Greatest Economists Quotes

If God had perceived that our greatest need was economic, he would have sent an economist. If he had perceived that our greatest need was entertainment, he would have sent us a comedian or an artist. If God had perceived that our greatest need was political stability, he would have sent us a politician. If he had perceived that our greatest need was health, he would have sent us a doctor. But he perceived that our greatest need involved our sin, our alienation from him, our profound rebellion, our death; and he sent us a Savior.

Yet the economists in Moscow had no reliable index of what was going on in the vast empire they notionally maintained; the false accounting was so endemic that at one point the KGB resorted to turning the cameras of its spy satellites onto Soviet Uzbekistan in an attempt to gather accurate information about the state’s own cotton harvest.

In nature nothing is done without a purpose Nature does nothing useless She is the greatest economist of all There is a reason for everything

The Americans, the Scottish economist Adam Smith warned, “feel in themselves at this moment a degree of importance which, perhaps, the greatest subjects in Europe scarce feel.… [They] are employed in contriving a new form of government for an extensive empire, which, they flatter themselves will become, and which indeed seems very likely to become, one of the greatest and most formidable that ever was in the world.

The economist Steven Radelet has pointed out that “the improvements in health among the global poor in the last few decades are so large and widespread that they rank among the greatest achievements in human history.

Perhaps the most dramatic effect of legalized abortion, however, and one that would take years to reveal itself, was its impact on crime. In the early 1990s, just as the first cohort of children born after Roe v. Wade was hitting its late teen years—the years during which young men enter their criminal prime—the rate of crime began to fall. What this cohort was missing, of course, were the children who stood the greatest chance of becoming criminals. And the crime rate continued to fall as an entire generation came of age minus the children whose mothers had not wanted to bring a child into the world. Legalized abortion led to less unwantedness; unwantedness leads to high crime; legalized abortion, therefore, led to less crime.

The economist Steven Radelet has pointed out that “the improvements in health among the global poor in the last few decades are so large and widespread that they rank among the greatest achievements in human history. Rarely has the basic well-being of so many people around the world improved so substantially, so quickly. Yet few people are even aware that it is happening.”13

As the economist Max Roser points out, news sites could have run the headline 137,000 People Escaped Extreme Poverty Yesterday every day for the past twenty-five years.33 But they never ran the headline, because there was never a Thursday in October in which it suddenly happened. So one of the greatest developments in human history—a billion and a quarter people escaping from squalor—has gone unnoticed.

In 1900, 2 percent of fossil fuel production was devoted to producing electricity, by 1950 it was above 10 percent, and in 2000 it reached more than 30 percent. In 1900 global electricity generation stood at 8 terawatt-hours; fifty years later it was at 600, powering a transformed economy. The Nobel Prize–winning economist William Nordhaus calculated that the same amount of labor that once produced fifty-four minutes of quality light in the eighteenth century now produces more than fifty years of light.

All around the world, people have an overwhelming sense that something is broken. This is leading to record levels of populism in the United States and Europe, resurgent intolerance, and a desire to upend the existing order. The left and right cannot agree on what is wrong, but they both know that something is rotten. Capitalism has been the greatest system in history to lift people out of poverty and create wealth, but the “capitalism” we see today in the United States is a far cry from competitive markets. What we have today is a grotesque, deformed version of capitalism. Economists such as Joseph Stiglitz have referred to it as “ersatz capitalism,” where the distorted representation we see is as far away from the real thing as Disney's Pirates of the Caribbean are from real pirates. If what we have is a fake version of capitalism, what does the real thing look like? What should we have? According to the dictionary, the idealized state of capitalism is “an economic system based on the private ownership of the means of production, distribution, and exchange, characterized by the freedom of capitalists to operate or manage their property for profit in competitive conditions.

The most-studied evidence, by the greatest number of economists, concerns what is called short-term dependence. This refers to the way price levels or price changes at one moment can influence those shortly afterwards-an hour, a day, or a few years, depending on what you consider "short." A "momentum" effect is at work, some economists theorize: Once a stock price starts climbing, the odds are slightly in favor of it continuing to climb for a while longer. For instance, in 1991 Campbell Harvey of Duke- he of the CFO study mentioned earlier-studied stock exchanges in sixteen of the world's largest economies. He found that if an index fell in one month, it had slightly greater odds of falling again in the next moth, or, if it had risen, greater odds of continuing to rise. Indeed, the data show, the sharper the move in the first, the more likely is is that the price trend will continue into the next month, although at a slower rate. Several other studies have found similar short-term trending in stock prices. When major news about a company hits the wires, the stock will react promptly-but it may keep on moving for the next few days as the news spreads, analysts study it, and more investors start to act upon it.

