Freeman

THE ECONOMIC WAY OF THINKING

The Mystery of the Mundane

SEPTEMBER 26, 2013 by PETER BOETTKE

The world is full of marvels, from FaceTime to air travel. But the real action is in the mundane—those everyday things we take for granted. Economics, and the economic way of thinking, are indispensable for learning how to see the mystery of the mundane. And when we do, it’s awe-inspiring. 

This is one of the crucial insights in Paul Heyne’s The Economic Way of Thinking, which I’ve relied on for more than 25 years now (and of which, along with David Prychitko, I’ve been coauthor for more than a decade). Along with another rule—don’t overteach the principles—we can show others how economics belongs in everyday life and not just in the classroom.  

Don’t Overteach the Principles

Heyne’s first rule was this: “Teach the principles of economics to your students as if it was the last time they will ever take an economics course, and it will be the first of many.” 

In other words, there’s no reason to teach basic economics with an emphasis on the tools of economic reasoning, such as mathematical formulas, graphs, and statistical relationships. Instead, you want your audience to be intrigued by the insights that one can gain by persistently and consistently applying the economic way of thinking to the puzzles and problems they confront in their daily lives. 

We must show our students—or anyone with whom we talk about economics—how the principles of economics make sense out of the buzzing confusion that makes up a modern economy. And we must show how to clarify and correct the daily assertions they read in newspapers and hear from political figures, axe-grinders, and talking heads commenting on economic affairs. 

Our job as teachers is to help students cut through the nonsense and begin to understand the world around them. So we have to outfit them with the right lenses.

The Mystery of the Mundane

Paul’s second rule was, “Allow yourself and your students to be amazed by the mystery of the mundane.” 

As we say on page 1: “When we have long taken something for granted, it’s hard even to see what it is that we’ve grown accustomed to. That’s why we rarely notice the existence of order in society and cannot recognize the processes of social coordination upon which we depend every day.” Don’t focus exclusively on the miracle of exotic or peculiar things, such as how we can FaceTime with family across the country, what forces enable a plane to fly, or why did Miley Cyrus do that. Instead recognize and be astonished at the feats of everyday social cooperation that you engage in and benefit from. Think about the how, what, why of the shoes on your feet, the hat on your head, the car that you drive, the smartphone on which you may be reading these words.

Adam Smith, in attempting to get his readers to appreciate the mystery of the mundane, went through the numerous specializations in production, the exchange relationships that must be established, and the mutual adjustments that must continually be made just to provide the common woolen coat to the average citizen.

More recently, FEE founder Leonard Read used the example of the No.2 pencil to convey the same point as Adam Smith when he described the production of a woolen coat. Milton Friedman used Read’s No.2 pencil to explain the power of the market to coordinate economic affairs, in contrast to the tyranny of government controls that failed to produce such an overall order. 

 

F. A. Hayek used the example of the market’s guidance of the use of tin in production and consumption. Hayek wanted to convey the ability of the price system to provide the required information and incentives for economic actors who must adjust their behaviors one-to-another until all the mutual gains from trade are realized. 

Adam Smith pointed out in The Wealth of Nations that every man lives by exchanging. The successful coordination of economic activity in society, where everyone lives by specializing and exchanging, is an extraordinarily complex phenomenon. The “invisible hand” metaphor for the market economy—with its private property, relative prices, the lure of pure profits (not to mention the penalty of loss)—is meant to capture the wonder of this complex coordination. Social cooperation happens through constant mutual adjustment. Once we appreciate this fact, it is easy for us to lose our awe at the miracle of it all. Hayek referred to the “marvel of the market” to try to jolt his readers from their intellectual complacency.

Economics Out the Window

So as you are studying economics this year as a teacher, a student, or a casual reader, step back from the chapter or the lecture notes and look out the window of your room. Drive around town. Pick any good or service and track down all the exchange relationships that must have been formed to enable that good or service to be available to people like you. From lawn services to milk shakes, the marvel of the market is on full display. If you allow yourself as you study economics to be open to the mystery of the mundane, then the teachings of economics will be that much easier to absorb and appreciate.



Find a Portuguese translation of this article here.

ASSOCIATED ISSUE

November 2013

ABOUT

PETER BOETTKE

Contributing editor and FEE trustee Peter Boettke is a University Professor of Economics and Philosophy at George Mason University and director of the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center.

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Unfortunately, educating people about phenomena that are counterintuitive, not-so-easy to remember, and suggest our individual lack of human control (for starters) can seem like an uphill battle in the war of ideas. So we sally forth into a kind of wilderness, an economic fairyland. We are myth busters in a world where people crave myths more than reality. Why do they so readily embrace untruth? Primarily because the immediate costs of doing so are so low and the psychic benefits are so high.
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