Economist's Notebook: On Economics

I had never encountered this quote before I read it in Greg Mankiw's New York Times Op-Ed this past sunday.  It is from Keynes:

“The theory of economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique for thinking, which helps the possessor to draw correct conclusions.”

I think this is about as perfect a statement on economics as there can be.  I often describe economics as simply a system of logic - a precise way to think about how the world is organized.  In another article in the same Times, Nobelist Tom Sargent referred to a former TA who called economics 'organized common sense,' which is also a good description as long as the emphasis is on the 'organized.'

I like economics because it allows me to see connections clearly, understand society better and be able to be precise and clear when I think about economic challenges and potential solutions.  In fact it was the frustration of living and studying in India as a junior in college that really cemented this in my mind: all around were examples of exceptional poverty and economic malaise and all of the discussions about the cause of the problems were notional and poorly focused.  I wanted answers, or lacking that, a precise way to think about the problems.  Economics gave me just that, and I now spend my life trying to find answers.

But the discipline of economics does not promote capitalism, nor any particular political philosophy.  You can be as liberal as Krugman or as conservative as Friedman and still understand that economics allows us to understand markets clearly - both the benefits and the drawbacks - and reasonable people can draw very different conclusions about the way society should be organized around them.  This is a strength, not a weakness of the discipline: we are looking for facts, not considered opinion.  

What you shouldn't be is an advocate for any economic structure without understanding neo-classical economics.  Which is why, frankly, I think the bulk of the heterodox folks, who have established a separate and parallel discipline, have it wrong.  You have to base your advocacy for non-market based economic systems on a reasonable critique of market outcomes based on neo-classical economics. By dismissing the core of economic thought and attacking straw men caricatures of the same you are not even competing in the marketplace of ideas, but relegating yourself to the fringe.

I say this because if the Occupy movement wants to argue that the current system is flawed and needs fundamental reform, they should study hard in principles of economics rather than walk out and dismiss it out of hand.  There is plenty there to serve as the foundation of a progressive critique of the current system. And there is plenty there to serve as a conservative rebuke as well.  Such is the beauty and utility of economics.