Wednesday, 8 February 2017

‘Essentials of Economics’


2282233Want to learn the essentials of economics in just 99 pages? Then Art Carden has the best recommendation for you in this guest post. It’s terrific.

Imagine you have a friend who is completely unfamiliar with economics. Imagine further that he says he is going to read exactly 99 pages of economics and no more. What would you suggest that he read? I submit that Faustino Ballvé’s Essentials of Economics: A Brief Survey of Principles and Policies would be an excellent candidate.

The book offers an admirable combination of breadth and brevity, and it delivers on everything promised in the title. The reader will come away with a brief survey of the essential principles of our beloved dismal science, a bit of familiarity with the intellectual genealogy of some of the ideas, and a handful of applications.

At 99 pages of text, Essentials of Economics is a masterpiece of efficient communication of economic ideas. It is an ideal introduction to economic thinking for people who haven’t the time or the inclination to conquer such massive tomes as Human Action, Wealth of Nations, or George Reisman’s Capitalism—though I suspect that the uninitiated reader with Essentials of Economics on his nightstand or e-reader for a few days will be much more likely to read further. [As Ayn Rand hoped when she recommended it as an introduction in her own book Capitalism: The Unknown Ideal – Ed.]

By the end of the book, the reader should be convinced that, in the words of Gustavo R. Velasco’s preface to the Spanish edition, “it is not possible to escape from economics.” Ballvé’s method follows in the tradition of the economists working then (and now) in the tradition of Carl Menger and Ludwig von Mises. He begins from a set of very simple postulates—relative scarcity and action—and deduces from these a body of propositions that help us make sense of the world around us. Ballvé writes with a passion and verve that makes sometimes-dry concepts come to life. In the course of ten short chapters, he explains to the reader what economics studies, how markets work, what entrepreneurs do, how income flows to factors of production, the origins of money and credit, the origins of business cycles, and the fallacies of protectionism, nationalism, socialism, and interventionism.

Ballve1While reading, I was continually impressed with the problems we face as teachers, scholars, economic communicators, and citizens. Research on public opinion and public policy—like Bryan Caplan’s 2007 The Myth of the Rational Voter, for example—suggests that the fundamental problem with economic knowledge is not that many voters don’t understand the fine points, nuances, and subtleties of sophisticated macroeconomic models. Rather, from all appearances, it looks like voters take issues with the most basic ideas in economics: people respond to incentives, relatively scarce compared to people’s wants, and trade creates wealth. Without getting bombastic or unnecessarily strident, Ballvé reminds us how important these principles are in a translation that absolutely sparkles.

Much of what Ballvé wrote will seem obvious today, and some readers might find his criticism of econometrics somewhat dated. It is important to remember the context in which Ballvé was writing. The book first appeared in Mexico in the 1950s and in English in the early 1960s. The consensus at the time, even among professional economists, was that Mises and Hayek had lost the socialist calculation debate, and Keynesian macroeconomics ruled the roost. Ballvé stepped into this environment and produced a very short, power-packed volume that offers an unapologetic defence of markets and liberty that relies not on a stubborn refusal to remove ideological blinders but on a nuanced understanding of the sciences of human action.

Speaking of which, readers familiar with Mises’s Human Action and Adam Smith’s Wealth of Nations will find much in this book that they recognise; indeed, there were times when I felt like I was actually reading Mises or Smith. For the uninitiated reader, it is a fantastic introduction. For the expert, it is a valuable refresher. For everyone, it is a valuable addition to any reading list. I expect to return to my notes on it quite frequently.

Ballve2In short, Essentials of Economics is a book that any economist would be proud to have written. It offers a valuable corrective to the errors that inform too many policies. If we take Ballvé's lessons to heart, we can perhaps fix some of the damage done by policies made by those who either do not understand economics or reject it outright. At the very least, we can avoid making bad situations worse.

That Essentials of Economics has not received more attention than it has is curious, if not scandalous. I hope that this book can gain a wider appreciation. The world will certainly be better for it.



Art Carden is an Associate Professor of Economics at Samford University’s Brock School of Business. Visit his website.
A version of his post first appeared at FEE.


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