Presumably it is least understood that it is a social science. Similar to psychology, sociology, anthropology, etc.
The difference with all others is that economics describes human behavior that is expressed with numbers, and therefore resembles exactly, or resembles a beta science.
Economics is a behavioral science, a social science, studies and reports on the why of decisions etc.Its purpose should be to repeat successes in the future and to avoid misses.
Indeed, to give this ‘ gentle ‘ science some academic allure to earn a place in the positive sciences, much is written, backed by countless graphs and tables for which the unsuspected possibilities of Spreadsheet programs does not shy.
A good economist is that these efforts are so often in vain.Those who do not know the past cannot estimate the future. Yes, there is a thing to say about it. Why do those darn well-paid gurus succeed in America, if you look closely at it, also do not point to the path to follow?
The wise economist Knoweth where the shoe is wrinting: those devilish ‘ external factors ‘ are constantly changing.Epictetus knew it already. Epictetus knew that No 10 or 50 centurions with each 100 brilliant economists and each led by the brightest centurions could change something there.
What both Epictetus and The Economist knew was: ‘ Afterwards you knew everything in advance. ‘
One of the things that is becoming increasingly relevant today is that it is producing goods and services, rather than jobs.
If you leave a train with or without a driver, the result is just the same (although the train without a driver may be safer).
If a car is produced by a robot or a human, the result is the same.
We are seeing a shift of production as a threat, while it is not inherent, on the contrary.That threat only exists because we see employment rather than production as the engine of the economy.
As far as I am concerned, there are two things that are not well understood from the economy.
Henk and Bernard, the other people who have now replied, are rightly making the relationship to social science.
In essence, economic science examines how people come to choices in fulfilling needs, and the consequences of these choices.
We can see “prosperity” as the extent to which primary and secondary needs are foreseen, and money as the means by which people make choices.
Like any other science, we start with an observation, ask questions, make a hypothesis, we do tests to see if the hypothesis is correct and on this basis we formulate a theory, preferably also stating under which conditions the theory does not Position (more), allowing others to investigate further to refine the theory.
If we find that certain things are always in a certain way under certain conditions, we can speak of a scientific law.
The first point which is not well understood by the economy is what I have described above.An economic legality is that a company cannot exist without a source of income.
An economic theory is based on such laws, and seeks the statement.How is it that companies cannot exist without a source of income. A theory can be: even though the land would be free and we use slaves for making the product, then we still need to feed the slaves, and if not, we need to find new slaves. Income is needed for both food and finding slaves. This theory can be based on very many observations.
In this respect, economy is a harsh science, there are a lot of these kinds of laws to be found in the choices people make.
The second point is directly related to this.
Do we know how an earthquake comes about?Yes. Can we determine the strength? Oh, that’s already harder. Can we determine to the second when the earthquake takes place? No, or at least not yet.
How is this?Because an earthquake depends on a lot of factors, and we cannot measure these factors in detail. The same applies to volcanology.
Then it is weird that geology is put down as hard science and economics as soft science.Both have to do with legalities and we can make predictions, but both also deal with uncertain factors.
But where no one is blaming geologists for a volcanic eruption or earthquake, economists get the crap bucket over them when once again something is going on in the economy.
Were there people who saw the mortgage problems in the United States coming?Yes, there were a lot. Were there people who saw the problems surrounding the Credit Default Swaps? Yes, again very much. Why did those people do nothing? That is the same question as asking why people in the Bay Area continue to live in the United States. They are on an active fault line with very high risk of an earthquake, and potentially a deadly earthquake.
Yet there are plenty of reasons to keep living.
This is exactly the economic problem: why do people make this choice?Why do they take this risk? Why do people sometimes behave like herd animals (think of the Bitcoin hype) while they are not able to overlook the risk? The answers to this are not to be found in economic science, rather in psychology or sociology. But it has a result what is to express in value. Living in Bay Area is worth something for these people. It delivers a lot of fulfillment of needs, and this is to express in Money. This is the field of study of economic Sciences: are we able to express human choices, the leads for the choices and the consequences of the choices in an absolute (as opposed to subjective) unity?
When we look at the economy or subtopics in this way, things suddenly become clearer.If the stock exchange is “volatile”, this is nothing more than a reflection of uncertainty. People don’t know for sure what something is worth, and that is out of focus in volatility, relatively large movements of the price of shares. As the certainty increases, volatility decreases. An event may introduce uncertainty, or there are reports that show that the alleged certainty is a sham certainty. Then uncertainty increases, and with it the volatility.
The biggest problem for economic sciences is that there is a huge “political” load around it.Choices are expressed in money, and the result is also expressed in money. If you make the wrong choice, the result is negative and you will be charged. This applies to governments, businesses and individuals. It is a world of probability, where we can determine that something is going to happen, but not exactly when and with what exact impact. As a scientist, you are settled on the uncertainty when you make public statements, and all when you take decisions based on these sciences. Think of Trump’s “condemnation” towards the FED at the recent interest rate increases.
People do not understand the economy well because it seems simple but underwater is enormously complex, and because they do not understand that it is a science that expresses choices in non-subjective value, but with an uncertainty factor.This is too abstract for many people, and irrelevant to their daily choices.
Money and the value of money is the least of all understood of the economy, I believe.
In our daily use of money we do as if our currency always remains the same, while we constantly complain that “everything” becomes more expensive.
A statement by an Italian states: “Buy houses, which always rise in value.” No, they rise in price, but their value remains more or less the same.When Italy still paid with the lira, the lira was notorious for its great inflation.
A fist rule says that every 30 years approximately doubles in price.When you speak to old people, you sometimes hear statements in the sense of: I bought my house for 30,000 guilders or inaccurately converted 15,000 euros or 600,000 Belgian francs.
The reason for inflation is even less understood, but we leave it undiscussed, because we cannot benefit from that science.
But with the realisation that money is constantly worth less, our saving behaviour can change.Most readers will not change anything or save less and spend more. Few will cross their money into tangible valuable goods. In things that are more or less immune to inflation and can be remonetized later.
Long and good stories.But the least understood notion in the economy is the word: value.
- Is that a number of euros?
- Is that what you could do with the money?
Eco Nomie.Life (ECO) in appointed affairs (Nomie).
It makes many things similar, we think. How many loads is your new car worth?No idea…. Both put in euros and you know. It is also interchangeable, by baking bread you can buy a car.
Yet again a story.But the answer is only one word: value.