Personal Economics--Introduction

During July I am going to use this blog to give ideas in what I call "Personal Economics". I realize, of course, that dozens of others have written, or are currently writing, similar ideas, but a blog is, after all, an opportunity to expand on ideas, frequently not yet perfectly formulated.

I think it instructive to remember that we typically give Adam Smith the credit for first really formulating the techniques we use in the social science of economics. All schools of economic thought use those basic tools, but the collectivist schools do not agree with his conclusions. We sometimes forget that Adam Smith was a principally a moral philosopher. His job was to teach students--most of whom planned to go into the Christian ministry--why the Christian moral philosophy was not only good, but also "smart", i. e. had application to this present life as much as to the next. He was most proud of his first book, "The Theory of Moral Sentiments" in which he attempted to show why people who barely could meet their own needs were willing to sacrifice for others whom they perceived as being in greater need. But he realized, I believe, that to pursue that same line of reasoning when it came to dealing with people in other countries, it would carry little weight. The feeling was then--as now--simply too strong, that people in one's own country should be treated differently, and that ultimately, there is nothing wrong with exploiting people in other countries. The wonderful (in my opinion) book, "Against the Tide" the author includes several examples of mercantilist writing from Adam Smith's day. These, like the similar writing of Pat Buchanan in our own day, are cast in Christian terms, but have an essentially anti-Christian bottom line--i.e. the Golden Rule simply does not apply to people in other countries. To counter this line of reasoning Adam Smith developed what we now call the social science of economics. Milton Friedman, in his book, Free to Choose, justified the application of the term "Social Science" to economics by stating that all economists agree with Adam Smith on the validity of free trade. The greatest economics teacher of the 20th century, Paul Samuelson, in the last pronouncement I heard from him, essentially denied the validity of free trade. I think it safe to say that there is, therefore, little "science" in economics, but that it can be enormously helpful as a boost to personal morality--the reason for which, I believe, Adam Smith conceived his ideas in the first place.

In the next days, I hope to outline 6 principles that I see as basic to personal economics. The first two come from Adam Smith. The third from Jean Baptiste Say. We then move from classical to "Austrian" economics for the last three. The first of these comes from Carl Menger, the next from Ludwig von Mises and the final from Frederick Hayek.