[Bylund, P. L. (2022). How to Think About the Economy: A Primer. Auburn, AL: Ludwig von Mises Institute.]

Introduction

One thinks of a primer as an introduction to a field of study. Per L. Bylund has fulfilled what the title of his book states. Although this is a short primer, Bylund’s work is not an oversimplification. Readers will obtain a thorough introduction to how to think about the economy. The author writes within the framework of Austrian economics, so in his exploration of the economy he draws on such historical figures as Carl Menger and Ludwig von Mises, both to whom the book is dedicated. Some might think this is a bias, but how many economic textbooks are written from a Keynesian perspective for the purpose of describing the “economy”?The Keynesian perspective, along with historicism in the social sciences, floods the universities. This primer is theoretical, building on the axioms of Austrian economics put forth by Menger, von Mises, Rothbard, and others.

The Primer at a Glimpse

Bylund divides his work into three major sections: 1) Economics; 2) Market; and 3) Intervention. In each section he introduces readers to the major elements of economics, explicated from an Austrian perspective. The following takeaways I provide regarding Bylund’s work merely scratch the surface of this excellent primer. If I succeed in piquing interest in people to read the book, then I will have more than satisfied my goal for this blog. If you champion the free market and desire a clear understanding of how the free market works, then this is a good starting point for anyone interested in economics, both as laypeople and for those starting out their journey on the road to becoming professional economists.

Six Takeaways from How To Think About The Economy

Economic Understanding Comes Through Economic Literacy

We live in an age where everything is politicized. And that is most definitely true about the economy. One can overhear debates regarding the market, government spending, inflation, etc., but the question that never comes to the surface is: how do you understand the economy? Per L. Bylund sets as the goal for his work to provide economic literacy. He would be the first to tell readers that they don’t stop with this book, but I believe it’s an excellent starting point, and that the author has fulfilled the goal he set for his readers. Through the three sections that divides the book, readers will learn what economics entails, what the market as a coordinated process involves, and how intervention affects markets.

Economics Is a Body of Theory

To properly study economics, one approaches the economy and the market from a theoretical orientation. Economic theory aims at helping people understand the working mechanisms of the economy. Without a theoretical foundation, one is speaking of a subject matter while standing over an abyss. Any theory should be coherent and based on first principles. These first principles, if flawed, my produce a theory, but it will be one that is not accurate. As I stated in the introduction, Bylund writes from the perspective of Austrian economics because he holds that Austrian theory provides a correct understanding of economics. He, therefore explicates the axiom of human action proffered by Ludwig von Mises as a first principle for economic theory.

Economics Is a Social Science, Not a Natural Science

For quite sometime, and it is still true today in many circles, social scientists have experienced the step-child syndrome in relation to the natural sciences. Because of this feeling of inferiority, many social scientists sought to incorporate the methods of the natural sciences into the social sciences. Such methodological procedures led to the rise of scientism and positivism. Hence, the very notion of science became misdefined. Bylund makes it clear from his discussion that the social sciences, and thereby economics, require a different methodological approach than the natural sciences. Drawing on Ludwig von Mises, Bylund discusses the a priori method that fits the social sciences, thereby truly defining any science as that which describes reality.

The Market Is a Process, Not a Factory

The market is a coordinated process among many entrepreneurs. Economic theory in describing the market, seeks to explain not merely the existence of goods, but how those goods got to the market via production and the savviness of entrepreneurship. One firm does not stand alone. It depends on what other firms do so that it can produce its goods and get them to market. For example, the automobile industry manufactures automobiles. But it does not manufacture the steel, rubber, and glass that are needed for the production of automobiles. Other firms do that, not only for the automobile industry, but also for a host of other industries. Hence the market is a coordinated process whereby all firms produce to make the economy work. To have a sound understanding of the market, one must approach studying the market as a coordinated process among those who act to fulfill their goals. Otherwise, statements regarding the market will be inaccurate.

The Scarcity of Resources Is an Economic Reality

Production in the market takes place to meet people’s needs. Production is demanded for the very reason that resources are scarce. Hence, to understand the market, one must understand production, cost, prices, profit, and the role of entrepreneurs. To grasp the understanding of entrepreneurship, one must also understand the distinction between capital and consumer goods. In his section on the market, Bylund delineates through an Austrian theoretical framework not only these important elements of the economy, but also he provides a thorough introduction of the place that value, money, and economic calculation play in the market. This latter concept Mises developed in his argument against socialism.

The Free Market Must Be Understood Before One Understands How Intervention Effects the Market

The third and closing section of Bylund’s work addresses government intervention into the economy. Throughout the book, Bylund approached the study of the economy from a free market perspective. He did not do this simply to propagate a free market. Workings of the market apart from government and regulations must be made clear before we understand how intervention affects the coordinated process that makes up the market. Bylund explores two general types of intervention: monetary and regulatory. The major question that emerges regarding any type of regulation is how do bureaucrats in government know how to design and control for the “common good” the coordinated process that is the market? Bylund discusses the effects of these two types of regulation on the economy. In so doing he discusses the Austrian perspective on the boom and bust cycle in the economy. Additionally, he explores a major economic theme found in the Austrian economic literature known as the seen and unseen effects when regulators seek to design the economy. Carl Menger was one of the first economic theorists to write about the seen and unseen effects of regulations upon the economy.

Conclusion

As I stated in the introduction, these six takeaways from Bylund’s excellent primer does not do the book justice. This short 132 page-primer is packed in a well-organized and succinct introduction to understanding the economy. For those who are searching for a beginning foundation to economic literacy, they couldn’t do any better than Bylund’s primer. In addition to his introduction to the economy, Bylund collected a thorough bibliography that will serve as springboard into continued reading for those who want to build on Bylund’s solid foundation. I strongly recommend this excellent primer for those who want to know more about how the economy works, and for those who want to pursue their study of economics further. This work is Austrian economics. I would welcome seeing this framework for understanding the economy replace what exists in most universities.

[Per L. Bylund is a Senior Fellow of the Mises Institute and Associate Professor of Entrepreneurship and Johnny D. Pope Chair in the School of Entrepreneurship in the Spears School of Business at Oklahoma State University. He is also an Associate Fellow of the Ratio Institute in Stockholm. (This bio is from the Mises Institute at mises.org)].

John V. Jones, Jr. Ph.D./August 14th, 2023

ANALYSIS/ECONOMICS/BOOK REVIEW