Economics Without Tears?!

It is certainly neither accidental nor irrelevant that economics was dubbed “the dismal science” by Thomas Carlyle in the 19th century. The term was intended then to be derogatory, as an inversion of the phrase “gay science” which meant “life enhancing knowledge.” In all events, ‘dismal’ implies ‘gloom and depression’ and, sadly, today economic discussion tends far too often to move in that direction. In fact, there remains a long-running debate about whether economics is a science at all.

That said, economics is now more real and important than ever, but simultaneously it also seems to be more opaque than ever.

When I was a child 75 years ago I had a book entitled Reading Without Tears, which I loved and still credit with my lifelong passion for reading. Perhaps a book today called Economics Without Tears might make the subject more accessible to more people. It certainly could not hurt.

A real problem is that far too few people in modern society have any real idea of what experts are talking about when they start talking about the all-important subject today, the economy, in ecospeak terms. And, that includes our brilliant, law professor, experienced President who mainly speaks soundly and wisely, but often not understandably, to the public about vital economics issues — issues which underlie the policies he proposes to fix the economy and create jobs. And, if they fail to understand his language, often they fail to understand his arguments and have a hard time supporting his ideas and goals.

Sometimes it verges on the embarrassing to test that hypothesis. For example, start with yourself: can you simply, quickly and easily explain the difference between ‘fiscal’ and ‘monetary’ policy? That question, put to a random but educated collection of acquaintances, yielded only one person out of about 20 who answered affirmatively, and his answer was only about 75 percent correct.

Actually, the answer is really pretty simple and straightforward:

  • fiscal policy is about taxes and government expenditure;
  • monetary policy is about interest rates and availability of money and the Federal Reserve Bank.

People who deal with the subject every day appear to assume that everyone understands and then rarely speak in anything other than ecospeak. There is nothing wrong with people who do not know ecospeak, but there is something the matter with our system that keeps them in the dark.

The big problem with the public’s (which surely includes most of the Congress) incomprehension of economic discussions is that, as a democratic society, we are doomed to have to live with economic policy making that requires actual public involvement and support, which today often springs out of serious distortions and misunderstandings of reality.

One way of thinking about economics is to think of it as beginning with a language that creates a kind of shorthand notational system for recording and describing societal/human behavior into terms that can be measured, tracked and influenced by various factors to create better conditions for all who are touched by economic activity, which is just about everybody.

As an illustration, for example, in the mid 20th century, one of that period’s first and great conglomerate builders and managers was a British-born accountant who was the driving force behind a then very successful giant company. He was known to devour endless pounds of heavy statistical reports on every nook and cranny of his businesses in order to put his operating executives on the rack to defend their quarterly reports.

Asked once what he learned from all that data, he said, “All that data sounds and looks to me the way music and ballet scores must appear to musicians and dancers. The difference is that I see trucks backing up to warehouses, machines churning out products, customers in stores and offices as well as endless everyday activities which add up to ordinary economic life. It is the real life stories of what is happening in my companies. That enables me to understand and manage such a wide range of businesses and their managers. The data is the shorthand of business and finance.”

What he said, of course, was absolutely right (and still is) but, surprisingly, relatively few people ever get to the point of recognizing what he meant. Most financial analysts and business experts become mesmerized by the data in and of itself and often draw vital conclusions from trend lines and even random discontinuities simply from the data by itself. For example, data spread sheets like Excel and others make data dance to assumptions as they are changed and projections are accordingly modified interactively for years ahead with an appearance of precision that too often deludes people into stupefying and mistaken beliefs.

It is very useful, when properly utilized, to size the effect of changing assumptions in economic and financial assumptions both public and private. But people have to be very careful to recognize the limitations of such exercises on decision making. That is where having an understanding of a common economic language becomes so important in both business and public policy circles.

The same manager above was often accused by his executives of being a tyrant. His retort was uniformly, “I m not a tyrant. The facts are the tyrant!” Again, he was absolutely right. The same thing applies today with the national economy. The politicians argue endlessly about the meaning of the facts, when the facts are blaring, like a neon sign, clear signals of danger: “FIX ME.” But, because there is so much noise in the system of ecospeak, the real messages get drowned out and misunderstood. And, nothing gets done, until it is often too late to head off serious problems.

There is consistent talk in business circles about the need to support better education in this country to be sure we have an educated workforce that can compete in the world economy. That is absolutely correct. And there is another equally crucial reason to support such education, and that is to ensure a population at large that is economically literate. Perhaps a start in that direction would be for the Department of Education to sponsor a competition to write an Economics Without Tears with several levels of sophistication to enhance nationwide understanding of enough economics to help push the political process to make more informed and intelligent choices for the country.

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