In the mouths of politicians, journalists, and experts, things usually sound like this: certain economists invent certain theories, which politicians then try to implement in practice. We constantly hear and read about certain “recipes” that are tried here or there, and which, as a rule, don’t work. These recipes are also called “reforms.” In plain terms: people live their lives, bother no one, and then economists come along and start changing everything based on their contrived theories. More often than not, this doesn’t lead to anything good.
In reality, although all sorts of recipes and reforms do indeed exist, the essence of economics is completely different. Economics, as a science, emerged quite recently—at the end of the 18th century. The task that economists set for themselves was to explain the principles of people’s economic activity. This activity and its principles existed perfectly well for God knows how long, without anyone giving them a second thought. One might say they appeared when exchange appeared, that is, in completely immemorial times.
In other words, the task of economics was to explain what exists, not to invent what doesn’t. Well, you might ask, where did all these reforms and recipes come from then? When economics emerged, state regulation was already flourishing in full force. Having begun to study “the origin of the wealth of nations,” economists discovered that most of what politicians do when regulating economic activity is not only useless but harmful. They create obstacles for that very “wealth of nations” that Adam Smith wrote about. So initially, the situation looked like “economists against politicians.” Then some economists figured out that the state is a constant source of income, and began working for it, trying to prove that some benefit from it still exists. The recipes and reforms we deal with are mainly the work of these economists. They believe that if you tweak something here and there, replace some obstacles with others, it will somehow be better.
This struggle has generated such confusion in concepts and meanings that any real content has long been lost behind them. Take, for example, the term “market economy.” What does it mean? Absolutely nothing. Any economy is market-based, since goods and services are exchanged in it. And if it is non-market—then it is simply not an economy at all, but something else entirely. What actually matters is the level of obstacles in the economy created by the state and other agents. But the term “market economy” says nothing about this.
In general, the situation now in economics textbooks mirrors what it was in Soviet universities, where they “covered” political economy. When it came to the political economy of capitalism, everything was clear. But as soon as it touched on the political economy of socialism, fog and shamanic dances with tambourines began. The same thing now. When textbooks explain where things come from, everything is clear—but as soon as “macroeconomics” appears, some nonsense starts. This isn’t surprising. Essentially, textbooks try to combine two different economies—one studies the behavior of people, and the other studies the behavior of abstractions.
It is these abstractions that politicians and the media feed us. To make decisions and forecasts, though, you need to understand where things come from and what is actually happening. This is exactly what we will do.