Firms in industries with the greatest increase in concentration enjoyed higher profits. But, as Adam Smith observed, monopolies don’t serve the public good. Rather, monopolies create barriers to entry which discourage the establishment of new firms and innovation.29 Rising industry concentration was associated with higher pay for senior executives, a decline in workers’ bargaining power, and falling investment and R&D. Economists at the National Bureau of Economic Research found that while ‘low interest rates have traditionally been viewed as positive for economic growth … extremely low interest rates may lead to slower growth by increasing market concentration.

Sometimes he wondered if it wasn’t all a giant con, the gaggle of letters after his name, the dinners with Angela Merkel and Narendra Modi, the notes from Gordon Brown and Larry Summers. They were like those fake Oscar statues bought at ‘World’s Greatest Photocopier’ or ‘Best Lightbulb Changer in the Galaxy.’ When he died only his writing would remain, until it was rendered obsolete when oil and coal ran out and the species established its first settlement on Mars. Professor Chandra was the foremost trade economist in the world, could phone any finance minister in any country at any time and have them take his call. And yet, what if he had only convinced himself that the world envied him? What if, in reality, they felt sorry for him with his swollen ego and his Savile Row suits and his sculpted tri-continental accent?

A wealth of research confirms the importance of face-to-face contact. One experiment performed by two researchers at the University of Michigan challenged groups of six students to play a game in which everyone could earn money by cooperating. One set of groups met for ten minutes face-to-face to discuss strategy before playing. Another set of groups had thirty minutes for electronic interaction. The groups that met in person cooperated well and earned more money. The groups that had only connected electronically fell apart, as members put their personal gains ahead of the group’s needs. This finding resonates well with many other experiments, which have shown that face-to-face contact leads to more trust, generosity, and cooperation than any other sort of interaction. The very first experiment in social psychology was conducted by a University of Indiana psychologist who was also an avid bicyclist. He noted that “racing men” believe that “the value of a pace,” or competitor, shaves twenty to thirty seconds off the time of a mile. To rigorously test the value of human proximity, he got forty children to compete at spinning fishing reels to pull a cable. In all cases, the kids were supposed to go as fast as they could, but most of them, especially the slower ones, were much quicker when they were paired with another child. Modern statistical evidence finds that young professionals today work longer hours if they live in a metropolitan area with plenty of competitors in their own occupational niche. Supermarket checkouts provide a particularly striking example of the power of proximity. As anyone who has been to a grocery store knows, checkout clerks differ wildly in their speed and competence. In one major chain, clerks with differing abilities are more or less randomly shuffled across shifts, which enabled two economists to look at the impact of productive peers. It turns out that the productivity of average clerks rises substantially when there is a star clerk working on their shift, and those same average clerks get worse when their shift is filled with below-average clerks. Statistical evidence also suggests that electronic interactions and face-to-face interactions support one another; in the language of economics, they’re complements rather than substitutes. Telephone calls are disproportionately made among people who are geographically close, presumably because face-to-face relationships increase the demand for talking over the phone. And when countries become more urban, they engage in more electronic communications.

The book received a wider review in the business press than in academic journals. A few weeks after the U.S. publication I was invited to address the annual meeting of Drexel-Burnham to outline how the new Treasury bill standard of world finance had replaced the gold exchange standard. Herman Kahn was the meeting’s other invited speaker. When I had finished, he got up and said, “You’ve shown how the United States has run rings around Britain and every other empire-building nation in history. We’ve pulled off the greatest rip-off ever achieved.” He hired me on the spot to join him as the Hudson Institute’s economist. I was happy enough to leave my professorship in international economics at the New School for Social Research. My professional background had been on Wall Street as balance-of-payments economist for the Chase Manhattan Bank and Arthur Andersen. My research along these lines was too political to fit comfortably into the academic economics curriculum, but at the Hudson Institute I set to work tracing how America was turning its payments deficit into an unprecedented element of strength rather than weakness.

