What economics means to me

When I was about twelve years old, I was suddenly determined to become an economist one day. Well, at least I wanted to busy myself with money and all that. The occasion of this vision was, ironically, the birthday of a saint (‘Sinterklaas’) who rewards children with gifts in case they behave properly. That evening, I received a novel called Felix en het grote geld (‘Felix and the big bucks’) by Nikolaus Piper. As I couldn’t imagine a more fitting title, I started reading straight away.

'Felix en het grote geld'

Fuelled by the lively insights presented in the book, I imagined what it would be like to an economist: dealing with investments, setting up your own company and, hopefully, making some serious money along the way. Throughout secondary school, I kept true to this mindset by enthusiastically diving into the basics of economics. Most of all, I was fascinated in the way economics seemed to dominate all other disciplines in terms of its daily impact on people’s lives. Sure, physics and history had their interesting aspects too. Yet it looked as if these could not touch the influence and relevance of economic analyses.

All this changed when I started studying economics in Rotterdam. At first, I aspired to become a macroeconomist at an international bank or consultancy. Since I enjoyed working with economic principles relating to the economy as a whole, this appeared to be the most logical place to end up. However, there were two specific courses that made me doubt my previous conviction: History of Economic Thought and Philosophy of Economics. Although almost every fellow student I know aboslutely hates these courses, for me they felt like a homecoming. Both are much more theoretical and abstract than most of the other branches of economics, like finance or marketing. Essentially, they have more to with the fundamentals of ‘economics’, than with the practicalities of ‘the economy’.

Related to this subtle but important distinction, there are two particular characteristics of economists that I appreciate most: modesty and diversity. The first characteristic can be derived from the influential Austrian economist Friedrich von Hayek (1899-1992), who once wrote that:

“The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.”

This quote airs a certain skepticism towards what economists are doing and what they can achieve. It puts them back on the ground by questioning whether they can really understand something as complex as the economy – let alone influencing it. According to Hayek, a true economist acknowledges the imperfections of his work. Clearly, this a much more sober view than what you would expect of economists today.

Why would modesty be an important characteristic for an economist? Let’s take the world of finance as an example. Despite the extremely sophisticated models that were employed by the financial sector, economists could not prevent the crash of 2008. Relying on elegant equations and forecasts, they believed the sky to be limit. The few Cassandra’s who saw the storm coming (like a couple of eccentric traders in the film The Big Short) were set aside as idiots. With the benefit of hindsight, it is perhaps too easy to say that modesty would have saved us from the worst financial crisis in modern times. Still, I am convinced that a more critical, common-sense approach to the risks of financial products would have made the consequences less severe.

The other characteristic, diversity, is a bit more difficult to capture. In my opinion, it is best illustrated by a quote of John Maynard Keynes (1883-1946), a famous British economist:

“The study of economics does not seem to require any specialized gifts of an unusually high order. Is it not, intellectually regarded, a very easy subject compared with the higher branches of philosophy and pure science? Yet good, or even competent, economists are the rarest of birds. An easy subject, at which very few excel! The paradox finds its explanation, perhaps, in that the master-economist must possess a rare combination of gifts. He must reach a high standard in several different directions and must combine talents not often found together. He must be mathematician, historian, statesman, philosopher – in some degree. He must understand symbols and speak in words. He must contemplate the particular in terms of the general, and touch abstract and concrete in the same flight of thought. He must study the present in the light of the past for the purposes of the future. No part of man’s nature or his institutions must lie entirely outside his regard. He must be purposeful and disinterested in a simultaneous mood; as aloof and incorruptible as an artist, yet sometimes as near the earth as a politician.”

This passage nicely shows that economics is a curious task indeed. Despite the fact that Keynes and Hayek are outspoken ideological opponents, they would agree on one thing: the diverse array of talents that a “master-economist” must possess. Actually, this further highlights the point of diversity because to be a true economist, you must be open to other ideas and opinions. In other words, economists should be able to take – at least sometimes – a philosophical point of view. By engaging with a broad range of other theories and disciplines, for instance, economists acquire a more complete picture of what it means to study economics. Luckily, my current studies aim to facilitate precisely this.


Author: Felix den Ottolander

Owner of China Hand (www.chinablog.com)

2 thoughts on “What economics means to me”

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