I’m not feeling well today so I’m probably going to go to bed early. Thus, here’s an earlier than usual post.
Back in the 1849, Scottish Essayist Thomas Carlyle coined the term “The Dismal Science” for reducing interactions to supply and demand and declaring that people should be left alone, when Carlyle was arguing for the reintroduction of slavery to the West Indies to increase productivity.
While Carlyle’s arguments failed (thankfully) the term “the dismal science” took on a life of its own as it got applied to other assumptions people made about economics, claiming that economics demonstrated that bettering the lot of mankind was impossible (particularly in light of Malthus’s then current theories), that wages must fall to the minimum point, that, according to economics, the lot of mankind was crushing poverty forever.
Fortunately all of those “dismal” predictions were fallacious. Malthus’s predictions have persistently failed to materialize. Wages heading to minimum? Less than 2% of full time jobs in the United States pay minimum wage or less. In other words, more than 98%, the vast majority, of jobs pay more. It’s almost like employers have to compete to attract productive workers from other employers. And likewise, workers compete with each other to obtain good-paying jobs. All of this leads to a dynamic and ever-changing balance a far cry from everyone being forced to accept starvation wages. And economic growth has been outstripping population–growing fastest where there is the most economic freedom–meaning that the lot of “the masses” has been improving.
But there is another way in which Economics is a “dismal science”. It’s dismal in the frustration of those who have some understanding of economics watching people without such understanding (or worse, people with an understanding) making decisions that economically range from bad to disastrous.
Consider minimum wage. When people with an understanding of economics point out that increasing the cost of hiring people means that fewer people will be hired which means increased unemployment they dismiss that because unemployment did not rise much with previous increases in minimum wage. Of course it didn’t. For sufficient values of “much”. After all, when less than 2% earn it in the first place, the most you’d get is a 2% rise and that’s if everybody earning minimum wage were let go. So the overall unemployment rate will change little. However, what’s important to consider is who those minimum wage workers are. They are generally young people just entering the work force, people with no work experience, no references, none of the things that say “I’m a proven good worker.” Often, because of the economic and educational situations they grew up in, they are minority workers. It is these groups where unemployment soars making it harder for them to get their initial jobs and become productive members of the workforce.
Or take health care, particularly health insurance. People love requiring insurance companies to cover pre-existing conditions. Lawmakers who talk about requiring insurance companies to provide such coverage, and without raising rates over it, are ensured of widespread popular support. That it is economically unworkable doesn’t matter to that support. Even many of those who grasp the essential impracticality of the demand silence that voice within themselves because they want it so bad. The only way it can be made to, sort of, work is to require everyone to have insurance–the business and individual mandates, which are as widely hated as covering pre-existing conditions is loved.
Then there are protectionist tariffs. People want to “save jobs”. This sounds good. But lacking an understanding of economics they do not see what cost those jobs come at. Look, if you put a tariff on imported steel, you save some steelworkers’ jobs. But this is at the cost of steel being more expensive than it would otherwise be. This increases the cost for everybody who uses steel. That means auto makers, machine tool makers, the people making stainless steel tableware, rebar manufacturers (and thus people making concrete structures and roadways), and so on and so on and so on. All of these people will find their costs higher than otherwise. And that is going to cost jobs. But these jobs, unlike steelworkers who are concentrated, organized, and have a loud political voice, are scattered over many industries and sectors of the population and have no such united voice. And so they are conveniently ignored in favor of the loud.
And so Economics is “the dismal science” as time and time again, people with even a basic understanding of economics watch in frustration as time and again people make exactly the wrong decisions that fly in the face of even the most basic economic principles with predictable results.
It’s Cassandra–gifted to be able to foretell the future but cursed so that no one would believe her–all over again.
And that’s dismal.