I have given myself the unruly task of reading George Stigler's The Theory of Price and Murray Rothbard's Man, Economy, and State, while going through the king of modern
grad school economics, Mas-Colell, for class.
This route is probably not advised. However, due to my specific interests and the way I learn, I am taking it. Maybe I will have a post about this strategy and why I am trying it, I am not sure how this will turn out, but I will keep everyone updated.
Reading through Stigler (you might recognize his mug from my silly banner), one passage captures why I love economics.
The goal of the economist is not merely to train a new generation in his arcane mystery: it is to understand this economic world in which we live and the other ones which a thousand reformers of every description are imploring and haranguing us to adopt. This is an important and honorable goal.
It is not an easy goal, however, or one which is now or ever will be fully achieved. A modern economic system is of extraordinary complexity. Imagine a three-dimensional jigsaw puzzle, consisting of roughly 100 million parts. Some parts touch against, let us say, 1,000 other parts. (This is each family deals at one time or another with that many employers, banks, retail stores, domestic servants, and so on.) Other parts touch- let us be conservative- 50,000 other parts (firms that sell to retailers and buy from other firms and hire laborers and so on). It would be enough of a task to fit these 100 million pieces together, but the real difficulties have yet to be mentioned. The pieces change shape quite often- a family has twins; a firm does the next best things and invents a new product. The economist has the interesting task of predicting (in the aggregate) each of these movements.- Stigler, George J. The Theory of Price. 1987. 7-8
There are a few reasons why I enjoy this quote.
- The opening paragraph summarizes why I study economics. While it is a consumer good (enjoyable for it's own sake), economics provides the best framework for understanding the world outside of my mind. It shows what reforms are possible and which are not. As my blog's title and subtitle try to convey, it is a guide for understanding human action in all of its elements.
- Human action and the ensuing order are extremely difficult to understand and even harder to predict. Anyone who says otherwise is trying to sell you something. The quote illustrates the complexity. Stigler goes on to explain the elements that make the problem exponentially more difficult because the rules are constantly changing, whether by law or legislation or custom. It is a terrifying area to study, but beautiful once these complexities and patterns are understood. For an example of what I mean, watch this video.
- Economists predict the future. For good or ill, they predict. Sometimes they are called upon from non-economists and other times they freely offer. A debate exists within economics of whether prediction is key to economic models or outside of pure economic theory. No matter which side of that debate one takes, it is clear that economists are not good at predicting the future with any precision. But the question is, who is better? As Thomas Sowell would say, compared to what? I'm putting my faith (unfortunately that is the right word) with good economists. Tell a physicist to predict when an earthquake will happen and then imagine that the individual particles had free will.
Stigler writes as well as any economist. I, thankfully, discovered him early in my studies. If the rest of The Theory of Price is as good as the opening, it will be a fun trip.