Crash Course in Economics, Part 1
“A nogid kumt op, un an oreman kumt oyf, iz nokh nit glaykh”. Rich man down and poor man up — they’re still not even.”
— Yiddish proverb
In order to solve an equation, we are told, just simplify operations by making certain that what you do to one side of the equation you must do to the other. Simplify and simplify until there are no more operations to do, and voilà, you can go out and play.
Whine about the relevance of Algebra, and the patient answer you’ll get sounds airtight—that mathematics teaches a disciplined way of thinking, or that it’s music and art and a jigsaw puzzle all rolled up into one, or the spectacular, theological, answer of all — gnats and weather and the big-bang answer all rolled up into one: “it explains how things are.” After all, numbers don’t lie. They’re objective; they transcend cultures; they hold in their abstruse code the answer to life’s most vexing questions. It’s all quite simple, really. Just do the math! And show your work.
These explanations were of little solace. The keys to unlock the mysteries of existence all looked alike. Each futile attempt to simplify basic equations or recognize the inherent logic of geometric shapes notched up my anxiety. There were doors everywhere. If, by luck, I managed to open one, others would appear, each one more forbidding than the next.
I rolled through the clichés. Math had seriously “done a number” on me; my mathematics days “were numbered,” my “number was up.” In a feeble attempt to resolve the cognitive dissonance between my simmering resentment of the math “winners”—the “number ones” and by comparison, me—the “zero,” I invented a string of shallow excuses. I convinced myself that those cliquish math boys, or “Algebros” may be able to calculate well, but their lives were unlikely to hold any real value. Mathematics was too aloof and too cold. Mathematics could not come close to what really matters. I even dipped a toe into nonsense conspiracy theories about mathematical brainwashing. Enamored of my own rhetoric, I avoided mathematics entirely, a mistake I was only able to remediate in graduate school where mathematics linked arms with statistics, provided a basis for an argument, and was, well, an indispensable component of rational discourse.
Brains, scientists say, are elastic. By the time I came around to the connection between mathematics and the humanities, I pictured my brain with stretch lines, cellulite, craters. It has been slow going. Arnold Sommerfeld, the German theoretical physicist once said: “Mathematics is like childhood diseases. The younger you get it, the better.”
It is easy to cite studies that affirm our predetermined ideological stance and add a level of legitimacy by peppering our arguments with numbers. It is far more difficult to bridge the chasm between one’s assumptive rhetoric and credible proof, to stop whining, and to bone up.
Those keys are opening doors of curiosity. I have a long way to go to understand the data, not just the ideology, of social change. The correlation between marginalized communities and economic disenfranchisement; between faulty education systems and poor health; between profiling and disproportionate levels of incarceration based upon race; between an inadequate education and self-efficacy, a lack of mobility, and susceptibility to discrimination in hiring and housing. I live in the world of the humanities. Economic analysis is a Rubik’s cube of dynamic insight about about how societies function, how decisions are made, how strategic interactions unfold, how bounded our rationality really is, why inequality is so intractable. Besides, Ernő Rubik was both a sculptor and an architect. But then again, you probably knew that already. I, however, did not.
I plunked down three dollars for N. Gregory Mankiw’s Principles of Economics: Seventh Edition at my local library book sale, and committed myself on the spot to overcoming my mathematical mumps. While not exactly a car chase or a tawdry page turner, the first two chapters convinced me that economics is not just about the world of numbers, but the world in numbers.
“Chapter 1: Ten Principles of Economics” includes: How People Make Decisions, including sub-principles like: People Face Trade-Offs and Rational People Think at the Margin. “Chapter 2: Thinking Like an Economist,” includes The Role of Assumptions, Differences in Scientific Judgments, Differences in Values, and Perception versus Reality—heady, poetic assumptions about how incentives drive innovation and vaguely religious descriptions about how the “invisible hand” of the market can account for those abstruse or unobservable forces that drive demand and supply and market equilibrium.
My autodidactic escapade motivated me to find and humble myself to my classmate Algebros on Facebook. They were gracious and perfectly well adjusted. I quizzed them about concepts I could not grasp. I watched TED Talks by the late Swedish public health physician, professor, and statistician, Hans Rosling. Rosling founded GapMinder to provide an accessible way for the public to visualize and “explore the vast treasure of global statistics” in order to “dismantle misconceptions, and promote a fact-based worldview.” Gapminder simply reported the numbers without the bias of “political, religious or economic affiliations.” Fidel Castro, Al Gore, Mark Zuckerberg, and the World Health Organization sought his advice.
