Economics—“The Dismal Science”
RECESSION, depression, inflation, stagflation, zero growth, negative growth—all of these are dismal words used in what one man called “the dismal science” of economics. But what really lurks behind these intimidating terms? Does the science of economics have any solution to the problems most of us are facing?
Lionel Robbins, an English economist, defined economics as “the science which studies human behaviour as a relationship between ends and scarce means which have alternate uses.” All of us have “ends,” that is, things we need or want. And these “ends” are virtually limitless. On the other hand, our “means,” such as our income, are usually very limited.
Take, for example, a man who sits down with his family for breakfast and finds that there is very little sugar to go with his coffee. He is now faced with an economic decision. How will their scarce “means” (the sugar) meet everyone’s “ends”? He may decide that everyone should take just a little. Or then again, he may decide that he wants it all. Mother, however, may want the sugar for cooking. So economic decisions are not solely the domain of an intellectual elite.
When you are discussing economics on an individual basis, such as for households or consumers, you are studying what is called microeconomics. When the same principles are applied to broad groupings of individuals such as a nation, you are dealing with macroeconomics. But do not let the technical jargon fool you, for economics is hardly a precise science. An observer once said that if you ask six different economists for their opinion, you will get seven different answers. Nevertheless, it is worth learning something about this science.
From Smith to Keynes
For much of history, the average person’s economic options were very limited. Usually if you were born poor, you died poor; and if you were born rich, you probably died rich, unless some noneconomic factors (such as invading armies) came along.
Then came the Industrial Revolution, and for the first time in history, people in general could look forward to improving their economic situation through their own efforts. As the feudal system gasped its last breaths, governments were now faced with making the economic decisions. Leaders started wondering how they could control the economic future.
Then in 1776, Adam Smith wrote the first work of modern economics, “An Inquiry into the Nature and Causes of the Wealth of Nations.” He expressed confidence in both the marketplace and the individual’s abilities to bring about economic progress. Smith theorized that man’s inherent self-interest would be the driving factor behind development. The desire for a good wage or a big profit would move people to invest their capital or talents in the market system. Two other men—David Ricardo and Thomas Robert Malthus—joined Smith in pioneering the science of economics.
It was these three men that Scottish essayist Thomas Carlyle called the “Respectable Professors of the Dismal Science.” Why “dismal”? Because these men held the gloomy opinion that while the economies of different countries would expand, the lot of the common worker would never rise above the subsistence level for anything more than brief periods. Malthus further concluded that any prosperity would be offset by an increased number of mouths to feed.
Then Karl Marx came on the scene. He was not only an economic theorist but also a student of human behavior and political thought. He shared the same pessimistic attitude that the rich would get richer and the poor, poorer. Marx concluded that as long as there were unemployed workers, or an ‘industrial reserve army,’ competition for work would always drive down wages. ‘Why should an employer give a pay raise when there is a hungry and unemployed man willing to work for less?’ he reasoned. But Marx also saw within capitalism the seeds of self-destruction: Riches would accumulate into fewer hands, and the misery of the working people would increase until they would be forced into open and bloody revolt.
But while socialism was gaining popularity, another movement was growing—social Darwinism. By applying Darwin’s theory of evolution to social problems, one of the leading men of that movement—Herbert Spencer—coined the phrase, “the survival of the fittest.” They reckoned that those who won in the battle of the marketplace would get the spoils, and as for those who lost—well, only the fittest should survive, anyway! This sort of thinking led to some very unscrupulous business practices and the amassing of tremendous fortunes by the most aggressive.
Thus, since the earliest days of economic theory, battle lines have been drawn between those who believe in the free market system (and hence limited, if any, government economic control) and those who want more or even absolute government control. The Great Depression of the 1930’s, however, caused many to reconsider the possible value of government intervention in the marketplace so as to prevent the suffering that the collapse of the free market had brought. So it was that another prominent economist, John Maynard Keynes, declared that state control of interest rates and government influence through taxation could prevent the economic cycles from bottoming out too low. Variations on his theories still prevail in the Western world.
Economics Today
Have economists, with all their theories and charts, solved the world’s money problems? In recent years, much has been said about economic theory. There has even been talk of going back to the teachings of Adam Smith and to trusting completely in the free market system. But most people realize that we face problems bigger than individuals or economists can handle. Thus, some government control is seen by many as a necessity.
An article in Saturday Review once said: “A humane economy requires more than prosperity and economic growth, more than efficient allocation of resources. It demands changes in the framework of economic institutions to achieve greater equality and freedom. . . . It requires a social environment that brings a sense of community and fellowship into human relationships. It demands compatibility among man, his technology, and the natural environment. And all of these things must be done on a worldwide scale.”
But achieving such “a humane economy” is far from easy. Today, wealth still tends to gravitate to the rich and away from the poor. A lasting solution based on human efforts alone eludes man. Recession, depression, inflation, stagflation, zero growth, and negative growth thus remain familiar words to those who follow the economic news, even in the richest countries.
The Future—Dismal?
Will there ever be a more efficient allocation of resources? Or a social environment that brings a sense of community and fellowship into human relationships? Will we ever see the day when economics will not seem “dismal” for the workingman?
Please open your Bible and look up the 65th chapter of the book of Isaiah and read Isa 65 verses 21 through 23. The words are simple, but the thoughts are profound. Imagine each person having his own home and being self-sufficient economically. No monotonous jobs but constructive, satisfying work. An economy that provides bountifully for all! And all of this under a worldwide government of God.—See also Psalm 72:16; 145:16; Isaiah 25:6.
We therefore need not be dismayed at the dire predictions of “the dismal science.” The future that God holds out is very bright, indeed, for those who put faith in him and in his purposes for this earth.
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Will the day ever come when economics will not seem “dismal” for the workingman?
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Malthus concluded that increasing population would offset any temporary prosperity
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