is out there. All you need to do is find it.


  1. I assume you've read debunking economics by Steve Keen? That book is essentially a giant fuck you to the neoclassical school of thought.

    As far as I know, economics is actually a pretty good degree, so as long as you use it to get all the math's material out of it, and stay away from shit like indifference curves. One lad I know got into a statistics and actuary course from economics and is doing pretty ok for himself. but the actual content is fucking horseshit.

    True economics is Austrian with Steve Keen/Financial Instability Hypothesis material thrown in. Likin the blog, added yous to the roll.

  2. Thanks, I appreciate the feedback. Oddly enough, I haven't yet read Steve Keen's book, even though various writes like Mish, William Anderson, and Vox Day have given it good reviews. It's on my (long) list of future readings in economics.

    Economics isn't necessarily a bad degree to study from a career perspective; it's just that, as you say, the content that one is taught is nonsense. Your point about indifference curves brings back some hilarious memories of convex R2->R exponential functions maximised with respect to a linear constraint, as if discrete and individual human actions can be distilled into continuous and differentiable functions!

    The books that really changed my views on economics were Rethinking the Great Depression by Gene Smiley, FDR's Folly by Jim Powell, and of course Vox Day's most excellent The Return of the Great Depression. I highly recommend the latter in particular, his writing style is very readable and yet very precise.

    Regarding Minsky's Financial Instability Hypothesis, the problem that I have with it is that it's a logical contradiction in terms. It argues essentially that instability arises from stability, which is a logical contradiction. The hypothesis fails to truly explain what causes the instability in the first place- debasement of the currency, or its modern equivalent, central banking. Frank Shostak's article provides a very good examination and refutation of the hypothesis itself:


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