Economics as a truly human thing

The most unfunny cliché about economics is the overused reference to its being a “dismal science.” The phrase, coined by 19th-century historian Thomas Carlyle, has become a cultural trope in modern times, reducing economics to something cold, mechanical, and formulaic—a series of laws illustrated in mathematical theorems and administered by central planners. Dismal, indeed!

Economics is the study of human action around the allocation of scarce resources, and my passion for economics is directly related to my understanding of it as anything but dismal. When we see economics as attached to moral philosophy and about the purposeful acts of human beings, it invites an entirely different attitude to its study. Economics should transcend mathematical and physical laws and instead lead to the discovery of timeless truths and the challenging work of applying those truths. This isn’t the kind of work best left to central planners.

Created by human action

It is hard to understate the impact Ludwig von Mises’ Human Action (1949) had on the 20th century. In a magnum opus for the economic movement, Mises resisted the collectivist impulse that dominated academia at the time. Today we take things like subjective value theory (value is not a by-product of the labor that creates goods and services but rather the subjective value humans place on them from their own preferences and judgments) and marginal utility (value comes from the very next need it satisfies, not the total use) for granted, but these were profound contributions of Mises’ Austrian school of thought. Human Action shows that humans act purposefully, and this foundational understanding allows us to deduce other discoveries in economics. The intentional actions of humans creates value, and out of that value we get this thing called “exchange.” Subsequent economic realities—such as prices, currencies, interest rates, etc.—are a by-product of the basic fact of human action. Mises wasn’t a Christian, but his insights can be understood within the Christian worldview. If economics properly starts with human action, economists can’t do their job correctly without proper anthropology. No discovery animated me more than this: that economics is fundamentally about the pioneering spirit of human beings, made in the image of God, to cocreate with Him. Mises lacked a full understanding of his own propositions, but his work led me down a path of economics as “rallying the really human things.” 

The need for human freedom

The Austrian peer of Mises, Friedrich Hayek, helped me understand these ideas from a different perspective in The Road to Serfdom (1944). Hayek’s elaboration of the knowledge problem (that central planners cannot obtain the knowledge to properly administer the affairs of an economy) and the price mechanism (that prices serve as pockets of information that coordinate activities among a wide array of economic actors) allowed me to understand the miracle of a market economy in a deeper and more intellectually serious way. He explains that if economics starts with the purposeful acts of humans, then individual human freedom is a cornerstone of optimal economics. Supposedly noble attempts to deny human beings their individual liberty should not be considered noble at all. They not only create suboptimal economic outcomes, but they also lead to political tyranny.

The impact on human lives

After I was firmly committed to the principles derived from Mises and Hayek and serious about understanding them in the context of my own Christian worldview, Henry Hazlitt’s Economics in One Lesson (1946) aided me in applying these principles to real matters of economic policy. From minimum wage laws to free trade to rent and price controls, as well as other late 20th-­century economic debates, Hazlitt took economics from the ivory tower to the street. I probably read his book more than 10 times in high school, and continue to use it to this day in teaching economics to high school students. Hazlitt’s popularizing of the broken window fallacy, explaining that almost all economic error comes from looking at visible effects while ignoring invisible ones, remains one of the most valuable economic principles (with universal application) I have ever come across.

The joy of human ingenuity

My journey to seeing economics as a social and human field could not have been complete without George Gilder’s Wealth and Poverty (1981). Viewing markets as mechanical venues where incentives compete with one another deprives us of the entrepreneurial element of markets. Gilder recognized that humans, created in the image of God, are not merely disincentivized by excessive tax and regulation, but stifled in their pursuit of new ideas and innovations. Gilder added to the depth of my understanding of human nature, centering my view of money around the ultimate finite resource in God’s created order—time. He celebrates entrepreneurship for all the right reasons, and condemns heavy-handed government intervention in the economy for all the right reasons, too.

The entire corpus of books that has informed my view of economics is too vast to cover in a short essay, but these four books were not merely “good reads.” They were transformative in a way that evokes gratitude that will last the rest of my days.

—David L. Bahnsen is the founder and ­managing partner of The Bahnsen Group, an $8 billion private wealth management firm, the author of several books on work and economics from a Christian worldview, and a regular guest on The World and Everything in It ­podcast’s Monday Moneybeat