1. Preface to the preliminaries

The situation of economics as it is practiced today is a little bit curious and contradictory, and we will try in this Preliminaries chapter to untangle things a bit.
Economics as a science has a problem with public perception. It is hard to ignore this fact and difficult to say that public opinion is wrong. We will discuss this topic several times throughout this website.

Nevertheless, there is a remarkable phenomenon regarding economics. If we watch a talk show on television or follow a debate on the internet; for instance, when people comment on a newspaper article, they argue using the same economic concepts as economists. Some believe that full employment can be achieved by lowering wages. Others think that wages should rise in order to increase demand. Some think that interest rates should be lowered in order to increase investments while others think that interest rates should be higher to avoid further debts. Some believe that a positive trade balance is good because it creates jobs, others think that this is bad because it increases the debt of importing countries and so on.

It might be true that economists are a herd of idiots. The author, who graduated in economics, would totally agree. However, then we would have to admit that, concerning economics, the whole world is a herd of idiots. Perhaps this is true as well but is not a comfortable situation because every issue publicly discussed (the insurance system, public schooling, demographic change, the financing of research and development and so on) are, at least in part, economic problems. To say that the whole world are idiots concerning economic issues is not really helpful if we work on the premise that in a democracy people must be able to make rational choices.

People trust economists blindly when it comes to saving money. They bring their money to banks or other institutional investors such as insurance companies and hope that they will know best what to do with the money. It seems that this deep confidence, as profound as it is foolish, cannot be destroyed. If people lose their money in a crisis, something that happens every few years, they start doing the same things once the thunder and storms have passed.

Something similar happens with politics. People complain about politicians and politics, and a very large part of society has even stopped complaining and stopped voting. In almost every country the most important political party is the party of the non-voters. Moreover, people have a tendency to demand a solution from politicians every time a problem, even a very small one, arises.

There are therefore many things to discuss. We must talk about changes in the supply side of information because a democratic decision process clearly works better the better people are informed. However, we also have to talk about the demand side: why is it that people do not ask for more information?

To tackle this topic we have to discuss the mass media, its business concepts and goals. Nowadays everybody knows that the internet has brought many possibilities, and the power of the mass media is staggering. This is good news. We can talk about how this process can be accelerated.

We need to talk as well about the methodological paradigm of economics. This sounds complicated, but it seems that this is part of the problem. Mathematical modeling tends to abstract from everything that cannot be modelled mathematically. There is the risk that the relevant parameters are not taken into account in the model. Needless to say, we cannot analyse something if we exclude the relevant parameters from our analyses. That is like a doctor seeking to make a diagnosis who excludes the existence of virus and bacteria in his examination. It simply does not work.

Of course, we will have to talk about more practical issues as well. People who study economics want to get a job. The main question, therefore, is what must change in the academic system to improve their chances of getting one?

Moreover, all this must be done in an easy to understand and straightforward way.

return to the top of the page ...

1. Preface to the preliminaries

What can be said at all can be said clearly, and what we cannot talk about we must pass over in silence.