In 2007 while I began teaching corporate finance and investment banking classes, I created a simple website called IBankingFAQ for my students to help guide them through and prepare them for the investment banking recruiting process. That site has grown into one of the most widely visited online resources about the investment banking industry and led to me authoring the book, How to Be an Investment Banker. Ever since then, I’ve been meaning to create a companion site about economics but I kept getting distracted by various other projects. Well, now it is 2015 and finally, I’m getting around to it.
While IBankingFAQ has a narrow focus geared towards students recruiting for investment banking, this site has a much broader focus. My not so humble goal is to, well, explain all of economics. Now you may be wondering why does the world need yet another economics resource when there are countless websites, blogs, books and periodicals covering this topic. Allow me to explain.
First, I believe that an awful lot of what is considered mainstream economics is flat out wrong. From the definitions of rationality and value to the causes of recessions and income inequality. From an understanding of inflation and deflation to the long-term drivers of economic growth. On these key issues, and many, many more I disagree with the mainstream economics you learn in school and with the economic commentary you read in the mainstream media.
As you will see, I am highly biased. Biased towards free markets, biased towards limited government, biased against active monetary policy and biased towards long-term, though not necessarily short-term, growth. There exists a view that economics is more faith than science. I tend to agree. And like all economic commentators, I believe that my economic faith is the one supported by evidence and by history. I’ll do my best to show you that. But I want you to make up your own mind. So wherever I do disagree with mainstream economics, I promise to try to both explain the mainstream view and explain why it is that I dissent.
We seem to be at the beginning of an intellectual and political war against capitalism. Or perhaps that war began the day after Adam Smith published “The Wealth of Nations” and we’re just at the start of its latest battle. Either way, tepid economic growth, declining middle class wages, rising income inequality, the expansion of Wall Street and the contraction of Main Street have led to a vocal chorus of criticism against the free market, against capitalism.
These symptoms of a broken economy are real, but the root causes are not too much free market but too little. We should be railing not against capitalism but against the pervasive and overwhelming crony capitalism, big government, and socialistic monetary policy that rot the economic system and invert the incentives necessary for growth, for progress and for well being.
The free market is misunderstood, no less so than by most economists. As Adam Smith knew, this is in part because the workings of the free market are not intuitive, and therefore nor is good economic policy. That self interest leads to societal interest. That trade is beneficial to both the exporting country and the importing one. That declining prices can be a sign of progress not impending disaster. That immigration can create jobs. That falling wages can benefit workers. That promoting high growth companies can reduce overall employment. These are just a few examples of economic concepts that can be difficult to comprehend and challenging to defend.
But defend them we must. The battle for economic freedom must be continuously fought, especially in the face of today’s political trends. If not, we risk the continued stagnation, cessation and indeed reversal of economic progress, as is currently happening in the U.S. and elsewhere. Those few fighting to explain and to defend the free market are losing. But we mustn’t lose. Explaining the free market and defending free market principles is the second purpose of this site.
Third, I believe that even when the concepts are correct, economics is incredibly poorly taught. So I will try to explain basic concepts as simply as possible. No graphs, no equations, no fancy math, no unrealistic assumptions. And occasionally, I’ll even try to share some evidence. I will also try to point out something that economists are loathe to talk about: what is known, what is unknown, and what is, likely, unknowable. Nearly all economic policies and regulations, and especially monetary policies, are based on the unknowns and the unknowables. I want you to know that.
As for my qualifications to do what I aim to do? You’ll have to judge for yourself. You can read my brief bio, which I hereby amend to state that I have no PhD in economics, merely a useless undergraduate degree in the subject, and an even more useless MBA. What I write is what I’ve learned from a short stint at the Federal Reserve, a somewhat longer stint on Wall Street, some time spent teaching finance and a bit of experience as an entrepreneur and in the general business world. And most importantly, what I’ve learned from reading. Reading some economics, yes, but more so from reading history. Long story short, take it all with a grain of salt. But I’m sure you already knew that.
Finally, I ask you to remember that this site is a work in progress. Right now the content is very slim, but my goal is to cover basic economics (and related finance) a few posts, a few questions per week. I may, from time to time, add some posts about more topical discussions as well.
On any and all posts, I welcome and encourage your comments and questions.