Principles of Economics Review (Part 1)

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Saifedean's Principles of Economics kicks off strongly, addressing a common flaw in economic literature: either they lean into pseudo-scientific approaches, like Keynes', leading to nonsensical interpretations, or they dedicate too much energy debunking these approaches, sacrificing readability. Saifedean intended to create the book he wished he had at 18, and it seems he's on track to deliver an accessible introduction to Austrian economics.

Chapter 1 zeroes in on the fundamental building block of economics: human action. Saifedean argues that the essence of economics lies not in aggregate statistics but in individual human actions. Unlike atoms that behave predictably, humans have diverse goals, making the tendency to treat them as a static collective amidst changing circumstances a serious mistake.

Interestingly, Saifedean notes that Keynesians' preference for a quantitative approach mimics hard sciences, driven by a desire for the prestige associated with subjects like chemistry and physics. This pursuit led to unproven assertions that have become dogma and harmful economic frameworks that persist today.

Saifedean argues that isolating human action for quantitative analysis is unfeasible, as actions are inherently embedded in their social context. No lab can replicate the complex, multifactorial outcomes of individual actions. Hence the constant need to update Keynesian theories. The ease with which these are manipulated after the fact to account for any phenomena removes their predictive power, undermining their value as knowledge.

Lastly, Saifedean contrasts Keynesian and Austrian approaches to the issue of minimum wage. As he notes, humans act to optimize their well-being, not to satisfy bureaucrats. The prevalence of Keynesian economics in government is rooted in the need to justify laws that limit freedom. Keynesianism provides this justification, making it an appealing choice for policymakers.

Overall, it's a very strong start to the book and if this post gets enough likes, I'll continue this review as I go through it.

Anyone in Innsbruck at the #BTC23 in September?