Part of the problem is the extraordinary place that economics currently holds in the social sciences. In many ways it is treated as a kind of master discipline. Just about anyone who runs anything important in America is expected to have some training in economic theory, or at least to be familiar with its basic tenets. As a result, those tenets have come to be treated as received wisdom, as basically beyond question (one knows one is in the presence of received wisdom when, if one challenges some tenet of it, the first reaction is to treat one as simply ignorant—“You obviously have never heard of the Laffer Curve”; “Clearly you need a course in Economics 101”—the theory is seen as so obviously true that no one exposed to it could possibly disagree). What’s more, those branches of social theory that make the greatest claims to “scientific status”—“rational choice theory,” for instance—start from the same assumptions about human psychology that economists do: that human beings are best viewed as self-interested actors calculating how to get the best terms possible out of any situation, the most profit or pleasure or happiness for the least sacrifice or investment—curious, considering experimental psychologists have demonstrated over and over again that these assumptions simply aren’t true.2

So how did Roe v. Wade help trigger, a generation later, the greatest crime drop in recorded history? As far as crime is concerned, it turns out that not all children are born equal. Not even close. Decades of studies have shown that a child born into an adverse family environment is far more likely than other children to become a criminal. And the millions of women most likely to have an abortion in the wake of Roe v. Wade—poor, unmarried, and teenage mothers for whom illegal abortions had been too expensive or too hard to get—were often models of adversity. They were the very women whose children, if born, would have been much more likely than average to become criminals.

In a passage often cited by Western conservatives and especially loved by American libertarians, the Austrian economist F. A. Hayek wrote in 1960: “The greatest danger to liberty today comes from the men who are most needed and most powerful in modern government, namely, the efficient expert administrators exclusively concerned with what they regard as the public good.

The logic of the market is excellent when deciding which sort of lipstick should be produced, for whom it should be produced, in which colours it should be produced and what it should cost. But American satirist H. L. Mencken’s observation that on noticing that roses smell better than cabbage, you can’t conclude that they will make better soup can also be applied to the logic of the market. Just because it works well in some areas doesn’t mean it should be applied to all areas. Unfortunately, applying the logic of the market to everything has largely become the project of economists in recent decades. What we call economic theory is the formal version of the dominant world view in our society. The greatest story of our time: who we are, why we are here and the reason we do what we do.

The focus on the market has made most economists neglect vast areas of our economic life, with significant negative consequences for our well-being. The neglect of production at the expense of exchange has made policy-makers in some countries overly complacent about the decline of their manufacturing industries. The view of individuals as consumers, rather than producers, has led to the neglect of issues such as the quality of work (e.g., how interesting it is, how safe it is, how stressful it is and even how oppressive it is) and work-life balance. The disregard of these aspects of economic life partly explains why most people in the rich countries don’t feel more fulfilled despite consuming the greatest ever quantities of material goods and services. The economy is much bigger than the market. We will not be able to build a good economy — or a good society — unless we look at the vast expanse beyond the market.

if the market system had not arisen naturally, it would have been proclaimed the greatest invention in human history. For market competition leads a self-interested person to wake up in the morning, look outside at the earth and produce from its raw materials, not what he wants, but what others want. Not in the quantities he prefers, but in the quantities his neighbors prefer. Not at the price he dreams of charging, but at a price reflecting how much his neighbors value what he has done.

it's rather interesting because one of the greatest economists of the world is a substantial shareholder in Berkshire Hathaway and has been from the very early days after Buffett was in control. His textbook always taught that the stock market was perfectly efficient and that nobody could beat it.But his own money went into Berkshire and made him wealthy. So, like Pascal in his famous wager, he hedged his bet.The iron rule of life is that only twenty percent of the people can be in the top fifth Is the stock market so efficient that people can't beat it? Well, the efficient market theory is obviously roughly right-meaning that markets are quite efficient and it's quite hard for anybody to beat the market by significant margins as a stock picker by just being intelligent and working in a disciplined way.Indeed, the average result has to be the average result. By definition, everybody can't beat the market.

Nobel Prize–winning economist Elinor Ostrom pointed out that Hardin was actually quite late to the party of thinkers who came up with this idea. Aristotle wrote in his treatise on politics, “What is common to the greatest number has the least care bestowed upon it. Everyone thinks chiefly of his own, hardly at all of the common interest.

Brigham, the greatest and certainly the most able economist and administrator and businessman this nation has ever seen, didn't give a hoot for earthly things: 'I have never walked across the streets to make a trade.' He didn't mean that literally. You always do have to handle things. But in what spirit do we do it? Not the Krishna way, by renunciation, for example... If you refuse to be concerned with these things at all, and say, "I'm above all that," that's as great a fault. The things of the world have got to be administered; they must be taken care of, they are to be considered. We have to keep things clean, and in order. That's required of us. This is a test by which we are being proven. This is the way by which we prepare, always showing that these things will never captivate our hearts, that they will never become our principle concern. That takes a bit of doing, and that is why we have the formula 'with an eye single to his glory.' Keep first your eye on the star, then on all the other considerations of the ship. You will have all sorts of problems on the ship, but unless you steer by the star, forget the ship. Sink it. You won't go anywhere.

