Economics and the hidden order

Economics and the hidden order

The “real world” is calling. But the real world is a real mess. So how do we clean up the mess? That’s a massive task: too big for any one person. This looks like a job for policy.

Good intentions do not equal good results

Maybe we should have universal free college, or at least student loan forgiveness. And how about universal health care, or even a universal basic income? Maybe with the basics covered, adulting would be manageable. Just think of all the potential that would unlock. Wouldn’t we flourish more as a society if we had a system based on people caring for and helping each other?

You’ve heard good-hearted people offer solutions like these, and they seem hopeful. But one doubt keeps nagging at you: will it work? Well-intentioned policies have failed before. How can we know if these policies won’t make things worse?

Economics is a toolbox and a superpower

To solve any problem, it helps to have the right tools. For over two hundred years, deep thinkers have been developing a set of mental tools for thinking clearly about these problems. That mental toolbox is called economics.

Economics is a superpower. Understanding it is like having enhanced vision. When you look at the world around you—full of human beings working, studying, fighting, falling in love, and just living—economics helps you see things that are invisible to most people.

And economics is within your reach: much more so than you might think. The best way to learn economics isn’t memorizing equations or staring at charts, but considering stories. Often thinking carefully about a story (even a fictional one) about humans making choices is all it takes to gain a mind-blowing economic insight that radically clarifies the way you see society.

And seeing things clearly is the first step to dealing with any mess: both for finding a path through it and for cleaning it up. Economics can help navigate the real world, and it’s absolutely necessary for choosing policies to make it a better world.

And, for me, the most wonderful thing that economics helps you see is that some “messes” are illusions: that beneath the seeming chaos lies a hidden order that is beautiful and awe-inspiring to behold.

Sometimes the economy looks chaotic and cruel: a wild jungle of arbitrary buying and selling, hiring and firing, making and taking. Who wouldn’t want to civilize such a wilderness with caring and rational plans like all the “universal” policies mentioned above?

But seen through the lens of economics, the world of commerce actually makes sense. More than that, it is revealed to be amazingly coordinated and wonderfully benevolent.

The global market dance

The global market economy is like a vast improvised dance in which billions of complete strangers help each other. The dancers constantly change partners. With every subtle movement, every exchange, partners communicate to each other how best to address each other’s needs. Not only that, but each gesture sends a signal to millions of other dancers, offering guidance on how they can best contribute.

But without economics, you can’t see the dance. The market may look to you like a mad scramble, or even worse, a war of all against all. That’s why policy solutions can be so attractive. The situation seems to call for some choreography.

So you want to delegate power to economic choreographers to prescribe and correct the dancers’ moves.

A dance of billions is too complex to choreograph. Efforts to do so only cause the dancers to stumble over each other.

Distracted by the choreographer’s commands, they lose touch with the delicate give-and-take of the dance floor.

Then things get even worse. The choreographers respond to each stumble by meddling even more, causing even more missteps. Eventually, the dance devolves into either a lockstep march or a riot: exactly the state of affairs you wanted to avoid.

What is especially tragic about this, is that the dance—the unseen order of the market economy—is how humanity has reached its greatest achievements. And we have achieved much, especially recently.

Higher quality of life thanks to markets

Indeed, making a living is hard. But it’s not nearly as hard as it used to be. For most of history, the vast majority of humanity lived in crushing poverty.

But today, for people living in market economies, basics like food, clothing, shelter, and household items are vastly easier to come by—and in much greater quality and variety—than they were two hundred years ago.

And what “living” is has been radically enhanced in many ways. We have gadgets and services that only decades ago were the stuff of science fiction.

In video games, we can explore vast photorealistic fantasy worlds. We carry supercomputers in our pockets that connect us to the internet, which is a global forum and marketplace of over 3 billion people and gives us free, instant access to a storehouse of knowledge equivalent to millions of libraries.

By tapping on our personal supercomputer a few times, we can summon to our doorstep, within a matter of days or even minutes, anything from a vast selection of products and services: from gourmet sushi, to robot vacuum cleaners, to a ride to tonight’s concert.

As economics can help you see, the market economy is a universe of opportunities to help others and be helped in return.

As economics can help you see, all of these wondrous experiences were made possible by the invisible order of the market. When you learn to see that, the economy transforms from something to be feared, resented, and fought into something that inspires awe and gratitude. And that is a much more uplifting mindset.

It is also a more empowering one. Economics can help you see the market for what it really is. Not a battlefield. Not a dog-eat-dog jungle of predatory exploitation. Not a heartless system built to chew up and spit out your hopes and dreams.

As economics can help you see, the market economy is a universe of opportunities to help others and be helped in return. When you learn to see it that way—the “real world” of work and enterprise will look a lot more engaging and meaningful. And you will see “adulting” as a lot more doable, interesting, and exciting.

Excerpt Dan Sanchez essayist, editor, educator