Economics is not common sense

[Hygro]

One of the biggest mistakes we make as a culture is assuming economics is common sense.

Economics is very rational, but we humans are not. We are kind of rational. And we intuit a lot of smart, important, valuable things that are not rational, just... correct.

Many of these intuited things go directly against rational economics. One reason why is because while the precepts for economics have been adjusted and adjusted again to match reality well enough that using the discipline improves our system of capitalism and democracy, they are still made up meta-physical philosophical ideas that have no fundamental basis in nature.

In other words, economics is unnatural. And as humans, we are a product of nature.


Watch or take any introductory course of economics at a top university that attracts the very exact kind of person who has the very exact kind of brain to learn the mateial quickly and correctly, and you will see as students have trouble grasping the simplest of economic concepts...--

--...But only for a while. Eventually they get them, and once they do, there's always the same thought:

"duh, this was so obvious"

But it's not. It's simple, but it requires you to rewire you human brain into a slightly more machine-human brain. Because we are apt to say "duh, that was obvious" we lose sight of the fact that the discipline is actually incredibly counter intuitive and goes against common sense.

A consequence of that is that in our society, we eventually learn some basic tenants of economics that stick with us: price is defined by supply and demand which in turn is defined by scarcity of resources and preferences (on both sides) and some similar stuff. And it seems so obvious in hindsight, and comes to use so fully through society that the following happens:


We assume we are economic thinkers and therefore understand economics and can use casual or even sometimes thoughtful (but not specifically educated) to make economic judgments. This leads to an overconfidence problem. While experts in issues of economy make sense and the wisdom of the crowd will beat experts in the long haul, this overconfidence in our ability to think our untrained selves are economically literate leads to bad policy choices and misinforms our value judgments.


Here's what I ask, please take an introductory micro and introductory macro economics course somewhere at a college or university near your before thinking you know enough. Combine THAT knowledge with your experiences, other education, values, common sense, intuition, intelligence, AND understanding there is even MORE to know. Afterword, even with just introductory micro and macro, you will know enough economics to vote with economic intelligence on top of your other intelligence. And you will know economics better than 85%+ of the country.

 

[dirtyparrot]

I'm currently following lectures from a couple courses from Stanford on their youtube channel. You could probably find equally good stuff from a university channel on youtube without the need to spend a dime.

 

[Hygro]

For sure. My university offers similar. But it's much better to be held accountable by homework---makes a huuuuge difference in this kind of thing. It's like trying to learn math without doing problems.

 

[Formaldehyde]

I tried taking an intro economics class in college. I have never been so bored in my entire life. There was nothing which was covered that didn't seem to be trivial and common sense, so I dropped it at mid term.

 

[Crezth]

I tried taking an intro economics class in college. I have never been so bored in my entire life. There was nothing which was covered that didn't seem to be trivial and common sense, so I dropped it at mid term.

Uggh.

 

[Integral]

Economics is chock-full of lessons that seem like common sense, but only after you've learned them.

 

[Gatsby]

Here's what I ask, please take an introductory micro and introductory macro economics course somewhere at a college or university near your before thinking you know enough. Combine THAT knowledge with your experiences, other education, values, common sense, intuition, intelligence, AND understanding there is even MORE to know. Afterword, even with just introductory micro and macro, you will know enough economics to vote with economic intelligence on top of your other intelligence. And you will know economics better than 85%+ of the country.

Having studied economics myself, I doubt that knowing economics better than even 95% of the country would mean a person had enough economic knowledge to vote with economic intelligence. In my experience, economics is often taught (at least in the English-speaking world) with a great deal of ideological bias, particularly neoclassical and neoliberal bias. Students are inculcated with this bias right from the beginning of introductory economics courses.

It might initially seem like a good idea to have more people do introductory economics courses, but as the saying goes "a little bit of knowledge is a dangerous thing", particularly when that knowledge is contaminated by ideological agendas. Moreover, having more people study introductory economics could lead to a widespread loss of confidence, both in our economic managers and in the discipline of economics itself.

 

[Skwink]

I wish the government would pass legislation to make economics a more arithmetic based program.

 

[ParkCungHee]

Is it good enough to just give up and say "Economics is a field I do not have an understanding of, and leave to the experts?"

 

[Masada]

Economics is chock-full of lessons that seem like common sense, but only after you've learned them.

I'd argue the opposite is also true. A lot of economics is counter-intuitive.

 

[Hehehe]

I thought that the basis of economics is the idea that humans are rational? Something which, by the way, is not true (and here they actually have the balls to call it "the science of economics").

So, if I understand you right, you are saying that we should learn basic economics then combine that with common sense? Experts combine top notch knowledge with common sense (I hope at least) and yet the results are less than impressive.

 

[Hygro]

some comments here I will get to after I get sleep (4am)

I wish the government would pass legislation to make economics a more arithmetic based program.

Why is this? Economics is precisely to be about concept and theory, not an accounting game.

I'd argue the opposite is also true. A lot of economics is counter-intuitive.

That was Integrals point...

 

[tokala]

In my experience, economics is often taught (at least in the English-speaking world) with a great deal of ideological bias, particularly neoclassical and neoliberal bias. Students are inculcated with this bias right from the beginning of introductory economics courses.

Any books you could suggest for someone trying to get a grip on economics "without the hot air"?

 

[Masada]

That was Integrals point...

You might be right. I misread.

 

[Borachio]

Economics is definitely not common sense. It's completely nonsensical. Chasing your own tail round and round in self-defeating circles all the time. And why, if it makes sense do we have bubbles? Tell me please.

