The Foundation for Economic Education, with the inevitable acronym FEE, aims to “promote new content and distribution techniques for free-market ideas.” Fee has “distilled ‘economic thinking’ into 12 key concepts.”
Let’s pray that the “distribution” fails and these concepts never reach America’s classrooms, because they’re all… well… wrong.
FEE’s words in plaintext, with my rejoinders in italics:
1. Gains from trade: In any economic exchange, freely chosen, both parties benefit–at least in their own minds. This is psychological thinking, not economic thinking. The subtle implication that most transactions are freely chosen by both parties is, well, faulty. Poor people forced to payday loan sharks because no banks do business in their neighborhood? Eating junk food because they live in food deserts? What about trafficked persons forced into prostitution?
2. Subjective value: The value of any good or service is determined by the individual human mind. Again, psychology, a field about which few economists are qualified to speak.
3. Opportunity cost: Nothing is free, and the cost of anything is what you give up to get it. Nonsense. Did you yourself have to invent personal computers or the telephone? No, you got the use of them for free, just for having been born in the 20th or 21st century. Breathing is still free, though surely some corporation is figuring out how to charge you for it.
4. Spontaneous order: Society emerges not from top-down intention or planning but from individuals’ actions that result in unplanned outcomes for the whole. Spontaneous disorder, too.
5. Incentives: Individuals act to maximize their own reward. Tautological fallacy.
6. Comparative advantage: Cooperation between individuals creates value when a seller can produce a given item or service at a lower cost than the buyer would spend to produce it himself. Even elementary economics texts tell us comparative advantage does not require cooperation.
7. Knowledge problem: No one person or group knows enough to plan (and force) social outcomes, because information necessary for social order is distributed among its members and revealed only in human choice. True only in the short term. Distributed information is insufficient for dealing with long term problems like climate change.
8. Seen and Unseen: In addition to the tangible and quantifiable effects, there are quite often invisible costs and unmet opportunities to any action or policy. Let’s not succumb to economic religiosity, bowing down to the Invisible Hand and its prophets, the Wall Street analysts. Economists sure love this invisible stuff. Actually it is the externalities – some visible, some not – that invalidate the simplistic economics advocated by FEE.
9. Rules matter: Institutions influence the decisions individuals make. For example, property rights extend from the reality of scarcity which demands that ownership must be vested in individuals and not a collective. The latter assertion was disproved by the 2009 economics Nobel Laureate Elinor Ostrom. Otherwise, yes, institutions matter. Government intervention can be beneficial, as proven by China overtaking the USA in GNP. See also this essay on the “missionaries” of neoliberalism (Torres 2017).
10. Action is purposeful: Each person makes choices with the intention of improving his or her condition. Except when they’re trying not to let their condition deteriorate. Or when they’re trying to torpedo the condition of a rival.
11. Civil society: Voluntary association permits people of all backgrounds to interact peaceably, create value, cultivate personal character, and build mutual trust. Excuse me, where do you see this happening?
12. Entrepreneurship: Acting on an opportunity to gather underused, misused, or undiscovered resources and ideas to create value for others. These days the “others” are usually the VC investors, not the customers. See my previous blog, "The Sad State of Entrepreneurship in America," which delves into this problem.
Craig Torres, This American Town Was Left to Die, and Suddenly Economists Care. August 7, 2017, Bloomberg. https://www.bloomberg.com/news/features/2017-08-07/this-american-town-wa...