Talking Economics

Economics is easy.  Thinking like an economist can be reduced to easy and even obvious principles.  Consider two of them: (1.) Much of what we want is scarce. Having one such thing means giving up another.  President Millei, who is a professor of economics, is trying to teach this to the Argentinians, who have not believed it, especially since Juan Perón.  Come to think of it, though, the Brazilians and the Yankees don’t believe it, either. Look at their national debts, or their personal debts, or the childish way they vote.  “We can have everything.”  Lula or Donald told us so.

(2.) Every act in society has two sides, at least.  If drug lords in Latin America are willing to sell heroin, some Yankees must be buying it.  Who is to blame? If grocery stores charge more for meat during inflation, farmers must be selling it to the stores at a higher price, and customers must be willing to buy.  Who benefits?

Good thinking.  If you think like this you are “thinking like an economist,” which every professor of economics wants you to do.  I do, for example.  Milei does. 

Notice, further, that the two examples, and many others, correspond to principles in physics.  The first law of thermodynamics says that energy can’t be created, which the economist echoes when she says, “There’s no such thing as a free lunch.”  Opportunity cost prevails.  Newton’s third law of motion says that each action has an equal and opposite reaction.  Any deal has two sides. There’s no expenditure without income.

Thinking like an economist, that is, is tough, realistic, and grown up.   The male economists delight in its toughness, and its resemblance to physics.’ Hurrah for us, they say.

But wait.  The Austrian-U.S. economist Fritz Machlup once asked, what would physics look like if atoms could talk like humans? Uh oh.  Then you would be in the realm of actual Argentinians, Brazilians, and Yankees.  You would not give up all thinking like an economist.  It would still be true that many things are scarce. But suddenly one human atom would be busily persuading another not to engage in, say, Brownian motion, or splitting, or whatever else atoms do.

It would be “humanomics.”  Tough but really realistic.

Weekly column in Folha de São Paulo, Brazil
Translated into Portuguese for the newspaper.