I am two days away from finally sending the manuscript of the 2nd edition of my Free Market Economics off to the publisher. What do academics do when they aren’t teaching? This, at least, is what one of them has done. But for interest and comment, I am putting the following up which I have just finished writing not five minutes ago. It will be at the very start of the book, right after the preface which I will get to as soon as I finish this section on the definitions.
And I hope you all have as much fun on this long weekend as I hope to have myself.
Before venturing into the full text before you, it is useful to have a few definitions in your mind. The language of economics is entirely made up of words that have ordinary meanings in everyday life. But these words, when they cross over into economics, suddenly take on very specific meanings that can cause someone to lose the thread during an economic discussion. We therefore provide a series of definitions of the specialised words used in the text. Having at least a preliminary grasp of these words and their more technical meaning will also in itself provide a grounding in the nature of the economic theory you will meet in the rest of the book.
Economics often looks easy because everyone already thinks they understand what’s going on in an economy without even having to study. Not true at all. For an economist it is painful to hear the mistakes that those who have not studied economics to at least a reasonable depth constantly make. But there are also major differences in the conclusions different economists reach and these are often at a very deep level that no lay person could possibly resolve.
This text will teach you everything you will find in studying economics in a normal, usual way. But it also provides a second perspective that has been taken from the economic theories that were dominant during the nineteenth century. But unlike with the natural sciences, economic theory does not progress to higher plains and then remain there. Economic theory is infused with the hopes and wishes of policy makers and of those who study the subject who are predisposed to some particular point of view. People just wish the world was one way when the way things are turn out to be something else again, and their wishes cause them to accept economic theories that are not properly grounded in the way the world actually is.
The definitions found here are already pointing in a particular direction. The very first definition is “entrepreneur”. These are the people who run our businesses and often, if they are successful, become very wealthy as a result. As this book will explain, entrepreneurially-managed firms are the foundation for wealth and prosperity for an entire community but also for personal freedom and independence from government. Economic attitudes are often determined by one’s reactions to entrepreneurs running our firms. Some people don’t agree that we should allow people to run firms any way they like as long as they follow the law. Some people think that governments should run our businesses or at least our major businesses. Or if they don’t run them should have a major say in what they do.
These are, of course, philosophical and political issues that are absolutely part of economics when thought about in the widest sense, but are not part of what gets taught at the introductory level when starting out on economic theory. Yet this is the foundational point. Economics, as we teach it and learn it today, assumes that most of what is produced is produced by businesses independent of governments and are run by entrepreneurs for a profit. These businesses sell goods and services on a market and these goods and services are bought by consumers with money they have for the most part earned by providing either their own labour or some other input into the production of some other good or service. How this process works in detail is what the study of economic theory is about.