Once, in the brashness of youth, I thought I would write a book on capitalism and economics. For some context, my thought on economics are influenced by Henry Hazlitt, Ludwig von Mises, and Ayn Rand. I know that such a mix won't be to everyone's taste.

My goal was to make economics fun, accessible and interesting to the layman who otherwise has little economic knowledge or interest. I do not believe that the math-driven econometrics that dominates news head lines is really economics at all and wanted to provide the reasoning to support this and the conceptual tools for understanding economics as it really is--the study of humans acting to better themselves by exchanging value.

The following is the beginning of that book which I never completed.

Introduction

This book is about economics and capitalism. Wait, wait, don't go yet...they're very important subjects, and if you don't understand them then people will use fancy words and flashy diagrams to trick you about matters of great importance, the cost of which is very high. "Which people" I hear you ask, "and what tricks?" The answer to which people is all those people who want to separate you from your money and liberty, and the answer to what tricks is through the hijacking of language and confusing mathematical reasoning.

You might have a low of opinion of economics, especially if you have taken an Economics 101 class at college and listened to the the teacher drone on about aggregates and utility curves. You might even be scared of economics, especially if you've cracked open a thick tome at the library only to be confronted by dry text and enough impenetrable math to make you wince. Let me reassure you, gentle reader, economics—real economics—is none of these things.

But economics gets off easily when compared to capitalism. Gosh...whole nations have shuddered at the thought of capitalism. Some cry capitalism "exploits the working classes", and others that it "makes the rich richer, and the poor poorer". Let's not forget the cry of the new Marxists, that if capitalism was unbridled the earth would become an arid waste-land of commercialism, our natural resources held at ransom by Lex Luther style businessmen charging five dollars for every glass of water we want to drink. The irony is that capitalism is the greatest good known to man. It is not because of labour unions that I can spend a lazy week-end writing a book on economics, it is because of capitalism. It is not because of philanthropy and government largess that the average life expectancy for most of Europe is 80+ years, it is because of capitalism. It is not because of DARPA and government investment in technology that I have a computer and high-speed Internet access, it is because of capitalism.

This book will set the record straight—you don't need to be afraid of economics and capitalism.

What is Economics?

Economics is the dismal science, at least according to Scottish historian Thomas Carlyle, and economists seem to take much glee in saying so. Mr. Carlyle was wrong though, as economics can be fascinating. So what is economics? Laymen might say economics has to do with money, and that it is boring and complicated and better left to the central bank to deal with. If you ask an economist or crack open a dictionary (whom am I kidding, by "open a dictionary" I mean "ask Google") you'll get dozens of different answers, they'll probably throw around terms like "production", "supply", "consumption", "demand", but they fail to characterize the essential nature of economics.

There are many definitions of economics, and if you ask your friends what it is then you'll likely hear many different answers. Economics is a science, and its subject of study is people. Economics, however, does not study people in the same sense as biology does, which studies the physiological functions of the body, and it does not study people in the same sense as sociology does, which is a pseudo-science studying "social phenomena". Economics, as a science, studies purposeful human action; that is, economics studies men employing means to achieve ends. An end is any state of affairs that a man deems more satisfactory than the current state of affairs, and a means is the chosen method for attaining an end.

The essential nature of economics is purposeful human action. Yes, it really is that simple. To understand the nature of human action and the corollaries that must logically follow, is to understand all of economics. You might think this definition is naive, and it is; however, it is also correct. All those sophisticated and wordy dictionary definitions of economics that start with "production" and "consumption" jump the gun, forgetting that economics is simply people acting to satisfy themselves. What sort of sophistication makes people forget economics is about what people do?

What About The Math?

This book doesn't include any mathematical descriptions of economic theory. This isn't because I'm trying to shield you, the gentle reader, from the horrors of secret economic math, but because economics isn't math. Math is a tool of the physical sciences where there are countable and measurable qualities, but economics studies human action, and as humans can't be described or explained entirely in physical terms (such man's qualities of life, consciousness, and volition) those methods that can explain and describe only the physical are unsuitable.

Mathematical Models

Some people think everything can be reduced to mathematics, that numbers can explain and describe exactly everything from the behaviour of atoms, the motion of the stars, and the nature of man. The ancient Greek followers of Pythagoras thought so too (the belief that all of reality can be expressed mathematically is light-heartedly called the "Pythagorean fallacy"), and were so incensed when Hippasus proved them wrong with his discovery of irrational numbers that they threw him overboard from the boat he was travelling on at the time. An irrational number is any number that cannot be expressed as the fraction m/n, where m and n are whole numbers and n is not zero.

Pythagoras discovered that for any right-angle triangle where a and b are the legs leading from the right angle, and c is the side opposite to the right angle (the hypotenuse), a² + b² = c². This led immediately to the discovery that for an isosceles right triangle, where a = b, there is no unit of measure that can measure both a leg of an isosceles right triangle and the hypotenuse. If a and b are 1, then c would be the square-root of 2, which starts with 1.41421 and has following decimal places going on forever. An exact value cannot be calculated for the square root of two—it is "irrational". When the measurement of such irrational relationships must be used, mathematicians use very close approximations (such as Pi).

There are many economists who believe the product of economics should be a mathematical model describing the market, like a mathematical model in physics might describe the path taken by a billiard ball bouncing off the cushions of a snooker table; but how can mathematics describe living people if it can't accurately describe an isosceles right triangle? Simple—it can't.

Statistics

There is another problem with trying to apply mathematical methods to economics. Economics is about purposeful human action, which means men acting now to achieve a more satisfactory state of affairs in the future, but all mathematical data and statistics gathered about the activity of men is, by necessity, historical. That is, any recorded data, such as one thousand people bought new cars in the city of London in the month of January of 1997, is nothing more than documentation of some past event. As the great economist Ludwig von Mises said of mathematical methods:

"...the alleged 'correlations' and 'functions' do not describe anything else than what happened at a definite instant of time in a definite geographical area as the outcome of the actions of a definite number of people"

—Ludwig von Mises, Human Action, p. 347

Statistics and observations of past human action contribute nothing toward economic theory.