Christian doctrine cautions against greed. So does present-day economist Thomas Sowell: "I have never understood why it is 'greed' to want to keep the money you have earned but not greed to want to take somebody else's money." Using the power of government to grab another person's property isn't exactly altruistic. Jesus never even implied that accumulating wealth through peaceful commerce was in any way wrong; he simply implored people to not allow wealth to rule them or corrupt their character. That's why his greatest apostle, Paul, didn't say money was evil in the famous reference in 1 Timothy 6:10. Here's what Paul actually said: "For the love of money is a root of all kinds of evil. Some people, eager for money, have wandered from the faith and pierced themselves with many griefs" (emphasis added). Indeed, progressives themselves have not selflessly abandoned money, for it is other people's money, especially that of "the rich," that they're always clamoring for.

The economists have us well along the way of the greatest mass extinction event in human history.

Of all the tragedies wrought by this collective amnesia in economics, the greatest loss to the world is the eclipse of the “Austrian School.” Founded in the 1870s and 1880s, and still barely alive, the Austrian School has had to suffer far more neglect than the other schools of economics for a variety of powerful reasons. First, of course, it was founded a century ago, which, in the current scientific age, is in itself suspicious. Second, the Austrian School has from the beginning been self-consciously philosophic rather than “scientistic”; far more concerned with methodology and epistemology than other modern economists, the Austrians arrived early at a principled opposition to the use of mathematics or of statistical “testing” in economic theory. By doing so, they set themselves in opposition to all the positivistic, natural-science-imitating trends of this century. It meant, furthermore, that Austrians continued to write fundamental treatises while other economists were setting their sights on narrow, mathematically oriented articles. And third, by stressing the individual and his choices, both methodologically and politically, Austrians were setting themselves against the holism and statism of this century as well.

It turns out that China, not the United States or Israel, presents the greatest existential threat to the Arab world, and through no fault of its own: rising incomes have gentrified the East Asian diet, and, more importantly, insulated East Asian budgets from food price fluctuations. Economists call this “price elasticity.” Americans, for example, will buy the same amount of milk even if the price doubles, but they will stop buying fast food if hamburger prices double. East Asians now are wealthy enough to buy all the grain they want.

IF THERE is one person to blame for economists’ habit of opining on everything, it is Gary Becker, who died on May 3rd. Not content with studying the world’s economies, he was the first prominent economist to apply economic tools to all aspects of life. His revelation was the sort that seems obvious only in hindsight: that people are often purposeful and rational in their decisions, whether they are changing jobs, taking drugs or divorcing their spouses. This insight, and the work that followed from it, earned him a Nobel prize in 1992. No less an eminence than Milton Friedman declared in 2001 that Mr Becker was “the greatest social scientist who has lived and worked in the last half-century”.

Nicholas Stern, formerly chief economist and senior vice president of the World Bank from 2000 to 2003, and principal author of the Stern Review of the Economics of Climate Change (commissioned by U.K. prime minister Gordon Brown), has called climate change “the greatest and widest-ranging market failure ever seen.”55 No wonder the defenders of free market capitalism are worried.

Funny how in a material world full of pundits and economists obsessed with assets and liabilities -personally, economically and globally - few speak about the greatest of all these…YOU.

Classical economists assume that people have rational and stable preferences and that their well-being is greatest when they have the maximum opportunities to satisfy them. So more choice is always better, and more income increases choices, so the way to make life better is to increase people’s incomes. This theory is all well and good, but is it in fact true?

The system of profit equations that Jerome Levy wrote down in 1914 anticipated a similar set of equations written down by the Polish economist Michal Kalecki in 1935. And Kalecki’s system is regarded by a lot of people as containing nearly all of what’s useful in J. M. Keynes’ General Theory of Employment, Interest and Money, published in 1936 and widely accepted as one of the greatest works of economics ever. Levy went on to demonstrate that the proverb ‘if you’re so smart, why aren’t you rich?’ was not applicable in this case; aided by his sons, the Levy family went into finance with sufficient success that the Jerome Levy Forecasting Institute they endowed at Bard College continues to promote their approach to economics today. You used to be able to buy a copy of the book Jerome wrote in 1943, Economics Is an Exact Science, from them; I got mine in about 2002. In the introduction to that book, Levy sets out his view of the purpose of capitalism: The working class is the original and fundamental economic class . . . The function of the investing class is to serve the members of the working class by insuring them against loss and by providing them with desired goods. The justification for the existence of the investing class is the service it renders the working class, measured in terms of wages and desired goods. The contrary is not true. The working class does not exist to serve the investing class. The working class has the right to insure itself through organizations composed of its members or through government, thereby eliminating the investing class.

