Garrison Keillor of Prairie Home Companion fame likes to point out that we can admire the college diplomas on our walls all we want, but if we’re honest with ourselves we admit we couldn’t pass those same tests today if our lives depended on it.
This is doubly so for courses we took that weren’t in our major field of study. As a case in point, it was my pleasure to have taken three economics courses. They were instructive, enlightening and even fun, but today it would take all three courses and a bit over a dollar for me to buy a cup of coffee, as the saying goes.
Those classes notwithstanding, some of my most important lessons in economics were from a little book titled “Economics in One Lesson” by Henry Hazlitt. It is great reading and has the advantage of not taking very long to do so.
An even shorter and more direct economics lesson came from my mother, an avid shopper. Years ago, she walked into a large department store intending to buy something but after a while looked around and noticed she was alone. Upon realizing there were no other customers in the store, she decided everyone must know something she didn’t and went home.
What was true for my mother is not just so for my mother, it’s true from her level right up to the most sophisticated macroeconomics. What is this great truth?
In a way, the world of economics is a house of cards whose foundational stability depends on a kind of mass psychology. If people feel good about it, the economy is secure. If they become fearful, it may teeter. When panic ensues, it tumbles to the ground.
It is for this reason our nation’s latest excursion to the edge of the financial cliff just about worried me silly.