Opinion & Commentary
The human face of economics
Would I advise one of my children to become an economist? Surely there are more honourable professions I would in turn be advised by my friends? What is it about economics that stirs the passions so negatively? What have economists done to deserve such a slew of slurs from people with no particular expertise in the discipline, but certainly no shortage of opinions?
The late and great Bert Kelly (the Modest Member to AFR readers) was one of the few Australians able to explain often quite complex economic ideas in ways that most people could understand. Typically he used humour, and sometimes satire. Importantly, Bert’s writings were infused with a moral dimension that seems to have escaped from the discussion of economics these days.
In one of Bert’s more memorable phrases, he questioned the ability of bureaucrats to foresee better than the market and asked if it was so ‘why are there not more bureaucrats sitting in the South of France with their feet in a bucket of champagne’.
Perhaps if they did make the trip there, maybe on a study tour to discover the secrets of French viticulture, they might have encountered the ghost of Frederic Bastiat whose 200th birthday is today.
'Like Kelly, Bastiat was a genius at explaining economics for the everyman'.
Like Bert he was a master of storytelling and much of his genius lay in using parables to illustrate the points he was making.
His use of satire is exemplified in his ‘Petition of the Candlemakers’ where the makers of candles and other artificial lighting petitioned the Chamber of Deputies to ‘shut off as much as possible all access to natural light, and thereby create a need for artificial light’ and thus encouraging all manner of industry in France. ‘If France consumes more tallow, there will have to be more cattle and sheep, and, consequently, we shall see an increase in cleared fields, meat, wool, leather, and especially manure, the basis of all agricultural wealth.’
He went on to describe the increase in shipping (because of whale oil), the manufacture of candelabra and chandeliers. What a bonus to French society.
Of course it’s all a fiction and he explains this type of fallacy with his notion of ‘The Seen and the Unseen’. ‘In the economic sphere an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them. There is only one difference between a bad economist and a good one; the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.’
Often he would use the reductio ad absurdum to highlight the foolishness of many arguments for special interest pleading. A classic is his notion of the negative railroad.
What is that you might ask? Well, in describing the building of a railroad from Paris to Madrid, some argued for a break at Bordeaux. It would thus be profitable for boatmen, porters, shopkeepers, hoteliers and others it was argued. That’s fine says Bastiat, but why not at all intermediate points? The more breaks, the more the shopkeepers and the rest would gain.
In fact, why not a railroad consisting of nothing but gaps? A ‘negative’ railroad would lead to riches for all and I imagine that’s what the burghers of Mittagong, Goulburn and everywhere else on a very fast train route to Melbourne might once have hoped.
So to the modern day Australian economist mystified by the public’s lack of understanding of his profession, perhaps it’s time to take some lessons from Bastiat. As Bastiat himself said, ‘The worst thing that can happen to a good cause is, not to be skilfully attacked, but to be ineptly defended.’ There’s no doubt that’s a pretty good description of what has happened to economics and the economics profession.
'Economics is the study of human action and should be explained that way. My children might even begin to enjoy the wonders of economic analysis'.
Oh, and for our bureaucrat on the study tour of France’s vineyards, one of Bastiat’s greatest speeches was aimed at reducing the tax on wine as an illustration of the need for a general tax reduction and a shift to proportional taxation.
Unfortunately, the speech failed, thus affirming another of his aphorisms that ‘the state is the great fiction where everybody tries to live at the expense of everyone else’, and proving that free lunches were as popular then as today.
It’s time, then, for the economists to get out and explain the cost of the free lunch. Our prosperity and our liberty depend on it.
About the Author:
Greg Lindsay is the executive director of the Centre for Independent Studies in Sydney.
