Robert Wenzel’s Critique of Episode 2

Surprisingly, Crash Course has not released their video for episode 3 yet.  I’m pretty sure they record all of the episodes in advance, so I can’t explain why they didn’t release episode 3 Wednesday evening as per usual.  Perhaps the topic of episode 3, which was mentioned in the last video to be “how economic systems contribute to differences between countries,” contained some errors, and they are fixing it last minute.  I’ll try to get to the bottom of this by tweeting at the co-hosts and official Crash Course Twitter handle.

I’d like to take this time to talk about Robert Wenzel’s observations of the second video.


First, Bob also recognized the mediocre example of a pizzeria, where it isn’t so obvious that people have different skill sets, to describe specialization in trade.  He recommends a clearer example:

[People] might become doctors, they might become lawyers, they might become creative movie producers.  If they spend five years studying it and then ten years in the field, they’ve got a lot of knowledge.  That’s a lot of intellectual capital invested in that sector, so it doesn’t really make sense for them to go to another field.  In general, once someone starts down a road of specialization like that, it makes a lot of sense to generally stay in that direction.

Bob also mentions a school of economic thought that rejects specialization:

Karl Marx really didn’t understand specialization.  He thought that there would be a society where in the mornings, someone would be making pizza, in the afternoon working on a farm, and later in the day, working at a construction site.

The Marxian idea, in fact, would work best in a pizzeria.  One employee could very easily go from preparing the vegetables to making the dough to sweeping the floor without much difficulty.  It would be much more difficult to switch from farming to telecommunications consulting.

It’s not that you can quickly put people from this place to that place to the next.  It is knowledge of specific localities, it’s the knowledge that someone is familiar with doing something, it’s knowledge because someone has greater intellect or skills or whatever it might be.

I’m not a Marxist, but I would have liked for Crash Course to talk about different economic schools of thought on the subject of specialization.  Am I right, comrades?


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Robert Wenzel Comments on Episode 1 (and 2)

While my response to episode 2 is in the works, check out Bob Wenzel’s commentary on the first two episodes.

What is Economics?

Wenzel agrees that Crash Course’s definition of Economics is good, but not ideal, because of its potential to delve into behavioral economics.  Let’s look at how Crash Course defined economics through the quote they used by Alfred Marshall:

A study of Man [and Woman] in the ordinary business of life.  It enquires [sic] how he gets his income and how he uses it.  Thus, it is on one side, the study of wealth and on the other and more important side a part of the study of Man [and Woman].

Wenzel cautions that this definition of economics may be “looking and attempting to understand how people reach their goals for action.  [Austrian Economist Ludwig Von] Mises doesn’t do that.  He says ‘okay whatever the reason men have goals, and let’s decide what happens in the economy with regard to exchanges once we understand those goals, regardless of how they come up with those goals’

This is a significant difference in one of the biggest questions in economics: what is economics?

Microeconomics Examples

Wenzel also takes aim Crash Course’s explanation of Microeconomics.  From Crash Course:


There is a whole other side of economics that look at different questions: How many workers should we hire to maximize profit?  If our main competitor releases their product in May, when is the best time to release our product?

Wenzel points out that economics is not the study of business decisions:

The economist can explain how once a businessman has his goals, how he chooses, but there’s nothing that an economist can do as far as providing insights into something that is really a decision of a businessman or entrepreneur.

Economics is about understanding how the economic system works.  It’s not about telling businessmen how to run their business.

So if the example questions from Crash Course aren’t actual examples of Microeconomics, what questions would be?  How about:

If the price of a good increases, what happens to the demand if everything else stays the same?

If the supply of a good decreases, what happens to price if everything else stays the same?

Macroeconomic Predictions

I didn’t know about this at the time, but Robert Wenzel mentioned that he was one of the economists who predicted the 2008 financial crisis in real time.  To read more about that, you can check out his book, or subscribe to his daily financial advice guide.

Read more of Robert Wenzel at his sites and Target Liberty.

Ryan Griggs Comments on Episode 1

Friend of Crash Course Criticism and Austrian scholar, Ryan Griggs, has written his own critique of the first episode of Crash Course.

Something I had not considered, Ryan observed Mr. Clifford’s choice of words in calling scarcity and cost “assumptions”:

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.

Ryan also details a subject I have only touched on, but not delved into: the classification of economics as a social vs. physical science.  He writes:

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.

Please read Ryan’s full post at his blog.