Recently, a friend of mine, who has long earned his living as an economist, decided to tackle the problem of economic illusions. It is no secret that economic science, on one hand, and the masses along with journalists and experts, on the other, understand economics completely differently. The masses, along with experts and journalists, tend to rely on “obvious observations” (like that “more money is better than less,” which anyone can verify), while economists, ideally, believe that this is nevertheless not quite so.
In his Facebook group, my friend began a discussion of these very illusions that ought to be described and dispelled so that people understand who is fooling whom. In general, it is a noble cause, and I wish him all success in it. What I want to tell you about, however, is one very instructive and telling moment that occurred during the discussion. The discussion was about the very foundations of economics, namely value and exchange. Economic science tells us that value is subjective. That is, no one except the subject themselves can judge how valuable a particular thing is to them. Accordingly, exchange always increases value for those who enter into it, because the very reason for exchange is the different valuation of its participants—what each party gives away is valued less than what they receive. In general, exchange is one of the main mechanisms of what can be called the growth of “social wealth,” since people constantly have to work at increasing the value of their product in the eyes of other people.
To describe cases when exchange did not meet expectations—when, in the opinion of one of the parties, the value received did not exceed the value of what was given—there exists the category of error. In general, it is your business how you proceed if you find out that “this is not a Mexican jerboa and you’ve been sold much more valuable fur,” but for “the market,” that is, for other people and the entire system of relations and institutions surrounding exchange and production, only your action matters. Grumbling, mental anguish, and a rich inner life are studied by another science—psychology. Economics, however, kicks in only when action occurs. For other people, your dissatisfaction has no significance whatsoever, and, generally speaking, it is simply unverifiable. It has no influence on their behavior or on subsequent events. Only your action has influence, and it alone sends the “market” a signal about an error. If, for example, you always used to buy Mexican jerboas and stopped doing so after seeing the seller’s dishonesty—this is a signal for the market. Your story about this in a cozy blog or beating up the aforementioned producer will be exactly the same kind of signal. But if you simply grumble unhappily under your breath and continue buying the damn jerboas, from the point of view of economics, nothing happens. The grumbling remains grumbling, and the jerboa seller continues to “profit” from you.
In general, in the course of discussing these points, it was discovered (by the way, not for the first time) that many people who discuss and probably write and publish something on economic topics are not ready to agree with the foundations of their own science. “What do you mean—” they say—“someone is suffering mentally from Mexican jerboas, and we should not intervene? What about Manhattan Island and the beads? Exchange must be honest and fair.” Objections that only an individual assigns value to a particular object (which does not exclude, of course, friendly advice) were not accepted. Answers to the question of how to make exchange “honest and fair” (that is, to exclude errors) could not be obtained. In general, the discussion reached a deadlock. And then one of the participants put everything in its place. He expressed the idea that if one agrees that only individuals assign value to things, that only they compare values based on their own beliefs, and that no one else can do this for them, then economists are simply not needed.
I think that this opinion, expressed precisely by a supporter of “objective” value, is very valuable, if you will forgive the pun, because it explains a lot. Today’s economists are such shamans and oracles for the boss. They are engaged not in the study of exchange, but in the organization of what interferes with it: taxes, duties, monopolistic currency, licenses, quotas, government budgets, and trade balances… The function of an economist is to determine how to correctly organize all this economy of interference. The scales at which he works are staggering and certainly flatter his ego. An economist readily discusses what, in his opinion, entire countries and nations should do, what they are actually doing, and how it will all affect you and me. Moreover, reasoning at such scales can be done both by a Nobel laureate and by a seemingly unfortunate student. And then you come along and say that value is subjective—and all this soul-warming beauty crumbles right before your eyes. After all, in the very foundations of economic science there is simply no place for either the boss, whose caring hand directs workers toward happiness, nor, all the more so, for economists pointing the direction for that hand. If you bought it—you value the acquired higher than what you gave. If you made a mistake—you don’t buy anymore, you tell others, you go beat someone up. Where is the boss here, where are the economists?
Of course, with the disappearance of bosses, economists will not go anywhere. They will engage in consulting for citizens and enterprises. They will finally do science. But this position of fate-deciders will disappear. And, it seems, the understanding of this circumstance greatly affects the views of many of them.