The Nobel Prize–winning economist William Nordhaus calculated that the same amount of labor that once produced fifty-four minutes of quality light in the eighteenth century now produces more than fifty years of light. As a result, the average person in the twenty-first century has access to approximately 438,000 times more “lumen-hours” per year than our eighteenth-century cousins.

So how did Roe v. Wade help trigger, a generation later, the greatest crime drop in recorded history? As far as crime is concerned, it turns out that not all children are born equal. Not even close. Decades of studies have shown that a child born into an adverse family environment is far more likely than other children to become a criminal. And the millions of women most likely to have an abortion in the wake of Roe v. Wade—poor, unmarried, and teenage mothers for whom illegal abortions had been too expensive or too hard to get—were often models of adversity. They were the very women whose children, if born, would have been much more likely than average to become criminals. But because of Roe v. Wade, these children weren’t being born. This powerful cause would have a drastic, distant effect: years later, just as these unborn children would have entered their criminal primes, the rate of crime began to plummet.

The economist Daron Acemoglu and the political scientist James Robinson share the view that liberal democracies are much less secure than they might look. They see the state as an inherently unstable “shackled Leviathan”: vast and powerful, but held in check by persistent civil societies and norms.

questions Those taking a new leadership role should ask: How is your industry changing and, in particular, how are your customers’ expectations evolving? What are the global developments (for example, increased migration, urbanisation or proliferation of mobile communications) that could benefit, threaten or generally alter the way that you do business? What are the political, economic, social, technological, legislative or environmental trends that could affect your business? What situation best describes the challenges and opportunities faced by the business? Is this clearly and widely recognised? What specific challenges are likely to be encountered? How can they be addressed? What are the major opportunities and what action is needed to realise them? Are there quick wins or low-hanging fruit that can be secured? What are the greatest risks, threats and potential pitfalls? How will these be avoided or overcome? What are the expectations of stakeholders? Are these expectations realistic – do they need adjusting? What should be the priorities?

Mises, perhaps the greatest economist of all time, broadened the thinking among his students; the market could not be viewed as or contained by a mere static thing or physical location, but rather as the actions of countless people

Thomas Sowell was born in North Carolina and grew up in Harlem. He moved out from home at an early age and did not finish high school. After a few tough years … read morehe joined the Marine Corps and became a photographer in the Korean War. After leaving the service, Sowell entered Harvard University, worked a part-time job as a photographer and studied the science that would become his passion and profession: economics. Sowell received his bachelor’s degree in economics (magna cum laude) from Harvard in 1958. He went on to receive his master’s in economics from Columbia University in 1959, and a Ph.D. in economics from the University of Chicago in 1968. In the early ’60s, Sowell held jobs as an economist with the Department of Labor and AT&T. But his real interest was in teaching and scholarship. In 1965, at Cornell University, Sowell began the first of many professorships. His other teaching assignments have included Rutgers, Amherst, Brandeis and the UCLA. In addition, Sowell was project director at the Urban Institute, 1972-1974; a fellow at the Center for Advanced Study in the Behavioral Sciences at Stanford University, 1976–77; and was an adjunct scholar of the American Enterprise Institute, 1975-76. Dr. Sowell has published a large volume of writing, much of which is considered ground-breaking. His has written over 30 books and hundreds of articles and essays. His work covers a wide range of topics, Including: classic economic theory, judicial activism, social policy, ethnicity, civil rights, education, and the history of ideas to name only a few. Sowell has earned international acclaim for his unmatched reputation for academic integrity. His scholarship places him as one of the greatest thinkers of the second half of the twenty century. Thomas Sowell began contributing to newspapers in the late ’70s, and he became a nationally syndicated newspaper columnist 1984. Sowell has brought common sense economic thinking to the masses by his ability to write for the general public with a voice that get to the heart of issues in plain English. Today his columns appear in more than 150 newspapers. In 2003, Thomas Sowell received the Bradley Prize for intellectual achievement. Sowell was awarded the National Humanities Medal in 2002. In 1990, he won the prestigious Francis Boyer Award, presented by The American Enterprise Institute. Currently, Thomas Sowell is the Rose and Milton Friedman Senior Fellow on Public Policy at the Hoover Institution at Stanford University in Palo Alto, California. —Dean Kalahar

