Economics: Instruments of Economic Analysis

Fortunately analysis is not the only way to resolve inner conflicts. Life itself still remains a very effective therapist... The therapy effected by life itself is not, however, within one's control. Neither hardships nor friendships nor religious experience can be arranged to meet the needs of the particular individual. Life as a therapist is ruthless; circumstances that are helpful to one neurotic may entirely crush another.

Now analysis is of two kinds, the one directed to searching for the truth and called theoretical, the other directed to finding what we are told to find and called problematical. (1) In the theoretical kind we assume what is sought as if it were existent and true, after which we pass through its successive consequences, as if they too were true and established by virtue of our hypothesis, to something admitted: then (a), if that something admitted is true, that which is sought will also be true and the proof will correspond in the reverse order to the analysis, but (b), if we come upon something admittedly false, that which is sought will also be false. (2) In the problematical kind we assume that which is propounded as if it were known, after which we pass through its successive consequences, taking them as true, up to something admitted: if then (a) what is admitted is possible and obtainable, that is, what mathematicians call given, what was originally proposed will also be possible, and the proof will again correspond in reverse order to the analysis, but if (b) we come upon something admittedly impossible, the problem will also be impossible.

Economics is a subject that really relates to core aspects of human well-being, and there’s a methodology for thinking about these things. This was a very appealing combination to me. Market systems are capable of massive breakdowns that can result in long, devastating periods of high unemployment. And I felt that economists had really learned something about how to address that.