And why if it makes sense, to we get no consensus from economists?

As for reading introductory texts, I remember some economist telling me that is the last thing I should do, since they're all rubbish, according to him.

(The opinions expressed in this post are entirely the author's own and may bear no resemblance to reality. In fact, very likely not.)

 

[Cutlass]

I thought that the basis of economics is the idea that humans are rational? Something which, by the way, is not true (and here they actually have the balls to call it "the science of economics").

So, if I understand you right, you are saying that we should learn basic economics then combine that with common sense? Experts combine top notch knowledge with common sense (I hope at least) and yet the results are less than impressive.

People are not rational. It is thinking that they are that makes the worst errors in economics. Say rather that they are self interested, respond to incentives, and have imperfect information. Some choices are rational. But it is an exceptionally rare person who makes only rational choices. And blatant irrationality is everywhere.

 

[History_Buff]

Economics is very rational, but we humans are not. We are kind of rational. And we intuit a lot of smart, important, valuable things that are not rational, just... correct

We humans also tend to intuit a lot of things that are definitely not correct. A lot of it only because we're terrible at statistics.

 

[azzaman333]

The most memorable thing from when I did microeconomics was that the majority of people doing finance related university courses are idiots. It was actually quite concerning how bad some of them were.

 

[Hygro]

Having studied economics myself, I doubt that knowing economics better than even 95% of the country would mean a person had enough economic knowledge to vote with economic intelligence. In my experience, economics is often taught (at least in the English-speaking world) with a great deal of ideological bias, particularly neoclassical and neoliberal bias. Students are inculcated with this bias right from the beginning of introductory economics courses.

It might initially seem like a good idea to have more people do introductory economics courses, but as the saying goes "a little bit of knowledge is a dangerous thing", particularly when that knowledge is contaminated by ideological agendas. Moreover, having more people study introductory economics could lead to a widespread loss of confidence, both in our economic managers and in the discipline of economics itself.

The "little bit of knowledge" is exactly the already existing problem. People growing up in western society already learn a little bit here and there, and think they understand. When you formally learn, you can also learn how little you know. Intro models and concepts are actually pretty decent too. Economics by definition is neoclassical. I study the critiques of the discipline as my major, but ultimately neoclassical economics is the only game that can quant anything. Keynes was a neoclassicalist himself....

There are problems with intro level neoclassical thinking--that more competition is inherently optimal is one of the main ones. Another is not appreciating black swans. Wars, the likelihood and time of any given financial crises, big government interference, pandemics, cultural factors that greatly shift value judgments, are all outside the scope of economics. If we keep that in mind, then we can keep economics in its place--a useful tool to understand policy decisions from one very important angle among many.

I thought that the basis of economics is the idea that humans are rational? Something which, by the way, is not true (and here they actually have the balls to call it "the science of economics").

So, if I understand you right, you are saying that we should learn basic economics then combine that with common sense? Experts combine top notch knowledge with common sense (I hope at least) and yet the results are less than impressive.

Responding this this and to @Park. Humans as rational economic-maximizing individuals has been dropped subject by subject for the past 80 years. But you have my premise correct. Experts are useful in this field, but very fallible. Mainly we need to harness crowd wisdom correctly anyway, which economics teaches us anyway (rolleyes@economists who forget this). If we can get a smarter crowd, that's an improvement. While crowd wisdom benefits from not everyone knowing and thinking the same thing, so many people are using the same broken understanding of economics it's not really adding to group think so much as its fixing the mistakes in existing group think.

Any books you could suggest for someone trying to get a grip on economics "without the hot air"?

It is precisely the lack of "hot air" that has the most insidious ideological spin. In the end, if I lefty remembers their understanding of social justice afterward, and if a righty learns about externalities, public goods, and how recessions work, how debt works, and a couple other things, it's a win for everyone.

Economics is definitely not common sense. It's completely nonsensical. Chasing your own tail round and round in self-defeating circles all the time. And why, if it makes sense do we have bubbles? Tell me please.

And why if it makes sense, to we get no consensus from economists?

As for reading introductory texts, I remember some economist telling me that is the last thing I should do, since they're all rubbish, according to him.

(The opinions expressed in this post are entirely the author's own and may bear no resemblance to reality. In fact, very likely not.)

We get a lot of consensus from economists. There are a couple of debates. Mostly there's so much to remember and there's so many angles to study, they forget or haven't learned the most salient models and syntheseze for that topic

There's a lot of reasons it makes sense we have bubbles. There are many causes. You could read a macro book on the business cycle, or you could read an investment/finance narrative that takes place within one. Either way it should be clear. For the latter, I recommend "more money than god" which is a great book on hedge funds. I thought hedge funds were boring until I read that (it got me back into studying econ, for one).


***
@History Buff (because I started this reply before you post, you are exactly correct. Intuition fails us, often in stats areas. Also in economics areas. That's why I suggest we learn this stuff formally.


***
edit: @Azzaman: yes. Finance is useful if you want to do some finance. But finance does not teach economics itself, at all. One of the biggest failures of the 1990s and 2000s was how we started replacing economists with finance experts for government policy chairs. Having worked with finance people, there were only a couple in an office of about 100 very successful and effective financial managers that I'd trust with economics. Whomp being one of them for sure. But that's because he studies a lot more than just finance.

 

[warpus]

I don't think there is such a thing as "common sense" to begin with.

I mean, there is a set of things that seem like common sense, but a lot of truths about reality run contrary to what you "would expect" if you had an armchair understanding or worse of the subject at hand.

I really think you'll find examples of this phenomenon in almost any discipline and all walks of life really