In the long term,” wrote the English economist John Maynard Keynes, “we are all dead.” The Scottish Enlightenment learned a different lesson from the changes brought by union with England. Its greatest thinkers, such as Adam Smith and David Hume, understood that change constantly involves trade-offs, and that short-term costs are often compensated by long-term benefits. “Over time,” “on balance,” “on the whole”—these are favorite sentiments, if not expressions, of the eighteenth-century enlightened Scot. More than any other, they capture the complex nature of modern society. And the proof came with the Act of Union. Here was a treaty, a legislative act inspired not by some great political vision or careful calculation of the needs of the future, or even by patriotism. Most if not all of those who signed it were thinking about urgent and immediate circumstances; they were in fact thinking largely about themselves, often in the most venal terms. Yet this act—which in the short term destroyed an independent kingdom, created huge political uncertainties both north and south, and sent Scotland’s economy into a tailspin—turned out, in the long term, to be the making of modern Scotland Nor did Scots have to wait that long. Already by the 1720s, as the smoke and tumult of the Fifteen was clearing, there were signs of momentous changes in the economy. Grain exports more than doubled, as Scottish agriculture recovered from the horrors of the Lean Years and learned to become more commercial in its outlook. Lowland farmers would be faced now not with starvation, but with falling prices due to grain surpluses. Glasgow merchants entered the Atlantic trade with English colonies in America, which had always been closed to them before. By 1725 they were taking more than 15 percent of the tobacco trade. Inside of two decades, they would be running it. A wide range of goods, not just tobacco but also molasses, sugar, cotton, and tea, flooded into Scotland. Finished goods, particularly linen textiles and cotton products, began to flood out, despite the excise tax. William Mackintosh of Borlum saw even in 1729 that Scotland’s landed gentry were living better than they ever had, “more handsomely now in dress, table, and house furniture.” Glasgow, the first hub of Scotland’s transatlantic trade, would soon be joined by Ayr, Greenock, Paisley, Aberdeen, and Edinburgh. By the 1730s the Scottish economy had turned the corner. By 1755 the value of Scottish exports had more than doubled. And it was due almost entirely to the effect of overseas trade, “the golden ball” as Andrew Fletcher had contemptuously called it, which the Union of 1707 had opened.

As every individual, therefore, endeavours as much as he can both to employ his capital in the support of domestic industry, and so to direct that industry that its produce may be of greatest value… he generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it.… He intends his own security; … he intends only his own gain and he is in this … led by an invisible hand to promote an end which was no part of his intention. By pursuing his own interest he frequently promotes that of society more effectually than when he really intends to promote it. —Adam Smith,9 18th century political economist

In the course of the 1960s, the left adopted almost wholesale the arguments of the right,” observed Daniel Patrick Moynihan, a domestic policy adviser to all three of the decade’s presidents. “This was not a rude act of usurpation, but rather a symmetrical, almost elegant, process of transfer.” Exaggerating for effect—but not to the point of inaccuracy—Moynihan remembered that by decade’s end, “an advanced student at an elite eastern college could be depended on to avow many of the more striking views of the Liberty League and its equivalents in the hate-Roosevelt era; for example that the growth of federal power was the greatest threat to democracy, that foreign entanglements were the work of demented plutocrats, that government snooping (by the Social Security Administration or the United States Continental Army Command) was destroying freedom, that the largest number of functions should be entrusted to the smallest jurisdictions, and so across the spectrum of this viewpoint.”2 Driven primarily by the expanding war in Vietnam, this new current on the left took up individualistic and anti-statist themes that were once the province of the right. Another part of this convergence was the rise of the economics profession. The new economics appeared a success on its own terms; growth had picked up across the Kennedy years. By 1965, GNP had increased for five straight years. Unemployment was down to 4.9 percent, and would soon drop below the 4 percent goal of full employment. As James Tobin reflected, “economists were riding the crest of a wave of enthusiasm and self-confidence. They seemed, after all, to have some tools of analysis and policy other people didn’t have, and their policy seemed to be working.”3 With institutional economics a vanquished force, most economists accepted the tenets of the neoclassical revolution: individuals making rational choices subject to the incentives created by supply and demand. Approaching policy with an economic lens cut across established political lines, which were often the creation of brokered coalitions, habit, or historical precedent. Economic analysis was at once disruptive, since it failed to honor these accidental accretions, and familiar, since it spoke a market language resonant with business-friendly political culture.4 Amid this ideological confluence, Friedman continued his dour rumblings and warnings. Ignoring the positive trends in basic indicators of economic health, from inflation to unemployment to GDP, he argued fiscal demand management was misguided, warned Bretton Woods was about to collapse, predicted imminent inflation, and castigated the Federal Reserve’s basic approach. Friedman’s quixotic quest—and the media attention it generated—infuriated many of his peers. Friedman, it seemed, was bent on fixing economic theories and institutions that were not broken.

