Thoughts on the Virtues of Economic Understanding

Economic understanding is crucial for individuals, businesses, and policymakers, as it forms the foundation for informed decision-making and societal progress.

I mostly encounter two reasons for learning about the economy or anything else: either it helps you to get a better job, or it helps you to advocate better policies. However, I have been writing this blog since May 2011. Any tidbits of job-relevant material have been unintentional. While I do sometimes offer policy-relevant commentary, I am aware that it lacks a 21st-century fighting spirit–that is, zingers and insults are notable mainly by their absence. Anyone reading here for instrumentalist purposes has doubtless been disappointed.

So what am I doing here? One a year or so, often around New Year’s Day, I mull over this topic. I’d like to believe that there is virtue in understanding. Just to make some other wild-eyed and crazy claims here, I also think that I benefit from reading good literature, from trying out new cookie recipes, from good walks, from occasionally misfingering my way around a Bach prelude on the piano, and from time spent with my wife, family, and friends. In short, I am not opposed to good jobs and sensible public policy, but not everything needs to be for the purposes of a job or a political cause.

One of the guiding texts of our time, it seems to me, is Karl Marx’s comment in his Theses on Feuerbach (the 11th thesis, if you are counting): “The philosophers have only interpreted the world in various ways; the point is to change it.” I’m not against change, sometimes (I’m the kind of boring person who wants to talk about the change before endorsing it), but Marx’s phrase “only interpreted” strikes me as dismissive and wrong-headed. To me, understanding has its own rewards.

I find that I am more in the spirit of Joseph Schumpeter, as described in a 1950 obituary by Gottfried Haberler, where Haberler wrote:

The main reason why no Schumpeter school developed is that Schumpeter was neither reformer nor an enthusiastic partisan of capitalism, socialism, planning, or any other ism; he was a scholar and an intellectual. … In the purely scientific sphere Schumpeter’s open-mindedness and universality, the lack of fighting spirit for any particular approach, the fact that he found something useful and acceptable in almost every theory and method helped to prevent development of a Schumpeter school.

Similarly, near the beginning of his 1939 book on Business Cycles, Schumpeter wrote:

I recommend no policy and propose no plan. Readers who care for nothing else should lay this book aside. But I do not admit that this convicts me of indifference to the social duty of science or makes this book — including its historical parts — irrelevant to the burning questions of the day. What our time needs most and lacks most is the understanding of the process which people are passionately resolved to control.

Again in a similar spirit, Schumpeter said in a farewell address to his students when leaving the University of Bonn in 1932, before moving to Harvard University: “I never wish to say anything definitive; if I have a function it is to open doors, not to close them.”

Just to be clear, I believe that improved understanding can help functional outcomes in careers and public policy. But I also think such effects often operate along unexpected and unpredictable pathways. I’m a believer that the process of learning can be as important as details of content; for example, learning how to master a body of content, how to absorb and look critically at text and data, how to experiment provisionally with new ideas, and how to communicate in speech and writing with others who may disagree are all generalizable skills. It’s true in my experience that learning is very rarely wasted in the longer term, but even if specific lessons don’t recur in the future, learning can be its own reward.

Conversely, it feels to me as if selling education to students as a sort of “golden ticket,” where good grades lead to financial success and personal happiness, can be misleading and even harmful both to high-performing students as well as to the 50% of student who, inevitably, find that their academic performance is below the median. When it comes to policy discussions, it feels to me as if passion and partisan affiliation can be substitutes for efforts to understand. For me, Schumpeter’s comment from 1939 remains relevant today: “What our time needs most and lacks most is the understanding of the process which people are passionately resolved to control.”