What people believe they know about the economy is typically exactly the opposite. (So no, it's not only your banker's investment advice.) It is the great power of #economics to point out how the world actually works. For instance, that already incurred costs are sunk, that costs
are a choice on the way to value, that capital is valued for its contribution to consumer satisfaction, that competition is a form of cooperation, that true cost is in fact value (specifically, the value forgone), etc. The apparent intuitive force of simple observation not only
lead people astray, but compels them to reject economics. Perhaps this is why we talk of an "economic way of thinking," which releases the mind from making all these simple and costly errors--and reveals the true nature of the world. I recently encountered another example of how
people lacking economic insight draw the wrongest of conclusions. They are vaguely aware of the concept of economies of scale (but not *why*). And they see how it appears to go in hand with the intuition that size is power, which was accurate for nomadic, pre-industrial man but a
practically a fallacy in the market (since it is not size or force that wins the day but one's ability to offer value). Thus emerges a catastrophic argument for the public monopolistic provision of services: the post office, the railroads, public schools, public healthcare, and
so on. And the conclusion that the post office loses money *despite* its economies of scale as monopolist, which suggests private companies stand no chance offering mail delivery. Or that healthcare is so expensive because there are too many (private) actors involved, and
(obversely) too little government. Yet the problem is that market action is uncertain and that economic production requires a division of intellectual labor to figure out how best use resources in the present to satisfy consumers with goods in the future. Size and influence are
the very opposite of success in this case. Healthcare is expensive because there is not enough business model innovation and consumer sovereignty in that market; the reason the post office cannot make ends meet is that it is both a government entity and has monopoly. These are
in fact powerful arguments for subjecting the provision of these services to consumer choice of provider, type of product, means/way of payment, etc. Only this way will the value of the services increase while the cost of production falls. To see this, one has to learn the
economic way of thinking: to identify the value and economizing that takes place in its pursuit, and to distinguish the actual variables and 'forces' from the apparent. It doesn't take a whole lot to learn this, but it requires that one is willing to question and reconsider all
the things one thought were true. Like any proper formal study (or, colloquially, 'science'), economics reveals knowledge about how the world actually works and dispels illusions and misunderstandings. And since economy is core to our lives, and especially our prosperity as
individuals and society, it's an enormously powerful quality to have the "economic way of thinking." It is not sorcery or ideology, but theory. Yet hated by many for showing us our ignorance and errors. And thereby undoing false promises of quick fixes and costless solutions.
