L.A. Liberty

The Usefulness of Economists

Or, Why Keynesians <3 Politicians and Vice Versa.

The economist’s role in a free society, then, is purely educational. But when government—or any other agency using violence—intervenes in the market, the “usefulness” of the economist expands. The reason is that no one knows, for example, what future consumer demands in some line will be. Here, in the realm of the free market, the economist must give way to the entrepreneurial forecaster. But government actions are very different, because the problem now is precisely what the consequences of governmental acts will be. In short, the economist may be able to tell what the effects of an increased demand for butter will be; but this is of little practical use, since the businessman is primarily interested, not in this chain of consequences—which he knows well enough for his purposes—but in whether or not such an increase will take place. For a governmental decision, on the other hand, the “whether” is precisely what the citizenry must decide. So here the economist, with his knowledge of the various alternative consequences, comes into his own. Furthermore, the consequences of a governmental act, being indirect, are much more difficult to analyze than the consequences of an increase in consumer demand for a product. Longer chains of praxeological reasoning are required, particularly for the needs of the decision-makers. The consumer’s decision to purchase butter and the entrepreneur’s decision about entering into the butter business do not require praxeological reasoning, but rather insight into the concrete data. The judging and evaluation of a governmental act (e.g., an income tax), however, require long chains of praxeological reasoning. Hence, for two reasons—because the initial data are here supplied to him and because the consequences must be analytically explored—the economist is far more “useful” as a political economist than as a business adviser or technologist. In a hampered market economy, indeed, the economist often becomes useful to the businessman—where chains of economic reasoning become important, e.g., in analyzing the effects of credit expansion or an income tax and, in many cases, in spreading this knowledge to the outside world.

The political economist, in fact, is indispensable to any citizen who frames ethical judgments in politics. Economics can never by itself supply ethical dicta, but it does furnish existential laws that cannot be ignored by anyone framing ethical conclusions—just as no one can rationally decide whether product X is a good or a bad food until its consequences on the human body are ascertained and taken into account.

- Murray Rothbard, Power & Market