The more I played with interactive tools on the GapMinder site, the more I could picture human activity: the connection between child survival and GDP, the numbers behind haves and have-nots and whether that gap is widening or closing; how industrialism has been both a liberator and an oppressor. Using a washing machine as an example of industrialism as a liberator, Hosling showed with numbers how the washing machine freed women to pursue other endeavors, such as education. He described his mother’s joy when she was able to use one at home. “‘Now Hans, we have loaded the laundry. The machine will make the work. And now we can go to the library.’ Because this is the magic: you load the laundry, and what do you get out of the machine? You get books out of the machines, children’s books. And mother got time to read for me.” Where some economists are accused of looking for the numbers, Rosling looked in the numbers.
With each successive TED Talk, more puzzle pieces took shape. I held back from making sweeping judgments about the state of the world before doing the numbers. I was feeling the burn of discipline and I wanted more. I audited graduate courses, picked up a few mass-market paperbacks and subscribed to a steady stream of podcasts about how we humans are fidgety, fickle, and impulsive. How what we dismissed as unpredictable, aberrant, or irrelevant could settle down into a pattern…and then implode.
I started to worry. I read game theory hypotheticals about what drives us, how willing we are to defer immediate gratification for a bigger reward or play it safe. How much control we think we have over our lives. How much confidence we have in our decisions. Why we may vote against our own best interests or seek affirmation in social media for opinions prepackaged just for us. Heady, important stuff.
In his 2017 Nobel Prize lecture, “From Cashews to the Evolution of Behavioral Economics,” Richard H. Thaler discusses how a nudge one way or the other could have huge implications, and that “understanding human nature can improve the explanatory power of economic theory, and help us devise solutions to public policy problems. In short, we can nudge for good.” Imagine that. Nudges are powerful levers capable of stimulating breathtaking advances in human welfare or undermining our own power to reason. Nudges can set in motion the wisdom of crowds or a mob mentality. Scary stuff, too.
All the other Nobel Prizes are named with one word: Physics, Chemistry, Medicine, Literature, and Peace—except for Economic Sciences. Was this because economics needed a self-esteem boost to sit proudly amongst the others? Established fifty years ago by Sweden’s central bank, the Nobel Prize in Economic Sciences was not stipulated in Alfred Nobel’s will and has, ever since, been attacked for being influenced by—rather than pretending to rise above—the political whim and the imperious power of money. Peter Nobel, the great-grandson of Ludvig Nobel, claimed it provided cover for profiteers, did not honor the family’s name or the intention of the prize (for social good), and represented nothing short of a “PR coup by economists to improve their reputation.”
The Dismal Science
Economics has been called the “dismal science,” so coined in 1848 by the historian Thomas Carlyle, convinced that overpopulation and limited resources will doom and drain humanity. A downer if there ever was one, Carlyle was also an ardent fan of reintroducing slavery in the West Indies, because black men should be “compelled to work as he was fit, and to do the Maker’s will who had constructed him.” Dismal, indeed.
Jokes abound. In one, economists are often wrong: Why did God invent economists? Answer: To make weather forecasters look good. In another, they are too theoretical: A physicist, a chemist, and an economist are stranded on an island, with nothing to eat. A can of soup washes ashore. The physicist says, “Let’s smash the can open with a rock.” The chemist says, “Let’s build a fire and heat the can first.” The economist says, “Let’s assume that we have a can-opener…”
Or they are unrealistic: Three economists (econometricians to be exact) went out hunting and came across a large deer. The first econometrician fired—but missed—by a meter to the left. The second econometrician fired, but also missed by a meter to the right. The third econometrician didn’t fire, but shouted in triumph, “We got it! We got it!”
Or shady: A mathematician, an accountant, and an economist apply for the same job. The interviewer calls in the mathematician and asks “What do two plus two equal?” The mathematician replies “Four.” The interviewer asks “Four, exactly?” The mathematician looks at the interviewer incredulously and says “Yes, four, exactly.” Then the interviewer calls in the accountant and asks the same question. The accountant’s answer is: “On average, four — give or take ten percent, but on average, four.” Finally, the interviewer calls in the economist. Same question. The economist gets up, locks the door, closes the shade, sits down next to the interviewer, and says, “What do you want it to equal”?
Sure, they can be wrong, unrealistic, or shady. But so can we all. Look yourself in the mirror and ask: “Do I base my theories on facts, (given the sheer volume of information, fake news, and bias out there), or do I twist my cherry-picked facts to fit my predetermined theories?” “Am I describing the real world outside my window or the one I want to see and convince others to see, too?”
Do I remain an economics ignoramus? Without question. My knowledge about the Tragedy of the Commons, Keynesian Economics, Marxism, Laissez Faire Capitalism, and Conspicuous Consumption is Wikipedia deep. I could not pick out a Laffer Curve, a Lorenz Curve, or a Phillips Curve in a lineup, but I am intrigued by the somewhat poetic and sweeping names for economic theories: Rational Expectations, Creative Destruction, Dynamic Consistency, Arrow’s Impossibility Theorem, Offsetting Behavior, Moral Hazard.
Next, Part II.
