Criticism of Crash Course Economics, Episode 1

I was asked by Gary Grimes of Crash Course Criticism what I thought of the first episode of Crash Course Economics, a sub-series of the popular YouTube channel CrashCourse. Needless to say, what CrashCourse viewers will learn over the 40 week course resembles economics in name only. I dissect Episode 1 below.

Jacob Clifford and Adriene Hill of Crash Course Economics claim they will be teaching YouTube viewers economics over the next 40 weeks. This is an untrue statement. It’s an untrue statement, because if Episode 1 is any indication, what will be taught–and frighteningly, learned–in this web series is not economics.

Jacob and Adriene’s misunderstandings lie in a few different areas. At one end, they mistake entrepreneurial forecasting and political decisions for economics, while at the other end, they shred the philosophical foundation of the science. In this hostile environment, the science of economics has a slim shot at survival.

Let’s start at beginning. Jacob identifies two “assumptions” in economics, the first of which is “scarcity.”

Scarcity is not an assumption. Scarcity is a reality.

Men (and women) have unlimited ends and limited means with which to achieve those ends. These means are necessarily scarce. This is a fact of life, not an assumption.

Jacob’s second assumption is that “everything has a cost.” Well clearly, if means (including time) are scarce, then men must ordinally rank (1st, 2nd, 3rd…) the ends they would like to achieve in the order that they would like to achieve them. In other words, the individual must choose one end over another, over another, and so forth. The first end foregone (2nd ranked end) is the cost of obtaining the first-ranked end. Therefore, scarcity implies cost, because man must choose one end–instead of another–to achieve first. Therefore, cost is a fact of life too, not an assumption.

That Jacob first identifies assumptions, rather than axiomatic facts, as the foundation of his explanation of economics reveals his methodological viewpoint. What does this mean? This is important to understand: not all economists–or at least, those who claim to be economists–think the same way. Their methods, their mental tools of investigation, their methodologies, differ. You can see that Jared approaches economics as a scientist might with any other physical, “hard-science” field, with the Scientific Method (or what is technically “verificationism”).

A famous economist writes, “it is a mistake to set up physics as a model and pattern for economic research” (Human Action, p. 6). The scientific method (verificationism) is appropriate for the physical sciences, because it’s subjects aren’t human. This sounds silly, but it’s implications are vast. Chemicals, electricity, rocks, and other elements of nature do not act. Humans are unique in that they are capable of cognition, identifying ends and ranking them according to their preferences. This fundamental distinction means that the method of study in the physical sciences is not appropriate for the social science of economics. After all, its subjects–humans–are inherently different than the subjects of the physical sciences.

The notion that we must analyze our world with two different methodologies–one for the physical sciences, and one for social sciences–is known in epistemology (the study of knowledge) as “methodological dualism.” Methodological meaning method. Dualism meaning two.

So if the scientific method is appropriate for the physical sciences, then what is the appropriate method for the study of human action? Economist Ludwig von Mises, building on his predecessors Carl Menger, Eugen Bohm-Bawerk, and others, gave an answer: praxeology.

In the final sentence of the introduction to the appropriately titled Human Action, Ludwig von Mises mentions praxeology for the first time:

“No treatment of economic problems proper can avoid starting from acts of choice; economics becomes a part … of a more universal science, praxeology.”

Thus, economics is a branch of the study of the action of choosing, praxeology. Economics in particular consists of the logical application of the fact that humans act and choose to a real, material world of scarce resources. Successively adding logically deducible–and thus equally true–statements to this initial observation is the process of building economic theory.

For example, we deduce from the fact that individuals have unlimited ends and only scarce means that individuals rank their ends in the order in which they would like to satisfy them. From this we may deduce that the satisfaction obtained from achieving the first end must be greater than the satisfaction obtained from achieving the second ranked end (otherwise the ranking would have been flipped). That successively lower ranked ends yield lesser satisfaction is known as the Law of Diminishing Returns.

It’s likely that this law will be mentioned by Jacob in the future. It will be interesting to see whether he understands it as I do.

Let’s turn to Adriene.

Despite claims that they won’t be pushing political positions, Jacob and Adriene smuggle plenty into their analysis. Remember the real-world examples Jacob and Adriene use? They include fatalities on highways, social services like feeding the hungry as the alternative to military spending, education policies that cause unintended outcomes in public universities, and what tools are best to combat climate change.

Do you notice anything here? All of these examples have to do with goods or services provided by government. Jacob and Adriene fail to understand that government involvement in these areas perverts the natural economic order. The source of the government’s revenue is extracted by force, rather than voluntarily contracted for. Remember, economics is about human choice. Government is the opposite of choice. You can think of it this way: the greater government involvement in a particular sector, the greater the perversion of what would otherwise, naturally occur.

Of course, proponents of government activity acknowledge this, and they are equipped with all sorts of contrived, academic excuses for why intervention is necessary, or at least justifiable. I have no doubt that these excuses for government intervention will be discussed later on Crash Course, so I’ll cover them later. At this point, it is sufficient to point out that it has merely been asserted–rather than argued–that government should be involved in these industries in the first place.

To then claim that government must provide good X or service Y is to smuggle in political and ethical judgements about how good X and service Y should be produced.

However, as we will explore later in the series, there exists a whole structure of economics, built up with the proper praxeological method that explains how individuals can achieve the greatest prosperity through peaceful, voluntary exchange. But I will warn you now, as Jacob proclaims, “the free market alone can’t solve all of our problems.” I predict (not in the capacity of economist, mind you) that Crash Course economics will air its fair share of excuses for various sorts of government intervention. So, from time to time I’ll try to “correct course,” and get us back to real economics.