Moneylenders have always received a bad press. Over the centuries all – well, nearly all – the greatest minds have been aligned against them. Aristotle, Plato, St Augustine, Thomas Aquinas, Dante, Luther and Shakespeare have each had a go at the wretched usurer. Criticism has come from the left and from the right. Marx detested interest, but then so did Hitler. A few years ago, the Archbishop of Canterbury launched an attack on a UK payday lending firm, which he believed took advantage of the needy and desperate. ‘The War on Wonga’ (the name of the financial firm) is a campaign without end. Many economists, in particular the experts on inequality, side with the angels. The taking of interest is depicted as robbing the weak and the needy. What’s more, by demanding back more than has been given, the usurer stands accused of injustice.

hindrances and its inability to resume the path of economic growth. The United States had in truth become the greatest economic and military power in the world but had no interest in taking over the world’s leadership from the hands of Great Britain. History gives us examples of what happens when a global hegemonic power ceases to exercise its dominant role, either from isolationist self-interest or from simple weakness, while the emerging power does not have enough interest or strength to assume the leadership. Basically, the function of a hegemony is to provide what economists call “global public goods,” such as world public order via military supremacy or international institutions that facilitate orderly world trade, international law or the preservation of the environment. If no single power has the strength or interest to provide these global public goods, the most likely consequence is permanent conflict, global recession, genocides and, in the end, war. Furthermore, when the ambivalence of the world’s leader coincides with a medium-sized power harbouring pretension of domination in its region, as did Germany after 1925, the likelihood of a worldwide conflagration increases even more.

as the nuclear physicist Al Bartlett warned, ‘The greatest shortcoming of the human race is our inability to understand the exponential function

you were born in 1980, you have only a 50 percent chance of making more money than your parents. If you were born in 1950, you had a 79 percent chance, according to research done by Raj Chetty and his team of economists. That’s one hell of a drop over just three decades! Upward mobility in the United States was once one of the easiest accomplishments in the developed world. Now it’s ranked as one of the hardest.

The point of self-control isn’t simply to be more “productive.” People today don’t have to work as hard as Ben Franklin and the Victorians did. In the nineteenth century, the typical worker had barely an hour of free time per day and didn’t even think about retiring. Today we spend only about a fifth of our adult waking hours on the job. The remaining time is an astonishing gift—an unprecedented blessing in human history—but it takes an unprecedented type of self-control to enjoy it. Too many of us tend to procrastinate even when it comes to pleasure because we succumb to the planning fallacy when we estimate “resource slack,” as behavioral economists term it. We assume we’ll magically have more free time in the future than we do today. So we

The Worldly Philosophers by Robert Heilbroner. For people who want to operate on the B and I side, his book is a must-read, for it traces the greatest economists of all time, starting with Adam Smith who wrote The Wealth of Nations.

The only major cycle pointing up is the 500-year cycle, and that’s why I don’t see the deep economic and financial crisis ahead as the end of the world as we know it, as some of my bearish colleagues would have us believe. It’s criminal that the president and his men and women (and, in fact, all world leaders and their “support staff” and their economists) can’t see what’s right in front of their faces! The worst years for these Four Fundamentals will be between late 2017 and early 2020. Period! There will be aftershocks into at least late 2022, before three of my four cycles turn back up again together. The demographic cycle turns up around 2023. The Geopolitical Cycle and the Boom/Bust Cycle turn up again after early 2020. Only the Innovation Cycle continues to move sideways until 2032–33.

To quantify the power of peer-group pressure, economists studied a group of Chilean street vendors, seamstresses, and other low-income “microentrepreneurs” who had received loans from a nonprofit group. These people, mostly women, met in groups every week or two to receive training and to monitor the repayment of their loans. The economists Felipe Kast, Stephan Meier, and Dina Pomeranz randomly assigned these people to different savings programs. Some were simply given a no-fee savings account; others received the account plus the opportunity at their regular meetings to announce their savings goals and then have their progress discussed. The women subject to peer scrutiny saved nearly twice as much money as the others. The result seemed to confirm the power of the group, but where did the power come from? Could these effects be achieved with a “virtual peer group”? In a follow-up experiment, instead of discussing their savings out loud at a meeting, the Chilean women regularly received text messages noting their weekly progress (or lack thereof) along with information on how the rest of the savers in their group were doing. Surprisingly, these text messages seemed to be about as effective as the meetings, apparently because the messages provided the women with a virtual version of the same key benefits: regular monitoring and the chance to compare themselves with their peers.

