As we survey the damage done by politics, pitting one half of Amerca against the other in a fight over the allocation of what the economy produces, it is instructive to switch attention to another field: economics. His studies in the Austrian school of economics led economist Sanford Ikeda to identify four categories in the teaching of economics: Truth And Light; Beauty And Awe; Hope: and Compassion. Peter J. Boettke summarizes them in his book, The Four Pillars Of Economic Understanding.
Truth And Light
Scarcity is a basic concept in economics. No-one in the world can have everything they want. Boettke writes:
There is certain shock value when you are first taught this idea and the notion that in our world we are constantly confronted with trade-offs.
Learning economics is learning about the consistent application of opportunity cost reasoning to all human affairs. This is where economics brings truth and light, piercing through the fog to make sense of all human endeavors. Trade-offs represent the logic and the underlying governing dynamics of the world around us.
Beauty And Awe
Adam Smith, in The Wealth Of Nations, asks us to contemplate that we depend for our very survival on the co-operation of a great multitude of individuals, whom we will never meet or have the opportunity to make friends with. Therefore we can not rely on their benevolence to help us. We must appeal to their “self-love” as Smith put it. They help us only if doing so helps themselves.
The economy is a system in which individuals generate knowledge, communicate it and utilize it in a complex web of interrelationships and interactions among economic actors near and far. It’s a marvel, as F.A. Hayek put it. Or as Boettke summarizes:
Prices guide us, profits lure us, losses discipline us in our decisions, and property rights provide the institutional infrastructure required for all this to take place.
It’s important for us to appreciate the spontaneous order of the market, which arises through independent but interrelated decision-making. There is beauty and awe in the mundane.
Economics teaches us that, through the expansion of trade, refinements in the division of labor and the division of knowledge, technological innovations, and adoption of the rules of the economic game that cultivates these developments, humanity was able to escape crushing poverty and raise standards of living all over the planet. Economics teaches us hope in the betterment of the human condition.
Entrepreneurs in the private sector are the economic actors who constantly seek mutual gains for them and their customers, are constantly on the lookout for new technologies to increase productivity or lower costs, and to improve the delivery to consumers of new and better goods and services, thereby better satisfying consumer needs. Hope is in the form of improved living conditions that result from entrepreneurs betting on ideas and bringing those ideas to market.
Economics teaches – and demonstrates – that economic progress doesn’t result in gains only for the wealthy, but lifts the least advantaged from their previously precarious situation through material betterment. The goal is to help all economic actors, and economists examine the logic of choice, the structure of incentives and the flow of knowledge to assess and improve the ability of the system to produce the desired results. Economics teaches us great compassion for the least fortunate and focuses energy on institutional remedies to open up opportunities and eradicate barriers. Economic theories co-evolved with the institutions of private property, freedom and the rule of law. Economics recognizes the rights of all.
The critics of capitalism often claim that markets corrupt our morals. The opposite is the case. Economic society provides the foundation for more learning and improvements in our social relationships with one another.
The Austrian school of economics shines a bright light to illuminate the true subject of the field: the flourishing of human beings and the structure of societies that allow for experimentation, innovation and the emergence of the social order that is possible only via individual liberty.