While working on HoundWire I would often go to Park Bench Deli (a few blocks up the hill from where that photo was taken) in Altadena with various interesting people. One fellow diner was our intern from Caltech. Caltech is the west coast rival of MIT so they have some very smart professors wandering the halls. One out of every thousand alumni has received the Nobel Prize. The point is that the professors there know a little bit about what they teach.
To the story. Stephen, the undergrad, had a math class that was being taught after an economics class. The econ teacher inconsiderately left his scribbles on the chalk board for the math professor to deal with. According to the story the math professor walked in, looked at the econ equations for a minute, turned to the class and proclaimed “This is complete nonsense”.
A great analogy I heard about economics is that of a book report. Modern economists look at novels, run statistical analysis on the average words per paragraph and paragraphs per chapter. It’s all very scientific, high brow stuff based on calculus. Then they use that information to try to predict what the author’s next novel will be about. Of course that’s completely ridiculous but it explains why economists have predicted 9 of the last 4 recessions.
The Austrian School argues that you can’t predict the author’s next book unless you understand human nature. One of the most important books in the Austrian School is called Human Action by Mises. It just makes sense in my not yet well enough read opinion.
If you have an hour to kill I highly recommend this 70 minute podcast about the Austrian School from the Econ Talk website:
I’ve listened to it about 4 times and it’s sinking in. Good for long, caffeinated drives.