It is a short book on specialization and trade. I have a first draft, that I plan to edit at least once more before sending it around for comments. Here are the first paragraphs of the forward:
Early in 2015, I came across a volume of essays edited by E. Roy Weintraub called MIT and the Transformation of American Economics. After digesting the essays, I thought to myself, “So that’s how it all went wrong.”
Let me hasten to mention that my own Ph.D in economics comes from MIT, in 1980. Also, the writers of Weintraub’s book are generally laudatory toward MIT and its influence.
Yet I have come to believe that the MIT approach to economics has stifled critical thinking. The critical thinker is always asking the philosopher’s epistemological question, “How do you know that?” The MIT approach suppresses that question and instead presumes that economic researchers and policy makers are capable of obtaining knowledge that many believe is beyond their grasp.2 This is particularly the case in the field known as macroeconomics, whose practitioners claim to know how to manage the overall levels of output and employment in the economy.
What I have set out to write is an introduction to economics as I believe it would have been written had the MIT revolution not taken over the academy. It sets out what I see as important principles of economics, and important issues in social theory in general. Some of the ideas were understood by classical economists but forgotten by the MIT revolution. Other ideas reflect more recent thinking about the factors that enable trust in society.
A few additional notes:
1. There is a Boudreaux-like emphasis on the gains from trade throughout the book.
2. There is a Boettke-like emphasis on the co-ordination problem and on economics as comparative institutional analysis.
3. There are some themes that are not heavily emphasized in Austrian economics, and may even run counter to it. One such theme is that trust is very important for a society’s economic well-being. Trust depends on individual beliefs, cultural norms, and formal institutions. Trust means that people have confidence that rules are being enforced. All enforcement mechanisms come with advantages and disadvantages. People count on government to serve as one important mechanism.
4. Another theme is the that financial intermediation is inherently fragile. Here, I also emphasize trust. I offer a version of the Minsky cycle, but with trust in opaque financial intermediaries, rather than sheer business confidence, as the variable that changes over the cycle.
5. My take on finance and the real economy is very antithetical to monetarism. It also differs, probably in substance and certainly in presentation, from the standard Austrian story of “the” interest rate, “the” structure of production, and malinvestment.
Should I refer to it as The Book of Arnold?