Think of Eric Clapton on that Saturday evening as a repentant sinner who is literally on the road to salvation, like the hero of Pilgrim’s Progress, the seventeenth-century allegory. Suppose that he, too, is journeying toward a Celestial City. While traveling through the open countryside, he can see the city’s far-off golden spires and keeps heading in their direction. This evening he looks ahead and notices a pub, strategically situated at a bend in the road so that it’s directly in front of travelers. From this distance it looks like a small building, and he still keeps his eyes fixed on the grander spires of the Celestial City in the background. But as Eric the Pilgrim approaches the pub, it looms larger, and when he arrives, the building completely blocks his view. He can no longer see the golden spires in the distance. Suddenly the Celestial City seems much less important than this one little building. And thus, verily, our pilgrim’s progress endeth with him passed out on the pub’s floor. That’s the result of hyperbolic discounting: We can ignore temptations when they’re not immediately available, but once they’re right in front of us we lose perspective and forget our distant goals. George Ainslie, a renowned psychiatrist and behavioral economist with the Department of Veterans Affairs, worked out the mathematics of this foible by using some clever variations of the familiar experiments testing long-term and short-term rewards. For instance, if you won a lottery with a choice of prizes, would you prefer $100 to be paid six years from today, or $200 to be paid nine years from today? Most people will choose the $200. But what if the choice were between $100 today and $200 three years from today? A rational discounter would apply the same logic and conclude once again that the extra money is worth the wait, but most people will instead demand the quick $100. Our judgment is so distorted by the temptation of immediate cash that we irrationally

The mind of the true economist is a sieve which lets everything fall through except that which is of use to him in the business of his life. He also employs only necessary words, and does only necessary actions, thus vastly minimizing friction and waste of power.

NOBEL-PRIZE-WINNING economist Herbert Simon introduced the concept of ‘satisficing’ into the science of problem solving. His point was that the solutions preferred by business, throughout human endeavours and by the mind itself are not usually the best ones but the good-enough ones – the ones that ‘satisfice’ the need rather than perfectly satisfy it.

As numerous economists and positive psychologists have observed, globally we make the mistake of becoming less social the richer we become as individuals, and as a society. As Weiner observes: “The greatest source of happiness is other people—and what does money do? It isolates us from other people. It enables us to build walls, literal and figurative, around ourselves. We move from a teeming college dorm to an apartment to a house and, if we’re really wealthy, to an estate. We think we’re moving up, but really we’re walling off ourselves.

As Smith put it: “Every individual . . . neither intends to promote the public interest, nor knows how much he is promoting it . . . he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention.”5

Speaking in a city on the precipice of disaster, the British economist hazarded a counterintuitive prediction. By 2030, Keynes said, mankind would be confronted with the greatest challenge it had ever faced: what to do with a sea of spare time. Unless politicians make “disastrous mistakes” (austerity during an economic crisis, for instance), he anticipated that within a century the Western standard of living would have multiplied to at least four times that of 1930. The conclusion? In 2030, we’ll be working just fifteen hours a week.

The full treatment of the formal theory of how to make decisions in risky situations—called expected utility theory—was published in 1944 by the mathematician John von Neumann and the economist Oskar Morgenstern. John von Neumann, one of the greatest mathematicians of the twentieth century, was a contemporary of Albert Einstein at the Institute of Advanced Study at Princeton University, and during World War II he decided to devote himself to practical problems. The result was the 600-plus-page opus The Theory of Games and Economic Behavior, in which the development of expected utility theory was just a sideline. The way that von Neumann and Morgenstern created the theory was to begin by writing down a series of axioms of rational choice. They then derived how someone who wanted to follow these axioms would behave. The axioms are mostly uncontroversial notions such as transitivity, a technical term that says if you prefer A over B and B over C then you must prefer A over C. Remarkably, von Neumann and Morgenstern proved that if you want to satisfy these axioms (and you do), then you must make decisions according to their theory. The argument is completely convincing. If I had an important decision to make—whether to refinance my mortgage or invest in a new business—I would aim to make the decision in accordance with expected utility theory, just as I would use the Pythagorean theorem to estimate the altitude of our railroad triangle. Expected utility is the right way to make decisions.

If our greatest need had been information, God would have sent us an educator. If our greatest need had been technology, God would have sent us a scientist. If our greatest need had been money, God would have sent us an economist. If our greatest need had been pleasure, God would have sent us an entertainer. But our greatest need was forgiveness of sins, so God sent us a Savior. Jesus Christ is the source and summit of our life. (Venerable Fulton J. Sheen)

today’s greatest commodities aren’t physical objects, they’re ideas. Economists use the terms rival goods and nonrival goods